The Stock Market: Did It Make You Rich? - The 5 Minute WrapUp by Equitymaster
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The Stock Market: Did It Make You Rich?

May 9, 2016

In this issue:
» March quarter results: Is the turnaround here?
» Indian real estate is overpriced: Here's the proof!
» Market round up
» ...and more
Richa Agarwal, Research analyst

Dear Readers,

By now, I guess most of you are familiar with Anisa Virji. She is the Managing Editor of Common Sense Living, and the Creating Wealth newsletter. She's passionate about helping people live a rich and fulfilling life.

For today's edition of the 5 Minute WrapUp, we invited Anisa to share her thoughts about wealth building in this uncertain economic climate. So here's Anisa with her secrets to being truly free of money worries.

Happy reading!
Richa Agrawal


They said that if we work hard, spend sensibly, and save enough, we would retire with a pile of wealth that would carry us comfortably through our retired years.But then one day, close to retirement, we woke up and realised there's no big pile of money. All our hard work was for naught. We played by too many rules, fed too many mouths, paid too much tax...

I'm an avid reader of Equitymaster letters. And in the past two years of 'following' them - the big picture ideas from Rahul Shah and Tanushree, the long-term recommendations from Radhika of ValuePro, the hidden treasures uncovered by Richa, the trading know-how of Asad and Apurva - I believe I have learned more about the markets than I could have anywhere else.

I can see why, dear fellow reader, you are so loyal to this series of profitable ideas delivered right to your fingertips.

If I do choose to directly invest in stocks, then I would certainly plonk my money down where my good friends, the researchers at Equitymaster, say I should. Because a) I find stock research tedious and am afraid my 'gut' will lead me to toilet stocks, and b) let's face it - they are smarter, more dedicated, and more interested in finding the right stock than I would be in a million lifetimes.

So there's your and my stock market confusion solved once and for good. So now, are you as wealthy as you had hoped?

Sure, you've made a decent sum of money. But that's not what I'm talking about. I'm talking about the wealth you dreamt about in your youth. Are you there?

I'm guessing not.

And here's why...

To get wealthy by investing in stocks, you need enough money in the first place, a sizable 'net investible income'.

And that's why I'm writing to talk about how you can get more money to invest.You have a fulltime job. You earn what you earn. How can you earn more? Two ways. One is to prove you are a valuable employee and convince your employer to increase your primary income. To do this, you might need to work harder, work longer, or learn more skills. But even then, you'll still be dependent on the generosity of a boss...

Or, you can create additional streams of income that make you money when you're not even looking.

According to wealth coach Mark Ford, 'The secret to being truly free of money worries is to have multiple streams of income, each one of them enough for you to live on.'Your stock returns are an additional stream of income. Same for your rental real estate investments. These are 'passive' streams of income. But you can also create 'active' streams of income.

It's an easy three-step process.

  1. Assess what you love to do and what you know how to do. A reader of my Wealth Builders Club loves cricket, for example. And he is good at online stuff.
  2. Figure out what your 'product' could be. Many Indian children want cricket training but don't have good trainers in their neighbourhoods. Voila - my reader's product is an online cricket course.
  3. Now sell it. With his son's cricket coach, my reader created videos and other online training materials, set up a website, developed some marketing materials...and boom! While he is at work all day, his website generates an extra stream of income. How about that?

There are many doable, practical ways to earn extra money with a few extra hours each week. You can start a business...or invest in someone else's. Start a website...or write for someone else's. Start a new career...or consult for someone else's. The opportunities are endless. We have shared more than thirty such ideas with members in our Club. And we're adding more every day. Another thing you can do to grow your pot is spend less. By this I mean that you can maximise your current income by learning how to get the most value from each rupee. Figuring out what a rich life means to you, practically and philosophically, is the key to that elusive financial happiness.

'I've learned through my own experiences that you really can live just as luxuriously as a multimillionaire or billionaire just by knowing what to splurge on...and what not to spend your money on. And it doesn't slow down your wealth-accumulation efforts one little bit,' says Mark Ford.

In fact, Mark has written a book on living like a billionaire - without spending like one - because he thinks everyone should enjoy a rich life no matter how much money they have.

If you haven't already, I urge you to read Living Rich. There are plenty of other good books on this general subject, but Living Rich is not a bad place to start.

Take these steps together: create additional income streams, spend wisely, and keep working with Equitymaster, to watch your investment portfolio swell. And then come back and tell us how the stock markets made you wealthy.

