Smart ways to invest and attain early financial freedom

With Indian stock markets giving a 31% return, there is a sense amongst many of us of having missed the opportunity.   Plus there is this fear that if we enter too late, we will be the losers.   Also quite a few of my readers have some amount invested in stocks and they want to know if they can increase their allocation at the current levels.   And there are others who are asking whether they must exit the stock markets and take home the profits.   So the question that I want to answer is what should I do?   Let us see a few graphs before I share my point of view:   Here is the data of HDFC Bank share and the Nifty for the past 13 years so. If you were thinking of investing on say 1st Jan 2010 – you would have felt uncomfortable as it was pretty high then – but see what has happened since then. This logic is true for most years except for 2007/2008.

HDFC Bank

  Let me show you the share price of TCS

TCS

Here again you can see the prices have generally gone up except for 2007 and 2008. The upward trend is visible.   Let me take another large company –ITC. You can see a similar trend here

ITC

Except for 2007 and 2008, stocks of good companies have seemed costly and high at the point of purchase and over time they have done well.   The key words here are “GOOD COMPANIES” – so if you can invest in good company stocks, you will get decent returns.   How do you judge which company is good and which is not?   I have a checklist of 13 questions that help you answering this question – you can find it in my book. If you do not have my book – you can find it in my presentation to Bangalore stock exchange here http://www.slideshare.net/sgrajasekharan/bangalore-stock-exchange-presentation   Right now India is very favourably positioned globally to attract money. The Modi government is slowly but surely improving the governance. There is a positive mood here and we all believe that the future will be better. It takes about 12 months for government reforms to show up in the financial performance of companies – hence expect the financial of Indian companies to improve from March 2015 onwards – And when that happens, the stock markets will also go up.   I believe that there are global risks and there will always be risks. But having said that, this is the time to invest in stock markets and reap the benefits for the next few years. As long as the Modi Government performs, the stock market should give returns upwards of 20% per annum (my estimate as large companies will grow at 20% per annum)   So the answer to the questions listed above is a YES. Please do invest in stock markets – it is not too late and if you have already invested, then stay invested and increase your allocations.   In case you have never done stock investments – then you should invest through mutual funds that in turn invest in stock markets. My book has a lot of details explaining mutual funds. You can also read this link to see which funds I am recommending as of now.

Author Description

S. G. Raja Sekharan

S. G. Raja Sekharan is a visiting MBA faculty, a mentor to budding entreprenuers, a wealth management consultant, an author of a book on Investing in India and the author of this blog.

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