We all talk about the World being fair and about the equal opportunities that are offered to everyone despite knowing that there is a set of elites who are always on front pages of newspapers and are rich and influential no matter what the economic scenario is. They don’t just manage to stay rich, but they actually prosper and are sometimes consulted by Governments on key policy decisions. We may feel that they don’t do a lot and are only seen to networking with the who’s who of the country, but actually they do a lot!
The goal of any individual doing any job or running their business/ company is to earn money for themselves, to satisfy all their personal and their family’s needs. Working to earn money is the final goal that most of us are working towards, but that is not true for these financial wizards. Their aim to ensure that the money that they have is working towards getting them more money! They aim to understand businesses, industries and companies, so that they can take (calculated) risks and invest in these hoping that their bet pays off and multiplies their money. Most successful investors, bankers and financial geniuses aim to get a 50% return on the capital that they invest in a company or the shares of a company.
Their investment may be in the form of loans that they give or in the form of an investment that they make in a company or just in the trading of shares that people do day in and day out, but what is common in all three is the knowledge required to understand a company/ business or an industry. That knowledge is what sets them apart from the normal people. An investor of this calibre will be able to spot a good company even when it has not made news. He will be able to spot a good opportunity because of the underlying fundamentals of the industry and that will let him make a killing when the time is ripe.
The skills that set these investors apart from the others are Fundamental & Technical Analysis, .i.e. their ability to read and understand a company’s health and asses its future based on the financial statements it releases. This skill is invaluable for stock market investing. This analysis will in some cases allow an investor to estimate the stock price just on the basis of the stock price movement! Imagine if you are able to predict the prices of goods just by looking at the previous stock prices. That will be the stuff of legends and we do have such living legends who do this day in and day out.
Picking the right stock and the industry at the right time is something that takes years of practice. Some investors have said that they have lost significant amounts of funds while learning the ropes of this trade. Getting the right guidance is of utmost importance. A great place to begin learning is at BSE Institute Ltd. They offer short term courses on finance and investing, which are taught by professionals who are working in that particular industry. In other words, you get your pearls of wisdom, straight from the horse’s mouth!
Another skill that is invaluable is networking. India is a huge country with companies scattered across its length and breadth. How does one learn about the multiple industries and the opportunities that are available? Networking is the key. You may be focusing on one industry but with a strong network you will be able to keep your ear to the ground for lucrative opportunities in multiple industries.
One point that is not emphasized on enough is planning and having a trading strategy. Some people follow a Pareto strategy, .i.e. an 80:20 strategy. What this means isthat you invest 20% of your money in a risky investment and 80% in a safe one. The risky one is the one which you feel may actually give you amazing returns. As per stock market analysis, in the long run, it is the 20% investment that multiplies to become 80% of your investments. Deciding the amount of funds that you will choose to invest, the break up of risky to safe bets will determine your success or failure.
Getting the proper knowledge, training and guidance to grow your portfolio is the fundamental of successful investing. However, the first step begins with your decision to plan for this, as failing to plan is planning to fail!