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Investing in Equities Dollar Cost Averaging
Investing in Equities
Expert Articles    

Step1

 Step2

 Step3
  
Its all about growth

Investing in equities is riskier than and definitely demands more time than investing through mutual funds. However, it can probably be more rewarding than you can imagine and certainly very exciting! World over, and even in India, stocks have outperformed every other asset class over the long run. So, what is investing in equities all about?
  Its all about growth
As an equity investor, you are part owner of a company and hence participate in the growth opportunities that your company can benefit from. Also, as good companies are normally able to adjust to inflation by either increasing prices or by controlling costs, equities also normally offer the best hedge to inflation. We discuss below three underlying principles to being a successful equity investor.
  Choosing the right company is important.
Identifying the right company is all about looking for growth - sustainable, superior (at the minimum 20%) growth. And this growth should be profitable i.e. the company should earn a superior (at least 20%) return on its shareholders’ capital (networth).
  Getting the investment time perspective right is critical.
At the short end (typically 3 to 6 months) of the investment time perspective, the performance of equity shares tend to be driven more by market sentiment and less by company fundamentals. The right time perspective for investing in equities is one that allows an investor to benefit and participate in the company's growth and should preferably be greater than 5 years.
In the long-run, the relevance of the right price diminishes
If you choose the right company and have the right time perspective, in the long-run, it doesn’t really matter too much whether you bought it at the lowest (right) price or not. This is because as long as the company is growing, and you hold on to your investment, the Power of Compounding will multiply the value of your investment at a rate that will make the initial investment price lose its relevance.
In step 2, we discuss how to Start off on the right track.
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