Stock Market created All Top Riches in the world. Yet, not all people can use stock market to become rich. Why?
In this article Paul, SEBI Registered Research Analyst of Futurecaps explains the core reasons that prevents people from becoming rich.
Reason #1 Choosing Trading instead of Investing.
People choose the fastest way to become rich & end up loosing money in Trading. In Trading you are competing with other traders for a small percentage gain, while leveraging on margins & mostly end up in losses, if not paying high taxes & charges. That is why only 1% Traders make more than 8% returns by annual data of traders.
Solution: Choose Investing
Investing is the purpose of stock market. All Top Riches are made through Investing.
Investing is Passive also where your money works for you as said by world famous finance expert Robert Kiyosaki.
Reason #2 Buying Bluechips of Past
Coming to Investing, the mistake people make is buying shares of company which are popular brands. These biggies might have given huge returns in the past – but once it is a bluechip the growth will become sluggish & thus slowdown your wealth creation.
Solution: Invest in Smallcaps
Smallcaps have lower market capitalization & lesser known brands. If you choose a smallcap from high growth sector you are destined for optimal wealth creation.
For example: Bajaj Finance was a smallcap during 2010 and from there it created 10000% returns. That is Rs. 1 lakh invested become 1 Crore!
Reason #3 Not Applying from Value Investing
Okay – so you decided to go with investing in smallcaps. Are you good?
No. Still there are problems of Valuation. You can end up paying high price for a stock.
Solution: Calculate Intrinsic Value
Intrinsic Value is the Value of a stock calculated based on its past performance, future growth aspects. You can buy a stock if the Intrinsic Value is higher than current market price. This formula is used by legendary investor Warren Buffett!
Reason #4 Not Holding Enough
Wealth Creation does not happen over few weeks or months. It can take years.
Most investors sell a stock on 50% gain within few weeks. Later regret when the stock gave 1000% returns in few years.
Solution: Hold Long-term
Investing is characterized by Long-term holding thus the underlying company gets opportunity to expand in capacity, attract more sales, profits & the market reflects on higher demand for the share thereby pushing the prices high.
The power of compounding happens in long-term. Risk of loss reduce in long-term.
Reason #5 Selling during Bear Market
A new investor will face a big challenge in the long-term journey. Bear Markets!
The Bear Market always comes with new terror story making us believe the world is going to end and the stock is going to reach Zero! Later in recovery phase we see that the problems were not that much & many of the stocks have given multibagger returns.
Solution: Buy during Bear Market
Bear Market is a Discount Mela opportunity. You need to buy more during bear market. This is what the Celebrity Investors do. They keep aside 30% cash fund for bear market purchase. That is how they have created massive wealth of 100+ Crores!
Action Time
If you decided to give a try on Investing, you can Register using below link to get a Free Multibagger stock which is selected from smallcap sector & undergone Intrinsic Value calculation.
Best Regards | Paul | Futurecaps | www.futurecaps.com