Investment strategies for wealth creation

Posted on: 04-05-2018 | Category: Finance

Wealth creation is a systematic approach to fulfill desired financial status without loosing midnight sleep. Wealth creation is not speculation, luck, betting or quick gains. Wealth creation is a long term project, where 'long term' indicates 10 years or more depending on the financial goal. Shortcuts and tips to create quick wealth are unsustainable, misleading and scam, period.

Strategies:

  1. Open 3 saving accounts in different banks. Use one of them for household expenses, one for long term savings/investments and one for emergency/buffer expenses.
  2. Use a nationalised bank (goverment bank) like SBI, BOB etc to open account for long term savings/investments
  3. Create an investment mix of Fixed deposits (FDs), Recurring Deposits (RDs), Gold and Equities (share market)
  4. Use this excel to manage and track your investment portfolio: Portfolio Tracker [Message me for excel's password]

How to select shares and build stock portfolio?:

  1. Beginners must focus only on long term investments i.e. when you buy a share and keep it for many years rather than day-trading or short term tactics.
  2. Select good companies and buy their shares everytime they are available at good prices. Accumulate them but also keep an eye on the news items/ frauds/ lawsuits related to them.
  3. In case of any unforeseen event like fraud in a company, sell all your shares of that company immediately. You will get the chance to buy them back at lower prices soon if you so decide.
  4. Select few sectors / industries, read about them and understand how those industries work and what socio-political-economic factors affects them.
  5. Make a list of few companies in those sectors that you would like to research further.
  6. Check variation in their stock prices for quick overview. In long term if there is steady growth in share price without any abnormal jumps and fluctuations within a range over the years, then this is first good sign.
  7. Look at their annual sales, profit, check profit / sales %, debt on the company. Some debt is good, it means banks and lenders trust this company, too much debt is bad because in that case company will spend all its income in paying the loan. You will get value for total debt and also value for total asset, their ratio (debt/asset) can be at max around 20%.
  8. Compare P/E ratio with their peers
  9. Look at shareholding pattern
  10. Check their websites, what products / services they sell. Will there be demand for their products / services in next 10-15 years or will they become obsolete? Will demand grow or go down. If demand will grow,then are they better then their competitors to fulfill that demand.
  11. A quick google search about news of these companies, search controversies, legal cases / lawsuits, new investments etc for each of these companies.
  12. Check new list of highly recommended stocks for long term investment here.
  13. Buy stocks in small quantities, anywhere between 1 - 10 at a time, unless you have very strong reason to buy more quantities. Once you have a stock in your portfolio, track it closely and keep buying more in small quantities if you feel positive about it.
  14. Do not spend all your money at once, best strategy is to sit on cash and wait for the right time. When market crashes, that is the best time to buy.

List of best books on financial investment:

  1. The Richest Man in Babylon: Click to buy Paperback | Kindle Edition
  2. A Random Walk Down Wall Street – The Time–Tested Strategy for Successful Investing: Click to buy Paperback | Kindle Edition
  3. One Up On Wall Street: How To Use What You Already Know To Make Money In: Click to buy Paperback | Kindle Edition
  4. The Intelligent Investor - Benjamin Graham: Click to buy Paperback | Kindle Edition