How to Invest in Stocks and Create Wealth?

You need data, analysis, tools and advice to make sound stock investing decisions. You need these to be unbiased and transparently presented so that you can trust it and act on it confidently. Here's how we enable you to build a wealth-creating portfolio.
Choose Quality-at-Reasonable-Price Way of Investing
Choose Quality-at-Reasonable-Price
Quality-at-Reasonable-Price, QaRP is a way of investing most suited for retail stock investors.This method ensures you invest exclusively in quality companies. Buying quality stocks at reasonable prices reduces the chances and extent of a fall in your net worth and thereby dramatically increases your chances of staying invested. Wealth is the natural outcome of staying invested and compounding growth of your investment. There are other ways of investing in stocks that can create wealth. However, they demand higher risk taking ability, higher tolerance to volatility and loss, higher willingness to book paper/real losses, higher patience than what most of us have.
Identify Quality Companies
Choose Quality-at-Reasonable-Price
Quality-companies are those that have delivered profitable results even during tough market and economic conditions..
  1. Look for a proven track record over many years. 10 years is a good period to do this as it usually has at least one tough period.
  2. Only companies with a moat-competitive edge can deliver this performance.
  3. Look at the key ratios over 10 years and if most of them are good you have found a Quality Company.
Assess Reasonable Price
Choose Quality-at-Reasonable-Price
Reasonable price is very subjective and hard to prove not just for stocks but for many products which do not have a MRP and certainly for all services. Consumers solve this problem by using an ‘anchor’, a price they use for comparing. We do it all the time- when we buy vegetable and fruits or judge the prices charged by a restaurant or a hotel.
Anchors used when assessing a stock price:
  • Using 52 week high or low, P/E or P/BV are examples of one type of anchor. These are all driven by market prices and may not have a correlation to the performance of the company.
  • Fair value, Intrinsic value etc. are anchors based on the current and future performance of the company. They have their basis in sound theory but influenced by assumptions.
It is difficult to prove which anchor works better.


Read more about anchors
  • Reasonable is not Cheap. Some quality companies almost always trade at very high P/E and P/BV. However, sometimes they are pretty close to fair value and hence reasonably priced.
  • Cheap is not always reasonable. Sometimes stocks are cheap for a reason and remain low for long thus giving very poor returns to the investor.
Point to remember
Build a Portfolio of about 20 stocks
Choose Quality-at-Reasonable-Price
You should not risk your money on only a few stocks but build a portfolio of about 20 stocks. It will take some time to build this portfolio as you are very unlikely to find 20 such stocks at one go. Be patient and you will be rewarded handsomely.
You can check the risk in your portfolio by uploading it on the MoneyWorks4me Portfolio Manager. Some good broker sites like ICICI Direct also provide risk analysis report of the portfolio you hold there.

How to Invest in Stocks and Create Wealth?

You need data, analysis, tools and advice to make sound stock investing decisions. You need these to be unbiased and transparently presented so that you can trust it and act on it confidently. Here's how we enable you to build a wealth-creating portfolio.

Choose QaRP Way of Investing

    Choose Quality-at-Reasonable-Price
    Quality-at-Reasonable-Price, QaRP is a way of investing most suited for retail stock investors.This method ensures you invest exclusively in quality companies. Buying quality stocks at reasonable prices reduces the chances and extent of a fall in your net worth and thereby dramatically increases your chances of staying invested. Wealth is the natural outcome of staying invested and compounding growth of your investment. There are other ways of investing in stocks that can create wealth. However, they demand higher risk taking ability, higher tolerance to volatility and loss, higher willingness to book paper/real losses, higher patience than what most of us have.

Identify Quality Companies

    Choose Quality-at-Reasonable-Price
    Quality-companies are those that have delivered profitable results even during tough market and economic conditions..
    1. Look for a proven track record over many years. 10 years is a good period to do this as it usually has at least one tough period.
    2. Only companies with a moat-competitive edge can deliver this performance.
    3. Look at the key ratios over 10 years and if most of them are good you have found a Quality Company.

Assess Reasonable Price

    Choose Quality-at-Reasonable-Price
    Reasonable price is very subjective and hard to prove not just for stocks but for many products which do not have a MRP and certainly for all services. Consumers solve this problem by using an ‘anchor’, a price they use for comparing. We do it all the time- when we buy vegetable and fruits or judge the prices charged by a restaurant or a hotel.
    Anchors used when assessing a stock price:
    • Using 52 week high or low, P/E or P/BV are examples of one type of anchor. These are all driven by market prices and may not have a correlation to the performance of the company.
    • Fair value, Intrinsic value etc. are anchors based on the current and future performance of the company. They have their basis in sound theory but influenced by assumptions.
    It is difficult to prove which anchor works better.


    Read more about anchors
    • Reasonable is not Cheap. Some quality companies almost always trade at very high P/E and P/BV. However, sometimes they are pretty close to fair value and hence reasonably priced.
    • Cheap is not always reasonable. Sometimes stocks are cheap for a reason and remain low for long thus giving very poor returns to the investor.
    Point to remember

Build a Portfolio of about 20 stocks

    Choose Quality-at-Reasonable-Price
    You should not risk your money on only a few stocks but build a portfolio of about 20 stocks. It will take some time to build this portfolio as you are very unlikely to find 20 such stocks at one go. Be patient and you will be rewarded handsomely.
    You can check the risk in your portfolio by uploading it on the MoneyWorks4me Portfolio Manager. Some good broker sites like ICICI Direct also provide risk analysis report of the portfolio you hold there.
Puchho Befikar
SEBI Registered: Investment Adviser - INA000013323
Research Analyst - INH000000719

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