Transforming Time into Money Without the Daily Grind and Stress

Do you want to achieve financial freedom without sacrificing your time and energy? Do you want to create a steady stream of income that works for you, not the other way around? Do you want to learn how to invest smartly and safely in the Indian equity market?

If you answered yes to any of these questions, then this blog post is for you. I'm going to share with you some of the secrets that helped me invest successfully without stress, and how you can do it too.

But first, let me introduce myself. I'm the founder of The Alchemists Ark-a business consulting, training and e-learning company and MoneyWorks4me – a Research and Investment Advisory firm. In short, a consultant, corporate trainer, entrepreneur, and author. I've been investing in the Indian equity for over 15 years, and I've seen the highs, the lows, the crashes, and the recoveries. I've learned from my mistakes, and I've also learned from what’s worked.

I've discovered that the key to successful investing is not to chase after the latest trends or hot stocks, but to follow a simple and proven strategy that works in any market condition. A strategy that allows you to turn time into income without the Daily Grind and Stress.

Let me break this down for you.

Compounding is the process of earning interest on your interest, or in other words, making your money work harder for you. Compounding allows you to grow your wealth exponentially over time, without having to do much work yourself. While in the initial years the growth seems linear, it takes off and becomes almost vertical, which is simply great.

Most of us have a regular job, practice, or business to run. And in the free time, we want to enjoy time with our friends and family, doing the things we love. So, we need a way of investing that does not require you to constantly monitor the market, research individual stocks, or trade frequently. In short without a daily grind and without stress.

Investing in equity is all about the future and hence uncertain and not guaranteed. Things change continuously, sometimes quite dramatically. However, these mostly impact the short-term price movements, only a few events really have long-term effects. The challenge then is how do we make decisions.

So, what is the strategy that I know works for sure? It is a way of investing that ensures the power of compounding works its wonders for me and avoiding anything that puts this at risk. It a unique combination of building and managing a well-diversified portfolio guided by a Quality-at-Reasonable-Price style of investing, with very low churn. But more importantly, it is a Process-driven way of investing using a Decision-enabling System – a set of data, analysis, tools and research that works in an integrated manner.  In my case, it’s the MoneyWorks4me Platform.

I am not for a moment suggesting this strategy is without challenges. But this becomes easier when you have a Process+System that provides a way of making informed investing decisions. Specifically, it answers:

• How do you choose the right assets to invest in?
• How do you diversify your portfolio to reduce risk and maximize returns?
• How do you deal with market volatility and emotional stress?
• How do you stay disciplined and consistent with your investing goals?

These are some of the questions that I will answer in this blog post.

By the end of this blog post, you will have a clear understanding of what is a good strategy that you can use and how it works, and how it can help you achieve financial freedom.

So let's get started!

The Indian equity market today is one of the most vibrant and dynamic markets in the world, offering a plethora of opportunities for investors to create wealth. Here are some valuable ideas to invest successfully.

1. How do you diversify your portfolio to manage risk while earning expected returns?

This is done by investing in different asset classes - equity, debt and gold. These asset classes differ in their returns generating potential and risks. Equity can generate higher returns but it comes with risks while Debt delivers inflation-like returns but with low risk.

The right way to decide this asset allocation is to do your financial planning so you know your financial goals and the investment horizon available to you to achieve it. A good financial planning tool like the one on MoneyWorksMe help you make the decision of the allocation you need to make to equity and debt. If you haven’t done your financial planning you can use the ‘100 minus you age in equity’  thumb rule. So, if you are 40 you can invest 60% in Equity and 40% in Debt and Gold combined. Plan to invest 5 to 10% in physical gold/Gold ETF/Sovereign Gold Bond.

2. How do you diversify your equity portfolio to earn high returns while managing risk?

The second step is to invest in equity to earn healthy-high returns. This requires you to diversify your equity portfolio across the market cap, sectors, themes and geographies. I find it effective to categorize stocks as Core and Boosters. To simplify this further Core stocks are the strongest large-cap company stocks and Booster are the best mid and small-cap stocks.  A combination of Core and Booster provides the best of both – a strong and resilient portfolio capable of delivering healthy-high compounding returns.

