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How to Invest for the Long Term

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  1. How to Invest for the Long Term By Peeyoosh Chadda Executive Vice President Edelweiss Financial Services Limited & Sandeep Raina Expert Research

  2. Follow a disciplined approach

  3. Follow a disciplined approach • Have an approach, if you are • Trading or • Investing • Each has a distinct need for a discipline which needs to be followed • We focus on long term investing here • Look at markets as a place for long term wealth creation • Markets are not a lottery • Do not panic when the markets correct or invest only in times of euphoria • Refrain from relying on tips – do your homework

  4. Understand your investment options

  5. Understand your investment options • Understand the investment options to participate in equities • Two basic investment options are: • Mutual funds – Regular investing and SIPs • Direct investment through stocks • Let’s have a look at the options

  6. Understand your investment options • Investing through Mutual Funds – Regular and SIPs • When you are quite busy with your regular schedule and can devote limited time, say not even on a weekly basis • Your job then is to simply identify the right set of funds and fund managers, invest money regularly and track performance regularly • The fund managers are the experts – they devote a large part of their time towards stock research and analysis, and are trustworthy in terms of investing on your behalf • Good funds can add a lot of value, here’s a look at some of them…

  7. Source: Valueresearchonline

  8. Understand your investment options • Direct investment in stocks • When you can devote enough time in your regular schedule towards analyzing and researching companies (at least five to seven hours per week) • You have sufficient knowledge of financial as well as other industry-related metrics • You have the ability to identify and track a particular sector where you can identify trends – an edge • You can resist tips / other temptations

  9. How to pick a stock

  10. How to pick a stock • Identify your style of investing • Investing styles primarily fall under one of these: • Value investingThis is when an investor looks at a bargain in terms of how a stock is valued, i.e., identifying stocks at deep discounts to their asset values, liquidation values or replacement values • Growth investingGrowth investors look for companies that are experiencing a rapid growth in their earnings, typically companies growing by upwards of 20% every year

  11. How to pick a stock • Turnaround investingTurnaround specialists look at companies in a distress state currently, but which could be potential candidates for turnaround in operations. This could be triggered by change in business model, change in management or change in balance sheet structure

  12. How to pick a stock Identify your risk appetite Small Caps Mid Caps Risk Large Caps Return

  13. How to pick a stock • Large CapsTypically companies which are large and have a proven long-term performance track record. Market cap exceeds INR 5,000 crores • Mid CapsTypically companies at an expanding stage of product/service acceptance and witnessing steady growth in their business. Market cap in the range of INR 1,000 to 5,000 crores • Small CapsTypically companies at an early stage of product/service acceptance and subject to change/competition/substitute products/ technology. Market cap less than INR 1,000 crores

  14. How to pick a stock • Key parameters to look at: • Growth • Capital Efficiency • Leverage • Valuations

  15. When to sell a stock

  16. When to sell a stock • Deteriorating fundamentals (Slowdown in growth, increasing competition, reduction in profit margins, etc.) • The stock price has appreciated to such an extent that valuations are beginning to look expensive on multiple fronts • A better substitute is now available versus the current stock you are holding, and with capital being limited, you sell the current stock to buy the new one

  17. Portfolio monitoring is not optional

  18. Portfolio monitoring • Portfolio monitoring is an ongoing exercise that you need to conduct to be aware of the performance of your portfolio and take corrective actions as needed • This involves tracking day-to-day events / news in the sector/ stocks you hold • Once the monitoring activity is put in place, the next logical step is to take corrective action in terms of reducing exposure to current holding or adding exposure to a current / new holding based on the analysis • In the case of mutual funds as well, a similar monitoring activity has to be undertaken

  19. Using your guide: Edelweiss.in

  20. Using your guide – Edelweiss.in • In order to simplify and enrich your investment decision-making process, you can take full advantage of your guide, Edelweiss.in • At Edelweiss.in, you have full access to Edelweiss’s full range of coverage on macro economics, sectors and over 200 stocks. • Further, you get research reports daily, tracking Indian corporate news, market movements, thematic reports across sectors, economy and asset classes.

  21. Stocks you should buy

  22. Bajaj Auto Second largest 2 wheeler manufacturer, set to benefit from increasing two wheeler penetration.

  23. ITC Cigarettes business to remain robust, FMCG the trump card, classic domestic consumption bet.

  24. ICICI Bank Banking revenue set to grow 5.3x to Rs 10.6 Trn over the next 10 years, ICICI Bank is a front-runner to capture this opportunity.

  25. Thank You