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Warren Buffett is one of the most respected and popular investors of all time. He was born in Omaha on August 30th, 1930. He developed an interest in the world of investing at an early age of 11. As of April 2021, his net worth is over the US $100.6 billion.

The exciting part that appeals to people is his ability to consistently beat the stock market for over 60 years. He was nicknamed the Oracle of Omaha for his brilliancy in investment selections.

What is his secret to success? What made him an investment legend?

Let’s find out!

Buffett’s First Investment and First Investment Lesson

Buffett made his first investment in a stock at an age of 11. He said, ‘I was wasting my life up until then’ when he was asked about his first investment.

In 1941, he purchased six shares of Cities Service preferred stock at a cost of US $38 per share. Shortly after, the share price fell to US $27. Buffett started to panic as the price declined. But soon, the share price climbed back to US $40 and he immediately sold all his shares.

Soon after he sold his investment, the share price shot up to more than US $200 per share.

This was when Buffett learned his first investment lesson of the virtue of patience.

The stock market is designed to transfer money from the active to the patient.’ – Warren Buffett

To pursue his higher studies, Buffett applied for Harvard Business School but was turned down. He eventually enrolled at Columbia University after learning that Benjamin Graham, the father of value investing, taught there. Buffett had read Graham’s book Security Analysis multiple times and looked at this as an opportunity to learn more from his idol.

Buffett was a successful student and this gave him an opportunity to directly work with Graham. He later claimed this to be one of the most valuable experiences of his lifetime.

Buffett Partnership Years

After his stint with Graham, Buffett started setting up investments focused on bargains. 

He soon discovered companies that were trading at a discount to their net asset value. This is popularly known as the Cigar-butt approach. Buffett adopted this approach from his mentor Benjamin Graham. 

Describing this approach, Buffett said –

‘Cigar Butt approach to investing is where you try and find a really kind of pathetic company but it sells so cheap that you think there is one good puff left in it. Though the stub might be ugly and soggy the bargain purchase would make the puff all free.

In this approach, Buffett would buy a large stake at bargain prices and wait for market sentiments to improve. Improvement in market sentiments would drive the share price up. Buffett would immediately sell this stake to earn profit.

During his partnership years, Buffett would write a letter to his partners every year. These letters would convey his investment rationale, philosophy along with partnership performance.

These letters are available in the public domain and are a must-read for investors. They withhold invaluable investment rationales and philosophies.

Warren Buffett Investment Strategies – Value Investing

Warren Buffett strongly advocates for value investing. He focuses on identifying undervalued quality stocks and investing in them for the long term.

Buffett’s two investment ground rules are –
  1. Buy what you understand 
  2. Invest only for long term

Buffett became one of the wealthiest men in the world by following these two simple rules.

He invests in companies only if he understands their business operations. This habit saved him from suffering massive losses during the dot com bubble burst.

Between 1995 to 2000, internet and technology companies were new and untested. Buffett did not understand the tech and stayed away from investing in such companies. When the markets came crashing down during the bubble burst, Buffett safely avoided the crash  by simply staying away from what he did not understand.

‘Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.’

#DidYouKnow Warren Buffett holds stocks of Coca-Cola, Wells Fargo, and American Express for more than 20 years. He once said that he has no intention to sell them.

You might be wondering, what is the point of holding it for this long? Why not instead indulge in short term and make quick money?

The simplest answer is that the power of compounding needs time and patience to do wonders.

Buffett learned this the hard way when he failed to earn higher returns from his first investment. He never dared to repeat the same mistake again and we all know how well it has paid off. Every year his investment compounds and adds value to his portfolio. All he had to do is research quality companies, invest in them and hold.

When you buy a stock, your intention should be to hold it no matter what. Look beyond the negative news. Most of them are speculations and are short-lived. If the company’s fundamentals are strong, they will outlive all their bad days and fetch you returns in the long run.

Impatient investors let anxiety and emotion control their decision-making. The best way to improve your patience is by ignoring the outside noise.

These two rules seem easy to follow, right?

As easy as they might seem, lot of investors fail to follow them. They normally end up not earning much or even worse losing their capital. 

Every investor tries and wishes. But many fail to follow the route.

