Stock Market Basics – Chapter 1: Introduction to Investment

Introduction to Investment:

When it comes to investing, there are various asset classes that come to mind.

Naming few such as Fixed Income Instruments which are Fixed Deposit, Government Bond issued by the RBI, HUDCO, NHAI, etc, and some Quality Corporate Bonds. And then we have Real-Estate Investing, apparently, this is the most favorable option for Indians, until now, and we have Bullion Investing – wherein we invest in Gold & Silver and finally we have our dear choice that is, Equity Investing.

Usually, it is termed that Investment in Fixed Income Instruments, Real-Estate & Bullion Investing is a safer bet. But, what always intrigued me is that whether these investments are safe investments as in easy to do or is it that their returns are better than inflation?

I mean, if your investment return is unable to beat the inflation rates then they are no good. Right?

What are we trying to achieve?

Our main goal in Investing, be it any asset class is to achieve such return on investment that is higher than the running inflation rates. Or, for your easy understanding, keep this lucky number in mind.

You should make, on your capital at least a 6% return each year. Anything above this is exactly what you make. Meaning, If your return on investment is 6% then you’ll make net “0” rupees of wealth. So, if your return is 10%. Then, you make a 4% ROI over and above the running inflation rate.

My personal goal in Investing is to earn over 12 – 15% ROI. Anything above that and I’ll start throwing parties.

Why? Because 15% return on 15,000 monthly investment for 15 years will build me 1 crore in wealth.

How to earn such a return?

Have you heard the term “With high risk comes high return”? Yeah right?

That’s exactly what we have to do. No, I’m not asking you to take a random risk! 

We have to take calculated risks to earn calculated returns. Especially in Equity Investing.

In the later part of this series, I’ll explain everything in detail which includes the importance of Diversification and how to optimally allocate into each asset class, into each stock, etc. which to the core explains the risk-return management.

Video explaining “Stock Market Basics – Introduction”

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