Meanwhile, we will keep bringing you new ideas on how to grow and protect your wealth.

Editor's Note: Right now, Common Sense Living is giving away hard copies of Living Rich - and it's not available anywhere else in India. Click here to see how you can also get a copy.

2:15 Chart of the day

The global economy is in chaos. Oil, commodities, China, Brexit, Fed, Japan... the list of variables impacting global economy and moving global markets is endless, and their magnitude... hard to determine.

Ultimately, for a retail investor, it will all boil down to how companies perform. So how's India doing in that regard? Let's take a look.

March 2016: A turn around quarter for India Inc.?
March 2016: A turn around quarter for India Inc.?

Note: Performance of 250 companies (excluding oil and gas, finance companies and banks) that have announced March 2016 quarter results.

Going by the results announced this quarter so far, barring banks, finance companies and oil companies where results might not be comparable, the worst seems to be past us. The sales growth for the quarter has shot from 1.4% to 6.1%, highest in last five quarters. The industry is optimistic about short term trend, citing indicators like growth in banking credit and fuel usage, improving IIP and other macroeconomic indicators. Financial dailies are now full of articles on views on stocks post the earnings. And after a dull period, investors are getting the action itch.

However, as an article in Economic Times suggest, it is too soon to celebrate. While one quarter is not convincing enough for the turnaround theme, here are other reasons why this recovery should be seen with scepticism.

For one, the monsoon yet remains a wild card in this theory of turn around. With due respect to IMD's (India Meteorological Department) positive forecasts, it has enough history of being wrong and catching investors' off-guard.

Secondly, while revenues show recovery, from a profitability point of view (which we believe is more important), the worst is not over yet. The margins are on a continuous decline. Most importantly, an overall positive trend gives no insight into company specific issues. It is of course the latter that will determine returns for long term investors.

And as far as long term is concerned, irrespective of this quarter or next quarter results, investors have reasons to be optimistic. As my colleague Rahul Shah recently claimed, Sensex earnings could potentially have an upside of 70% in 3 years.

That said, not all companies will enjoy this growth. One needs to keep an eye on factors like overcapacity and debt levels of individual companies.

My colleague Tanushree Banerjee, editor, StockSelect, is on the lookout for the safest blue chips that could offer the best returns over next three years. It's not just the growth, but valuations as well for blue chips with Sensex and beyond that she is focusing on. From what I hear, the team has short listed some candidates and it will be revealing within next 30 days. Make sure you do not miss this opportunity to make big gains with safe bets....

Do you believe that the March 2016 quarter marks the start of a turnaround in corporate earnings? Let us know your comments or share your views in the Equitymaster Club.


In his relentless pursuit for interesting facts beneath the pile of drab data, Vivek Kaul, the editor Vivek Kaul's Diary has recently presented an interesting analysis that suggests how overpriced the real estate sector is. In case you have not read it already, I suggest you spare some time to understand why demand and supply principles are so out of order for one of the basic necessities in life.


After opening the day on a positive note, the Indian stock markets have added to their early gains. Sectoral indices are trading on a positive note with stocks from the banking, capital goods and FMCG sectors leading the gains. The BSE Sensex is trading up 357 points (up 1.4%) and the NSE Nifty is trading up 102 points (up 1.3%). The BSE Mid Cap index is trading up by 0.9% while the BSE Small Cap index is trading up 0.8%.


"If you buy things you do not need, soon you will have to sell things you need." - Warren Buffett

This edition of The 5 Minute WrapUp is authored by Richa Agarwal (Research Analyst).

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Equitymaster requests your view! Post a comment on "The Stock Market: Did It Make You Rich?". Click here!

2 Responses to "The Stock Market: Did It Make You Rich?"

The dabbler

May 10, 2016

It's about experience and not smartness.

When you do something for a living and do it for years, it is not about smartness, it is about experience, collaboration and access to resources that general public does not have. It is about having instincts of what to do when. There are examples of numerous stock market investors who have made loads and loads of money without understanding all the jargons or having access to research papers. They are smart. And if EM team is so smart, there should never be any loss to any investor whatsoever. Then why the need to flag the warning, "Recommendations are subject to market risk" ?

Why the need to bring in Anisa Virji to write about how to create additional streams of income?

One needs to be more aware and responsible when it comes to handling others' money. That's all.

Like (1)

The dabbler

May 9, 2016

Another "beat the drums" session and this time from an acquaintance's mouth!

Like (1)
Equitymaster requests your view! Post a comment on "The Stock Market: Did It Make You Rich?". Click here!
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