But don’t worry. We at StockBasket have the right solution for you. Explore Value Buy 2020 Basket is built to take advantage of Warren Buffett’s investment strategies. Our experts have created a basket of value stocks that Buffett would buy. So you can invest in them with ease.

With StockBasket, you don’t have to worry about checking your portfolio every now and then. We do that for you! You can start with your investment of just Rs 2,500 in your preferred basket. Simply open a FREE Demat account with Samco and get access to StockBasket!

Warren Buffett’s Investment Philosophy –

Buffett started focusing on Berkshire Hathaway, a textile manufacturing company. He originally bought it as a value investment in 1964.

He then realised that the company was getting stiff competition from domestic as well as foreign plants. The future was not very bright. So, Buffett turned Berkshire Hathaway into a holding company for his investments which he operates as a hedge fund. 

Expensiveness in stocks made Buffett shift his investment philosophy. He no longer relied on the idea of bargains to stocks that were merely cheap and had wonderful business prospects. But in fact, he adopted a philosophy which believes that it’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.

Warren Buffett and his Circle of Competence

Buffett says that it is important to know one’s circle of competence and stick with it. He added that the size of that circle of competence is not very important. But knowing the boundaries is very vital.

He says, ‘what an investor need is the ability to correctly evaluate selected businesses. Note that word ‘selected’: You don’t have to be an expert on every company or even many. You only have to be able to evaluate companies within your circle of competence.’

Watch this video to learn how you can develop your own circle of competence with the help of a very practical example –

Here are few Warren Buffett stocks by the number of shares held based on Berkshire Hathaway’s most recent 13-F filing.
 SymbolHoldingsMkt. priceValueStake
AbbVie IncABBV2,05,27,861$120.57$2,475,044,2011.20%
Amazon.com, Inc.AMZN5,33,300$3,421.57$1,824,723,2810.10%
American Express CompanyAXP15,16,10,700$164.26$24,903,573,58219.10%
Aon PLCAON43,96,000$285.34$1,254,354,6401.90%
Apple IncAAPL90,75,59,761$153.12$138,965,550,6045.50%
Bank of America CorpBAC1,03,28,52,006$41.66$43,028,614,57012.30%
Bank of New York Mellon CorpBK7,43,46,864$55.18$4,102,459,9568.60%
Bristol-Myers Squibb CoBMY2,62,94,266$67.21$1,767,237,6181.20%
BYD Co. LtdBYDDF22,50,00,000$33.60$7,560,000,0008.20%
Charter Communications IncCHTR52,13,461$814.20$4,244,799,9462.80%
Chevron CorporationCVX2,31,23,920$98.39$2,275,162,4891.20%
Coca-Cola CoKO40,00,00,000$56.18$22,472,000,0009.30%
DaVita IncDVA3,60,95,570$131.14$4,733,573,05034.40%
General Motors CompanyGM6,00,00,000$49.17$2,950,200,0004.10%
Globe Life IncGL63,53,727$95.98$609,830,7176.20%
Itochu CorporationITOCF8,13,04,200$29.56$2,403,352,1525.10%
Johnson & JohnsonJNJ3,27,100$173.66$56,804,1860.00%
Kraft Heinz CoKHC32,56,34,818$36.12$11,761,929,62626.60%
Kroger CoKR6,17,87,910$46.20$2,854,601,4428.30%
Liberty Global PLC Class CLBTYK18,76,522$28.58$53,630,9990.50%
Liberty Latin America Ltd Class ALILA26,30,792$14.22$37,409,8625.20%
Liberty Latin America Ltd Class CLILAK12,84,020$14.36$18,438,5270.70%
Liberty Sirius XM Group Series ALSXMA1,48,60,360$49.50$735,587,82015.30%
Liberty Sirius XM Group Series CLSXMK4,32,08,291$49.40$2,134,489,57519.20%
Marsh & McLennan Companies, Inc.MMC41,96,692$156.41$656,404,5960.80%
Mastercard IncMA45,64,756$353.05$1,611,587,1060.50%
Merck & Co., Inc.MRK91,57,192$76.50$700,525,1880.40%
MONDELEZ INTERNATIONAL INC Common StockMDLZ5,78,000$62.16$35,928,4800.00%
Moody’s CorporationMCO2,46,69,778$381.09$9,401,405,69813.20%
Organon & CoOGN15,50,481$33.72$52,282,2190.10%
Procter & Gamble CoPG3,15,400$142.93$45,080,1220.00%
Restoration Hardware Holdings, Inc common stockRH17,91,967$716.75$1,284,392,3478.50%
Sirius XM Holdings IncSIRI4,36,58,800$6.27$273,740,6761.10%
Snowflake IncSNOW61,25,376$297.85$1,824,443,2422.10%
SPDR S&P 500 ETF TrustSPY39,400$452.23$17,817,8620.00%
StoneCo LtdSTNE1,06,95,448$49.50$529,424,6763.40%
Store Capital CorpSTOR2,44,15,168$35.89$876,260,3809.00%
Teva Pharmaceutical Industries LtdTEVA4,27,89,295$9.40$402,219,3733.90%
T-Mobile Us IncTMUS52,42,000$137.90$722,871,8000.40%
United Parcel Service, Inc.UPS59,400$194.01$11,524,1940.00%
US BancorpUSB14,65,17,349$57.08$8,363,210,2819.90%
Vanguard 500 Index Fund ETFVOO43,000$415.76$17,877,6800.00%
Verisign, Inc.VRSN1,28,15,613$216.15$2,770,094,75011.50%
Verizon Communications Inc.VZ15,88,24,575$54.77$8,698,821,9733.80%
Visa IncV99,87,460$231.23$2,309,400,3760.50%
Wells Fargo & CoWFC6,75,054$48.41$32,679,3640.00%
TOTAL   $323,861,361,225 
Source: CNBC (as of August 2021)

