Stock market is a unique place. It has a huge potential for long term wealth creation, if the investor focuses on just a few but correct investment opportunities. And if they can manage to make investments in even a few multibagger ideas, they will be on their way to an extremely wealthy life. No doubt that multibagger stocks can be life-changers. Even if we talk about the average long-term returns, equity beats every other asset class by a large margin. Unfortunately, most people still lose a lot of their money in stocks.
Why
This is majorly because such investors allow short-term events to affect their decisions. They are mostly lured by short-term gains and become fearful due to short-term volatility. They keep speculating as to what will happen next. They pick wrong stocks that lead to large portfolio level losses and eventually, they start avoiding markets. But we cannot blame the markets for losses of such people. People make mistakes which could have been avoided easily had they got themselves the right guidance. And that is the whole problem of going in markets without the right equity investment advisor.
Problem in Investing without the Right Equity Advisor
In India, mostly people invest their money in stocks based on tips received from friends, relatives and ‘well-wishers’. But neither these people nor their ‘tip-sources’ have much expertise or time to correctly identify the fundamentals behind a stock. As a result, stocks invested on basis of tips ends up losing money for the investors. There is another problem to it in the markets – problem of plenty. There are more than 5,000 companies listed on Bombay Stock Exchange alone. So, it is not easy to find the good ones worth investing from so many of them. Problem of plenty is not restricted to the number of companies alone. There is a constant bombardment of news and information. But all information is not useful. Unfortunately, the investor who is on his own (without any market study) doesn’t know which piece of information to consider and which to ignore.
Role of Equity Advisor
Now Making Wealth through stock market is not just about picking the right stock.
It is also about deciding how much to invest in each stock position (asset allocation), knowing when to sell and managing various risks all the time. Buy-and-Forget works in theoretical world but not in real life. Real wealth creation happens when you are able to buy the right stock, book profits at the right time and are also able to remove the under performers at the required time. And a good stock advisor understands all of this. He will always remain invested in top companies to understand their quarterly results and earnings growth. Nobody can doubt the importance of high quality research when making direct investment in equities. So the investment research company or the advisor whose team has experience in all types of markets (bear, bull, flat) will be in a better position to help you take informed investment decisions. A good advisor will not promise you the sky. He will help you develop realistic expectations about the risks and rewards of each investment option. Most importantly, he will help you avoid the common pitfalls that are the cause of big losses for most investors who enter markets on their own.
• Temptation to believe that you can time the market successfully every time.
• The fear-driven urge to sell at a loss when stock prices are falling.
• The greed-driven desire to buy when stock prices are going up without any change in fundamentals.
But strangely in India, people don’t seem to recognize the importance of having a true guide on their side. They fail to understand that by paying a few thousands as fees to their advisors, they can avoid losses worth lacs due to their wrong actions. We believe that having a professional and honest equity investment advisor on your side can help you gain access to valuable insights into the factors that affect the economy, stock markets and ultimately the individual stocks in your stock portfolio.
If you analyze the financial lives of the ultra-rich, you will see that they all have access to good investment advisors. So there is no doubt that having a good advisor can work wonders for your wealth.
So think about it
Remember that it’s easier to say things than to do them. We all know the formula of becoming physically fit – eat healthy, eat less and exercise more. But it takes a gym instructor to get our bodies back in shape. The same goes for investing in stocks. So find your true investment advisor at the earliest.
Hemant Parmar
MBA-FP (2017-19)
