Not many people really understand the long-term opportunity in the Indian stock market.
Why? Because very few understand why India will do well in this decade and beyond.
There's a great opportunity right in front of us and most ordinary investors have almost no clue about it.
Take for example, the electric vehicle (EV) revolution happening right in front of us. Of late, stocks related to the EV supply chain have soared big time.
Many are placing their bets on the renowned and most obvious automakers. But little do they know that the biggest beneficiaries will be players involved in EV charging infrastructure, battery swapping operators, EV ancillary manufacturers, EV battery makers, among others.
Another example is the renewable energy theme playing out in India and the top renewable energy companies benefitting from the megatrend.
There are many such examples. To name a few...
Green hydrogen and how it's the key to EV riches.
Semiconductor stocks in India and the boom we're about to see in this space.
The humongous opportunity that defence stocks with big growth stories present.
The exploding opportunity for drone manufacturing companies.
The key here is to identify the best stock from the lot and hold on to it for the long term.
Keep in mind a long-term investing approach because Rome wasn't built in a day. Similarly, as India goes on a massive transition, the results will be fruitful for those who have a long-term approach.
As long as you invest in fundamentally strong stocks and hold on for the long term, you will do very well.
A word of caution: Just because you're investing in a stock for the long term, doesn't mean you can buy and forget it. Investing is not that simple!
You need to constantly re-evaluate your portfolio. Some stocks may not deserve a place in it anymore.
We suggest reading this Equitymaster editorial - 10 Rules for Successful Long-Term Investing.
You can also checkout our playlist on Long Term Investing on Equitymaster's YouTube channel.
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The strategy behind long term investing is to hold on to stocks for a period of more than three years, or possibly more than five years.
Three years or five years sounds like a long period when one dives into the stock market. That's because most investors are looking to make a killing in the short term.
But that's the difference between a trader and an investor.
There are retail investors who choose to invest in fundamentally strong stocks and remain invested for the long haul. This can even mean a period of 3, 5, 10 or more years.
The best long-term stocks are those that compound wealth that could last you for generations.
For this, you need to buy great companies at a reasonable price and hold on to them 'forever'.
Asian Paints is a classic example that embodies the true spirit of a 'Forever Stock'. Had anyone invested Rs 500 in the company when it went public in 1982, the value of the holding would be as much as Rs 10 m today.
To know about more such companies, check out our recommendation service - Forever Stocks.
Value investing is an investment approach that allows one to profit from undervalued stocks. It is based on the idea that each stock has an intrinsic value, i.e. what it is truly worth.
Through fundamental analysis of a company, we can determine what this intrinsic value is.
If the intrinsic value is higher than the actual stock price of the company, then the stock offers an investment opportunity. It's like buying a Rs 100 note, for Rs 80.
Conversely, if the intrinsic value is lower than the current market price, then the stock is 'over valued' and should be avoided. Think a Rs 100 note selling for Rs 120.
Value investing continues to be a reliable way for investors to make healthy returns.
Investors just have to be patient with their investments as value investing may not work well in all phases of the market.