Buffett created this portfolio by religiously following value investment strategies which we discussed above. But there is one more thing which one cannot ignore which played an important role in the making of The Oracle of Omaha.

Buffett, His Books, and His Reading Habit

One common habit amongst all successful people is their habit to read. Warren Buffett reads more than 500 to 600 pages every day. He reportedly spends almost six hours a day reading books. 

Surprisingly, he has never written a book but infact has more than 47 books with his name in the book’s title. His annual letters to his shareholders always include a couple of book recommendations.

Two very famous books which the Oracle of Omaha has mentioned at multiple occasions are –

  1. The Intelligent Investor by Benjamin Graham, and
  2. Security Analysis by Benjamin Graham and David Dodd

Both these classic investment books majorly focuses on value investing. Benjamin Graham, also known as the Father of Value Investing, led the foundation of this investment style.

So, before anything else, make sure you read at least these two books to understand Buffett’s investment strategy in a better way. We have listed down seven books that Warren Buffett says are a must read for every investor here.

End Note:

Buffett has developed an expertise in looking for quality and fundamentally rich businesses. He selects companies solely based on their overall potential. 

He places a great deal of importance on investing in companies having an economic moat. These are companies with an advantage, legal or operational which prevents competitors from entering and affecting margins of the business. 

There is an ocean of wisdom with this billionaire investor. Few things that I would love my readers to inculcate in their investment philosophy is –

  1. Start investing as early as you can.
  2. Always invest in wonderful businesses with an economic moat
  3. Invest in your circle of competence
  4. Invest for the long term.

This will help you start your wealth compounding journey in the right direction.

If you start investing Rs. 1,000 today, every month, for the next 40 years, you will be able to create a wealth of approximately Rs. 72,788,853.

How did I calculate that? How can your monthly investment give you a return in lakhs?

Warren Buffett made the best of this secret. It is your turn now!

Read what is the power of compounding and how Warren Buffett compounded his wealth over all these years.

The best investment approach is to buy quality stocks after analysing the company’s fundamental aspects.

Invest in the companies who has the potential to give superior returns in the long term. StockBasket operates on the exact same principle. It has various expert-curated portfolios or basket of stocks to suit varied investment requirements.To enjoy these expert services and to invest in StockBasket, open a FREE Samco Account today. It is time for you to start investing smartly!

There’s a high possibility that you came across this page while searching for the best long term investment stocks. Well, congratulations, you have come to the right place. 

In about another 100 words, we will reveal the list of the best long term stocks to buy in India. 

But only discovering the names of the best long term stocks will do you no good if you do not know the secret of creating wealth through these stocks. 

