Compounding and patience: Market veterans share key lessons for new investors

Market veterans at the CNBC-TV18 Global Leadership Summit

India’s stock market veterans say that patience and the power of compounding are the two most important things for investors who want to enter the markets. At the CNBC-TV18 Global Leadership Summit, Ramesh Damani calls it the snowballing effect while Manish Chokhani says that one should buy into businesses at the right price.

Here are the lessons what market experts gave to new investors:

Calling compounding the eighth wonder of the world, Ramesh Damani, owner Damani Finance Private Limited, said that compounding is like a rolling snowball, and one has to make sure that the hill is tall enough for the snowball to increase in size. In order to achieve this, one has to either start very young or live very old, he adds. “Compounding can take a generation from poverty to wealth if done well,” Damani added.

While Raamdeo Agrawal, chairman and co-founder of Motilal Oswal Financial Services, said that one has to wait for the compounding to happen. He added that along with timing the market, it is important to have patience. “When markets are roaring, everybody is in the markets. But when times are bad, when markets are falling, that is when one should have patience,” Agrawal said.

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Backing the right businesses is important, however, one should be careful with the price that it pays for the company, said Manish Chokhani, director of Enam Holding Private Limited. Chokhani said that one should enter at a good price because the soil in India is fertile for entrepreneurs and businesses, and hence one should stay for the long haul because they will compound a lot of money.