Apart from the traditions investment options, experts are of the view that equities alone can get you the financial independence.
India celebrates its 72nd Independence Day on August 15,2018. While the freedom was an outcome of sacrifices made by great leaders but for investors, financial freedom will come at the cost of years of saving.
Investing according to your financial objectives is the right way to achieve financial independence. But, apart from the traditional investment options, experts are of the view that equities alone can get you the financial independence.
Investing is not a one-time activity but more of a continuous process. The investment methodology will be different when you start investing in your 20s and will change when you turn 40 and later on towards your retirement age, above 60s.
“Equity markets have been known to have beaten other asset classes by wide margins (Sensex has grown at CAGR of 17% from inception) when it comes to returns delivered over long-term investing,” Arun Thukral, MD & CEO, Axis Securities told Moneycontrol.
“If properly invested, equity investments have rewarded the investors by multiplying the investments in a relatively short span of time compared to other investment avenues. If one starts early, plans properly and invests meticulously, one can create sufficient wealth thereby helping him/ her to achieve financial freedom at quite an early age,” he added.
If an investor is not able to commit lump sum investments, systematic investments in equities would also enable an investor to create wealth that can take care of his/ her early retirement, suggest experts.
Equities is by far is one of the best asset class in the financial markets. History suggests that small amount if invested regularly in the market could generate enormous wealth for investors over a period of time which could well outpace other investment classes.
“There are many stories of investors achieving financial freedom by investing in the stock market that can be classified into two or three types of wealth creation. First, buying a stock early on that went on to be a multi-bagger,” Sunil Sharma, Chief Investment Officer, Sanctum Wealth Management told Moneycontrol.
“Second, owning a portfolio of equities over a long period of time and continuing to purchase at regular intervals, allowing the power of compounding to create wealth. The easiest way to achieve financial freedom would be to buy quality growth and keep saving and keep buying for an extended period of time,” he said.
Here are five mantras to consider when investing in equities, from experts to generate wealth and attain your goal of financial freedom:
Be Disciplined When It Comes To Investing:
Discipline is the foremost principle when it comes to investing in equities. “Our advice to clients would be to be disciplined when it comes to investing. The mantra for long-term returns is to buy fundamentally sound stocks at attractive valuations and then hold on to them from a long-term perspective,” Nitasha Shankar, Sr. Vice President and Head of Research at YES Securities told Moneycontrol.
“It is recommended to build a portfolio balanced with equity and debt (depending on the risk profile of the investor) and then hold on to the same to reap long-term returns. For regular income, it is good to have a certain portion of investments in healthy dividend yielding stock,” she added.
Optimally Utilizing Power of Options:
Shubham Agarwal, CEO & Head of Research at Quantsapp Private Limited advise investors to optimally utilizing the power of Options. Buy Insurance in the form of Put options and hold on to your investments being free from ill effects of being long only especially in falling markets.
“With around 10 percent returns in the latest year of freedom, I would like our investors to be able to lock in their gains at the first sight of fright yet be in a position to reap benefits of any further gain in case the fear was false,” he said.
Stay Away From Noise:
On this Independence Day, we would like to suggest that investors stay independent of noise in the markets, said Sharma of Sanctum Wealth Management. “There will always be reasons to sell, reasons to fear, but our advice is to adopt a longer-term investment horizon and buy quality companies or work with quality investment managers,” he added.
“We feel this is the most relevant advice because the most difficult task in investing is to hold on through up and down markets,” said Sharma.
Do Not Depend On Your Employer for Remuneration:
The basic premise of financial independence is that we should not be dependent on our employer for our monthly remuneration, explains Thukral of Axis Securities.
“We should make sufficient arrangements in the early stages of our career to ensure that we have a regular source of money that is sufficient to take care of all our expenses when we reach a certain age,” he said.
He further added that with planning, basic minimum needs like a house, vehicle, education, and marriage of children can be taken care of. We can also build sufficient corpus of funds to give a regular stream of money so that if needed we can retire peacefully even before reaching the superannuation.
Shortlisting brokers/experts:
“Investors should spend a lot of time on shortlisting brokers/experts on whom they can rely taking their past recommendations and track record into account,” Deepak Jasani, Head – Retail Research at HDFC Securities told Moneycontrol.
Relying on hearsay, tips or media stories may not be helpful. They also need to focus on money management principles after doing their own risk profiling, he added