Yes. Contrary to millions of ‘getting-you-rich’ books, market experts and finance gurus, there are only two secrets to infinite wealth creation. 

These secrets are followed by some of the greatest investors of our times. From Warren Buffett, Benjamin Graham, Peter Lynch to our very own Rakesh Jhunjhunwala and Raamdeo Agrawal. 

These two secrets revolve around the 3 most powerful words in the stock market – Long Term Investing

But before we reveal anything further, as promised, for the busy readers getting late for office and okay not knowing the greatest investment secrets, here’s the list of the 10 best long term investment stocks to buy in India. Enjoy! 

StockReturns* in %Market Capitalisation
(in Cr.)
Bajaj Finance ltd.141.233,01,224
Coforge ltd.93.1817,067
Infosys ltd.89.435,86,204
Jubilant Foodworks ltd.83.8038,620
Tata Consultancy Services ltd.59.321,191,926
HDFC Bank ltd.49.657,99,408
Godrej Consumer Products ltd.44.5978,690
Crisil ltd.34.4914,155
ITC ltd.23.732,49,178
Hindustan Unilever ltd.17.845,70,730

* Returns after our recommendation on 6th May 2020 to 7th Jan 2021

Now for our disciplined readers, the two secrets for infinite wealth creation are: 
  1. Selecting top-quality stocks 
  2. Staying invested for the long term. 

Aren’t these secrets quite obvious? Shouldn’t all investors inherently follow them? Unfortunately, while obvious, 99% of investors fail to follow these basic long term investing principles. These ‘investors’ then wonder why they did not create infinite wealth! 

But we empathise with you. While common sense, discovering the best long term investment stocks is no easy task. It takes years of hard work, perseverance and a keen eye to discover the best long term stocks amidst the 4,500+ stocks in the market. 

StockBasket, India’s first long term buy and hold investment platform, runs more than 2 crore data points every day to discover the best long term stocks. 

We have already revealed the 10 best long term investment stocks to buy in India. So, you’ve already won half the battle. 

To win the other half, you need to commit to long term investing. But before making a long term commitment, you first need to understand the Power of Compounding.

Power of compounding is the single reason why an ordinary boy from Omaha is amongst the richest men on the planet! 

Did you know that Warren Buffett’s annual portfolio return is only 22%? On the contrary, Jim Simons has generated an annual return of 66%! 

But then why is Warren Buffett known as the greatest investor of all times while Jim Simons remains unknown? 

If returns are the only thing that matters, then why is Jim Simons not the richest man on the planet having beaten Warren Buffett’s portfolio returns by a whopping 44%! 

You’d be surprised to know that returns are not the most crucial component of long term wealth creation. 

The secret of long term wealth creation is the power of compounding. Warren Buffett selects great quality fundamentally strong stocks. No arguments here. But that is not the sole reason for his abundant wealth. 

“Warren Buffett’s strength lies in stock selection but his secret is the time! “

Warren Buffett started investing when he was 9 years old. He is 90 years old now. His investments have been compounding for almost a quarter of a century. On the other hand, Jim Simons started investing in good quality stocks in his late 50s. 

Simply put, even a 44% higher return couldn’t cover up the gains accumulated due to the Power of Compounding. 

So, there you go. Select fundamentally strong stocks and stay invested for the long term and you too shall create infinite wealth. 

But the next logical question is, ‘Which among these best long term stocks should you buy first? It might be possible that you do not have the funds to buy all 10 long term investment stocks at one go. 

So. how should you go about investing in these best long term stocks? 

watch our video to learn about long term investment strategy

There are two ways to invest in our shortlisted long term investment stocks. Either you invest on your own or through StockBasket. 

When you invest on your own, you might buy some stocks and miss out on others. But when you invest through StockBasket, you get to invest in all these stocks proportionally. So, you never miss the wealth-creating potential of any of these stocks. 

You might think, ‘What is StockBasket?’. 

StockBasket is the smartest way of investing in the stock market. StockBasket is India’s first long term investing platform

When you invest on your own, you might not have the time or resources to constantly track all individual stocks. StockBasket, courtesy of its 60+ intelligent parameters monitors the quality of stocks and only includes the best stocks in each basket.

Who Should Invest in StockBasket? 

