Why Today’s Mid Cap Will Become Tomorrow’s Large Cap?
“Rule no 1: never lose money; rule No 2: Don’t forget rule No 1.” There is no better way to set the tone for this ‘investor-pedia’ than by recalling this succinct advice from the mightiest investor of them all—Warren Buffett. You could respond with: Easier said than done. And he would nod sympathetically. The times, after all, have been turbulent. And wisdom has been pouring in from all quarters—every television set, newspaper, and even your neighbourhood uncle.
Instead, we should set the tone right for our own investment philosophies. Value investing is the strategy of investing in stocks that the market has undervalued. They invest in businesses that have enduring competitive advantages and scalable business models run by owners who are both honest and competent.
Convincing Indian investors to invest in the stock market might be an easy task, but it is quite tough when it comes to advising them to do retirement planning, which according to most experts is an alarming sign.
Retirement planning is a complex process. Ideally, retirement planning should consist of a mix of different assets classes and instruments such as equities, MFs, debt plans, as well as monthly income schemes, NPS etc. You might have had bad experience in Stocks, Mutual Funds, but as the saying goes: “I do not know if stocks would rise in next 1-2 years, but 10 years from now, everything looks fine”.
If we relate to past 20 years, many of the new companies then, are now large companies – You name Hero, HDFC, Reliance, Sun Pharma.
Did you buy any of these and hold it for long? Let me know through reply. It is commendable. For others, we need to learn patience.
Many of us are not from finance background, and find it difficult to identify opportunity. Then, seek help. People at the highest position are also never afraid to seek help. You may seek help from fund managers, portfolio managers.
Among our group of 40,000 people reading this email, we have people who are retired or on the verge of retirement, people in the age of 50s, and there are young blood. We all can build this wealth for ourselves, gift to our children, gift to society through charity.
Following sectors may be attractive in next 20 years:
Banking & finance: Finance is the backbone of any economy and has been there since the inception of civilization. For any economic activity institution like banks and NBFCs will be needed for project funding, or meeting the working capital requirement.
Automobiles: Transportation is an integral part of any economy. Companies which keep pace with technological breakthrough and advancement for better transportation products offer merit in selection.
Pharmaceuticals: Medicines are required at every stage of human life. Right from the time a child is conceived till the time last breath is inhaled. It can be for curing a disease or just for maintaining a healthy life style.
Companies with proven track records and focus on new product development through intensive research merits selection for long term investing.
Consumption: This area is vast. It can be biscuits, confectionery, soaps, electrical and electronic equipment like television, air conditioners, refrigerators, fans, bulbs etc., garments, home furnishing among others.
Management’s vision and company’s adaptability to timely come out with new products as per changing consumer preferences are key criteria for selection in the portfolio.
Materials: For any construction be it roads, ports, airports, shopping complexes, dwelling units, commercial complexes, hospitals, schools, civic amenities etc., construction material is required like steel, cement, copper. Investors can look at companies with sustainable business model which merit selection in the long term portfolio.
I’ve learned a lot from your feedback this year, and from the countless surveys and polls Fincare has conducted. I’ve learned that you’re leaders in your industries. Your innovation is both groundbreaking and wave-making. Then, why should you fall back on your investments?
I hope that our tools and solutions have improved the way you invest this year. I hope that our around-the-clock support team has impressed you with their pro-active approach and friendliness. If not, I hope you’ll get involved in the new year, and I look forward to hearing your feedback.
Thanks for a great year.
Co-founder, Fincare Services