You have the option of investing in stocks directly and mutual funds/ETFs to build your equity portfolio. This has the challenge of selecting stocks and funds that complement each other so that you avoid buying more of the same. Essentially, this means the stocks in your MF portfolio should be different from each other and from what you own in your Direct stock portfolio. Once again you will find information and tools on Moneyworks4me to help you with this. A simple and effective way to manage this is to build your Direct stock portfolio with strong large-cap stocks and few and select mid/small-cap stocks and select funds that are not large-cap oriented. If you invest 100% through mutual funds choose a few say 3 from Large+Large and Mid+ Flexi cap funds and 3 from the rest, Mid+Small+Thematic funds.

3. How to select stocks and Mutual funds?

I find far too many MF investors with a very large number of funds and stock investors with far too many stocks. The challenge is to limit it to a reasonable number say 6 funds and 25 stocks. This requires you to follow a good process with great discipline.

My secret formula for selecting the best funds in any category is to look for the funds that has outperformed its benchmark consistently. I use the 3-year rolling returns with monthly rollover and check if the fund has outperformed its benchmark. I check this over as much as 10 years. Monthly rollover because investors do monthly SIP. I also check the average of this number to select one that is high in addition to consistently outperforming the benchmark. This and much more is available on Moneyworks4me in a simple-to-understand page.

Coming to stocks, investing based on the Quality-at-Reasonable-Price process appeals to commonsense because that’s how we buy things. As a retail investor with no superpowers investing in very good quality stocks is a very comforting safety net. So, don’t compromise and always invest in companies with a strong performance track record preferably over 10 years because that usually covers periods of good and not-so-good economic climate.

The next piece of information that you require is whether the stock is available at a reasonable price, i.e. valuation. This can be determined through Relative or Absolute Valuation methods. Relative valuation compares valuation ratios with peers and with the stock’s historical ratios to arrive at a reading on whether the stock is Under/Fair/Overvalued. Absolute valuation is done by an Equity Research Analyst who understands the company's business, past performance and projects the future performance (eg cash flows) to arrive at the fair value of the stock. I find it very effective to be anchored in the estimated fair value of a stock to decide whether I should buy/wait/sell a stock.

When I want to do build confidence on a stock, I prefer to see decision-enabling data, information, analysis, charts, research, and news in one place but in an easy-to-understand presentation format. Many options are available today but when you eliminate the one providing only data and news a few remain. Finally, you want to take informed decisions and not just be informed.

You can also use online platforms such as MoneyWorks4Me.com  that provide unbiased and reliable research and recommendations on various stocks and mutual funds.

4. How do you deal with market volatility and emotional stress?

The fourth step to investing in the equity market is to cope with the market volatility and emotional stress that can affect your decision-making and portfolio performance. Market volatility is the fluctuation in the prices of stocks or funds due to various factors such as economic conditions, political events, corporate actions, liquidity, interest rates, etc. It can create opportunities as well as risks for investors. This risk materializes when you react and make a wrong decision. However, volatility is different than permanent loss of capital which is what harms investors and must be avoided.

When you invest based on the above principles, you protect yourself from permanent losses and helps you handle volatility better. Volatility is the nature of the stock market and cannot be avoided. How you handle it makes you a matured and successful investor.

The way to handle volatility and stress is to keep your exposure to market news and media at a bare minimum. Some useful habits will help you deal with this. Here are my top 3 habits;

1. Consume financial content like an antibiotic – it works well in small dosages.
2. Don’t search for ideas to buy. Have a shopping list with buy prices and have a good system to alert you.
3. See your portfolio infrequently. The more often you see it the more likely you will get stressed because some stocks in your holding has not performed as expected in the short term.
4. How do you stay disciplined about your investing?

The fifth and final step to investing in the equity market is to stay disciplined and consistent with your investing.  For this make your goals and financial plan the guiding light, the north star of your journey. Don’t compare your portfolio performance with others or with unrealistic benchmarks or expectations. You should monitor your portfolio regularly and make necessary changes or adjustments based on your changing needs or circumstances. You should also learn from your mistakes and successes and improve your knowledge and skills continuously.

Investing in the Indian equity market can be rewarding as well as challenging. You need to follow some basic principles and practices to make informed, prudent, and profitable decisions. You can also seek professional guidance or advice from experts or platforms such as MoneyWorks4Me.com that can help you achieve your financial goals with ease and confidence.

Start investing wisely with expert guidance now. 

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