StockBasket is created with the principle that every investor whether big or small, should have access to wealth creation via the stock market. 

You should invest in StockBasket if you are: 

  • A long-term investor, who knows wealth can only be created by staying invested in quality stocks for a long period.
  • A student, who wants to make the ‘perfect’ start to stock market investing. 
  • A salaried professional wanting to achieve your financial goals. 
  • A seasoned investor, who has created some wealth in equity markets and understands the nitty-gritty of the stock market.
  • A senior management professional, who does not have the time to track markets but wants to create wealth in the stock market.

Why should you invest through StockBasket? 

You should invest in StockBasket as it follows the two most important fundamentals of long term wealth creation – Superior stock selection & investing in them for the long term. 

StockBasket has SEBI registered expert-curated ready-made baskets of stocks, suited to each and every financial goal. Each basket contains the absolute best long term stocks to buy in India. 

Our confidence in our research is so strong that we offer a unique ‘5-year fee refund guarantee‘. So, if you don’t make money in any of our recommended baskets in 5 years, then the entire subscription fees collected from you over these five years, will be refunded.   

StockBasket investments start from as low as Rs 3,500 to Rs. 15,00,000, and it takes only 5 minutes to open a StockBasket account.

One of my favourite quotes is, “Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.”

As you watch the paint dry or grass grow, these articles will make up for an excellent company! 

I’ll be back with many more such ‘interesting’ articles. For now, Ciao! 

The Asian Currency Crisis (1997), the 9/11 disaster (2001), the Global Financial Crisis (2008), the US Sovereign Rating Downgrade (2011), China’s Economic Slowdown (2015), and the COVID-19 (2020), the stock market has suffered a lot of bruises from such massive body blows, but it has continued its mercurial rise.

Such an exemplary performance is characterised by the SENSEX, which has multiplied nearly 10 times since its inception. SENSEX is a stock market index comprising 30 well-established and financially sound companies listed on the Bombay Stock Exchange.  

Looking back in history, while the stock market may seem volatile in a short time, it has a massive potential to generate a vast corpus of long-term wealth. The economy may go through an extended period of slump, but robust companies with strong fundamentals survive while antifragile companies grow, thrive and feed on such transient economic challenges. And looking back, compared to the tottering and galloping bull runs, the length of the bear runs have been tiny and minuscule.

Just to provide an overview of the massive rise in the stock markets, Rs 1 lakh invested in SENSEX in 1984 would be Rs 1 crore in 2017. 

Types of investments

Let us address the elephant in the room “Long-term investments” by classifying the investments based on a specific term. Long-term investments, medium-term investments, and short-term investments are used interchangeably due to the relativity of time, as some investors consider even 1 year to be long-term investments. Based on the standard definitions agreed unanimously by stockbrokers and financial analysts, the different types of investments are as follows:

  • Short-term investments:  Short-term investments are investments anywhere between 1 year to 3 years. Any investment for less than 1 year can be defined as ultra-short investments.
  • Long-Term InvestmentsInvestment horizon of more than 5 years should ideally come under Long-Term Investments.
  • Medium Term Investments: Medium Term Investments are investments for a period between 3 years to 5 years.

Why Long-Term Investments?

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It was Friedrich Nietzsche who said, “He who has a why to live can bear almost any how”. This also applies to long-term investments. When you have incisive clarity about the intrinsic value of the share, in-depth knowledge of the fundamentals of the company and have clearly devised financial goals, the temporal peaks and troughs don’t affect you, though you’re intricately aware of the market. Logic always supersedes emotions. You avoid being a victim to falsified rumours, and fraudulent claims. You remain calm, patient and stay invested while all hell breaks loose around you. As the legendary investor Warren Buffet says “The stock market is a device for transferring money from the impatient to the patient”. 

There are two expressions often running in tandem but conflicting with one another “follow your dreams” and “follow the crowd”. If you follow your dreams, you require extensive financial planning which requires allocating money to long-term investments so you can fulfil your big-budgeted, long-cherished dreams of vacationing in Hawaii, having a grand wedding of your children, possessing a corpus of funds for higher education, etc. The best way to fulfil your dreams is to stay the course, with a long-term vision; remain invested in the financial instruments till it reaches its highest perceived value or till the investment value is enormous enough to fulfil your long-held dreams. 

