Wealth creation is the dream that each and every person aspires for. It is difficult not to get captivated by the mention of term wealth. Wealth creation may be the ultimate goal of many investors but is seldom achieved by few. There is no investment formula that guarantees wealth generation. But, there are certain key points and strategies that will guide you to your wealth creation aspiration.
Let us understand some wealth generating principles or key ideas for wealth generation-
Yes, research is the key area every investor must conduct without fail. Would you just randomly buy a new real-estate property without doing any research? You would definitely not. You will research its market value, its location, accessibility to public transport, hospitals, educational institutes etc. and assess whether it would be a good asset or not. Similarly, you must put in efforts to know about the company in which you are interested to invest. You must evaluate company’s past 10 years growth rate and check whether it has potential to reach a higher level and deliver good returns consistently. Thoroughly understand the product thoroughly produced by the company and assess its MOAT factor. It is wise to invest your efforts and time in conducting research of the company before investing your hard-earned money into it. In such a way, you can make an equity investment, a research and knowledge-based wealth creating tool and not a gambling platform.
- Think of long-term
Long-term investment in equity has generated returns much better than mutual funds, real estate, gold and fixed deposits. There are several advantages of long-term investment. It is here when the principle of compounding reveals its magical power. Money compounded over a long period of time gives you very high returns. Also, long period investment is subjected to fewer volatility risks and the investor does not have to worry about everyday falling or rising prices.
- Set financial goals which are practical
Setting impractical financial goals and then feeling sad about not achieving it is not going to take you anywhere. Before you invest, analyze how much of hard earned money you are ready to invest in equity, your risk-taking capacity and time frame to hold your stocks. Equity investment will help you achieve your financial goals when done correctly and held over a long period of time.
- Keep your equity portfolio simple
Investing in too many stocks and diverging your focus will make equity investment a byzantine complexity. Instead, emphasize on few well-researched and high returns generating stocks. Focusing on few stocks will not only make portfolio easy to handle but also reduce risk. 100 stocks on your equity portfolio not necessarily will help you achieve your financial goals. It would be wise to keep your equity portfolio limited to few good performing stocks.
- Keep a tab on management
Management is the mirror of the company. They reflect the vision and have the power to drive a company to reach new heights. A good management symbolizes the growth of the company. So, it is important that an investor keeps a tab on the management of the company to predict its growth or downfall.
Purnartha Equity Investment Advisory firm provides research-based stock recommendations that help investors achieve their financial goals. Our benchmark-beating performance and high returns are a testimony of our proficiency and efficiency in managing and creating wealth.