Best Investment Planning in India-Learn From Market Gurus To Create Wealth

WHY DOES THE CO EXIST?

"Never invest in a company that you can't illustrate with a crayon

PETER LYNCH |

FORMER FUND MANAGER WITH FIDELITY This is perhaps the starting point for any Best Investment Planning in India, which means understanding what you are buying. Lynch only invested in businesses that he either knew very well or could understand very easily. This was the first key criteria of investing in any company that he ever invested. All successful investors do rigorous stock research and duediligence on the company before deciding whether they will invest in the company or not. There search mainly focused on fundamental analysis, and they do not get carried away by the euphoria of existing market noises. Most investing greats, once they have zeroed in on any stock, would commit to it for the long term, while regularly evaluating the company's progress and growth.

When studying a company, investors must look at the scalability of the business starting with one very important question: Why do they exist? For example, legendary investor and one of the richest people on earth, Warren Buffett, did not invest in technology companies because he did not understand them very well. Did he perform badly? Certainly not! It is very important to decide what you will buy, it is also extremely important to decide what you will not buy. -Tanwir Alam

FOCUS ON RESPONSIBILITIES

"If you buy things you don't need, soon you will have to sell things you need

WARREN BUFFETT |

CHAIRMAN, BERKSHIRE HATHAWAY In today's world, lifestyle infla tion is the biggest issue and it is difficult to measure in percentage terms. Most of today's consumers cannot distinguish between their needs and wantsaspirationsdesires. As financial planners, we usually ask our prospective clients, through a detailed questionnaire, about their responsibilities and dreams. After they answer the questions relating to these two things, their own replies often work as an eye-opener for them.This also helps them focus more on their responsibilities -which ones are necessities at the cost of their dreams, which mostly are not necessities. As responsible investors, you should not end up buying something that you don't need. -Mukund Seshadri

GO FOR MARGIN OF SAFETY

"It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price

WARREN BUFFETT |

CHAIRMAN, BERKSHIRE HATHAWAY Benjamin Graham, whom Buf fett considers his guru, coined the phrase `Margin of Safety', which became the guiding principle and worked as a safety net for a lot of his followers. This puts a very important perspective about valuing a company and buying below its intrinsic value, providing the margin of safety. The phrase means that a company's liquid assets depicted on the balance sheet (net of all debts) must be more than the company's market capitalization.

Markets work on a phenomenon called reversion to mean: In euphoric situations, companies get valued much above their intrinsic value, and in a bad market it is typically under-valued. However, the belief is that during such a transition, it reverses to its fair price sometime before it diverges again. This strategy has a dual advantage: The downside risk is very limited or muted even if the market were to go down further and, more importantly, the return potential of the stock becomes much higher if the market were to go up and arrive at its fair value. -Tanwir Alam

RESEARCH BEYOND GADGETS

"The investor's chief problem, and even his worst enemy, is likely to be himself

BENJAMIN GRAHAM |

GURU OF ACE INVESTOR WARREN BUFFETT As investors, we mostly try to blame everyone else -brokers, financial advisers, agents, financial planners, friends who had given any investment advice, etc -for an investment gone wrong. Rarely we take the blame for any bad decision. Often, we buy a long-term ULIP policy without looking into the pros and cons of such buys, the suitability factors associated with such a decision, etc. We also sign so many blank forms for important investment decisions. On the other hand, we do a thorough research while buying an LCD TV, look for deals on websites or at shops before finally paying for one. As investors, we should put in serious efforts for choosing the right financial product too. If we don't do that, chances are high that such investments may turn bad. -Gajendra Kothari

ALLOW INVESTMENTS TO GROW

"Compound interest is the eighth wonder of the world. He who understands it, earns it... he who doesn't, pays it

ALBERT EINSTEIN

| CELEBRATED THEORETICAL PHYSICIST There are two key secrets to successful wealth creation: Compound interest and time. There is a story about a king being challenged by his neighbouring king. The reluctance on the part of the first king over loss of life and wealth in case of a war led the two to decide the winner through a game of chess. After the first king won the game, his wise adviser suggested the win ning king to ask for one grain of rice on the first square of the chess board, and double the amount in every subsequent square till the 64th square was reached. Without realizing the veracity of the reward in its en tirety, the losing king thought it a small price to pay for his loss.

When he started counting, he realized that the rice on the 64th square was equal to 18 million trill lion rice grains -good enough to cover the entire surface of earth this is the power of compound in. Now if you allow time for your investments to grow, the com pounding effect can work won ders. Investments by Buffett over the last 50 years compounded just under 21% annually, resulting in a multiplier of 7,448 times. This means an investment of Rs 10,000 fifty years ago is worth Rs 7.45 crore now. -Tanwir Alam

TAKE TIME & EFFORT

" An investment in knowledge pays the best interest

BENJAMIN FRANKLIN |

US STATES MAN & SCIENTIST

All the time and effort that you put in to understand things would rarely go waste and, in most cases, they pay you multi baggers. You may attend some conference which is free, but you obviously put in time and effort for the same. Investing such time and efforts will surely pay you in the long run. And this is not only true for financial markets and investments, but also in every area of life. -Gajendra Kothar Tanwir Alam is the founder & CEO, http:www.fincart.com Mukund Seshadri is a co-founder, MSVentures Financial Planners. Gajendra Kothari is MD & CEO Etica Wealth Management NEXT WEEK

In our next edition, we will deal with the basics of capital protectionoriented funds and their importance to investors.

Fincart is a Delhi based Financial Investment Planning Company provides. http://www.fincart.com/services/investment-planning.php