Now when you take the other expression “follow the crowd”. You may put your dreams in the backburner and get swayed by the short-term volatile movement, which is often a reflection of investors’ paranoia or irrational optimism. In such a scenario, you’ll either cash in and make a profit or sell the stocks off and record a loss. In both cases, your dreams remain unfulfilled. So, while others revel in pleasure over few sultry gains and others sob profusely in sorrow over trivial losses, you stay invested while the paltry sum in thousands invested by you in some distant past slowly burgeons into an immense fortune worth in millions. 

And then onlookers credits luck for the glory, wealth and even fame while you acutely know it was patience, tenacity, the initial drudgery doing extensive research, faith in your expert and more importantly LONG-TERM INVESTMENTS that brought the envious success and stunning victory. 

It is also essential to consider that courtesy, widespread advancements in medicine; people are living longer and healthier lives. However, merely entrusting your money into the safe hands of the bank will not grow your money much and may not ensure a stress-free, relaxing retirement. Hence, given the volatile conditions of the market, the teetering global economy, and the vulnerability of the world to shocks and events beyond its control, long-term investments for a stable future seems to be a wise decision.

Hence, its Long-term investments that will fulfil your investment goals so you can live a life you have always dreamed of.

watch our video to learn about long term investing

Recipe for Successful Long-Term Investing:

If you’re for the long haul, please make sure that you take care of these fundamental ingredients required for creating the recipe of long-term successful investing: 

Invest Early

Compound interest is the eighth wonder of the world. He who understands it earns it; he who doesn’t, pays it” quoted by Albert Einstein. Compound interest can be defined as the interest accumulated on the initial principal and also on the accumulated earnings or interests of the previous periods. Compounding takes place when the interest or gains on initial investment is added back to the principal amount to calculate the returns for the subsequent period. Let us understand the power of compounding.

Let us take two people Mukesh and Anil.

Mukesh and Anil both made long-term investments worth Rs 2,00,000. Both opt for interest to be calculated as compound interest. However, Mukesh’s age at the time of investing was 25 years while Anil’s age was 30 years. Both stay invested until the age of 60. Let us calculate the difference between Mukesh’s returns and Anil’s returns from their long-term investments, for a mere difference of 5 years

Particulars MukeshAnil
Principal Invested2,00,0002,00,000
Rate of Interest20%20%
Age at the time of Investing 2530
Age at Maturity6060
Amount at maturity (in Rs)₹ 11,81,33,646₹ 4,74,75,263
Difference in final value (in Rs)
₹ 7,06,58,383

Now let us understand how much more Mukesh earned from his long-term investments for a difference in investment duration amounting to 5 years. 

He earned a colossal corpus of Rs 7,06,58,383 more than Anil. That means he made 1.49X times the amount Anil receives, from his long-term investments.

He makes 149% more than Anil for merely investing for 16.67% more time than Anil. 

Let that sink in.

This is the genuine power of compounding. 

Hence, the magic ingredient/elixir/ambrosia that makes compounding work is time.

Essentially, it creates a chain reaction by generating returns upon returns until you stay invested in the financial instrument, which makes your wealth slowly snowball into a fortune. Hence, the longer you stay invested in your long-term investments, the more time you give your interest income to compound and grow. So, it is never too early to start investing as the sooner you invest, the sooner you allow your returns to generate further returns until you stay invested. 

Spread your eggs among different baskets.

The world is riddled with uncertainty. You must understand that despite the innumerable forecasts, the best analysis, the world has always thrown down the gauntlet to defy the best of us. Hence, as a long-term investor, it is imperative to mitigate the investment risks by diversifying the portfolio in different asset classes, in diverse geographical regions, etc. Let us understand diversification and importance of it through the example of a fruit vendor. As a fruit vendor, you’d want to sell a variety of fruits instead of just one, so if a large unforeseen event like a hurricane brings Maharashtra to a standstill, completely cutting off supplies of oranges from Nagpur and bananas from Nashik, you can sell the apples from Himachal Pradesh or guavas from Prayagraj in Uttar Pradesh.

Similarly, you can benefit from having strawberries in your fruits catalogue in winter due to their seasonal demand. Think of the fruits as different styles, sectors, regions, by having a diversified portfolio; you mitigate the risk of losing all money at once. At the same time, you’re spreading your risk among a host of financial instruments from different geographies and sectors; so in case of an unforeseen event, the losses suffered by one investment are mitigated or offset by the profits earned in other investments. Also, you don’t want to lose on gains made in other asset classes during their bull run, just like strawberries in winter in the example.

Ride the Winner 

If some of your holdings in long-term investments are doing exceptionally well, there is always this temptation to cash in and make a profit. If you bought 100 shares of Page Industries at Rs 1500 in Jan 2011, and you witness the uninhibited rise in the share prices and see the prices touching Rs 3500 in Jan 2013, you’ll be naturally lured into selling the shares and booking a profit of a whopping Rs 2000 per share, i.e. Rs 20,00,000 in total. However, if you hold your horses and continue holding the stocks you would see the price of the share reaching a mammoth of Rs 36000 in Aug 2018, even now the shares are trading at Rs19000, that is still an appreciation of 1300%. If you’re in the game for the long run, you want your long-term investments to grow and reach their fullest potential, so when you find the winners, hold them and cherish them. Peter Lynch famously spoke about “ten baggers” – the stocks that have the potential to grow tenfold. He attributed his success to such a handful of stocks in his portfolio. However, this requires unyielding discipline to hold on to the stocks even after their prices have exponentially risen and increased by many multiples if you think there is upside potential. You overcome the initial euphoria of your investments riding the bull run and let cold, unyielding investment logic take over. You consider each of the long-term investments on its own merits, keep emotional biases at bay, hold on to those long-term investments which are yet to achieve its zenith irrespective of the considerable gains you may earn presently by selling the shares.

Relinquish the Loser

There is always this engulfing temptation to hold on to poorly performing stocks with the false hopes that it may rebound in the future or worse still to increase your holdings at a lower price. When the housing bubble burst in 2007, when the stocks prices were crumbling down at an unprecedented pace, the investors stiffened and froze. Many did not react until the value of the portfolio got brutally truncated to 40-50% of the portfolio value. During the 2008 financial crisis, many opined “I’ll wait till the stocks reach their original price and then sell off. Then at least I’ll break-even”. First of all, there is no guarantee that a stock may rebound after a protracted, lengthy decline. Also, many investors assume that if the price of shares reduces by 20%, the price needs to simply increase by 20%, which is a fallacious assumption, as described in the chart below. 

Percentage LossPercentage Rise to Break Even
10%11%
15%18%
20%25%
30%43%
40%67%
50%100%

So if your stock worth Rs 1000 is reduced by 20%, i.e. 200, to Rs 800, it has to rise by 25% to reach the price of Rs 1000. Even though acknowledging losing stocks may seem to be a crushing failure, it is imperative to sell the shares and take a few lusty blows to the ego, and stem further loss rather than holding on to the stocks for emotional reasons, defying investment logic and taking a gigantic loss in the future. There is no shame in accepting mistakes and relinquishing the shares eroding in value with no foreseeable recovery and extracting valuable lessons from them.   

Do not try timing the market.

Let’s suppose you invested Rs 42000 to purchase 500 shares of the company Rana holdings in 2008 when the world suffered the worst global financial crisis since the Great Depression in the 1930s; you would be endowed with an enormous wealth of Rs 1.24 crores. This was the time when investors were paranoid of a Financial Apocalypse and were selling their investments off at deep bottom prices. Do you know there were 152 companies listed in the NSE that have recorded in its annals a whopping 1000% to 30000% growth since the 2008 Global financial crisis? Investors always have this overbearing impulse to get in when the markets are doing exceptionally good and get out when the needle of the market is pointing down, but this leads to the investors getting entrapped in fear of missing out and putting their money in the markets when it’s most expensive and exiting the markets when the prices are low, when it is apt to increase the holdings at a lower price to profiteer from the prices rising in the future. 

Re-invest dividends

Let us revisit the concept of compounding in Benjamin Franklin’s words “Money makes money. And the money that money makes, makes money”. Re-invest dividends and harness the power of compounding. The compounding effect can significantly increase the returns if the same dividends are reinvested in equity over time. Significant growth in a portfolio at times comes from reinvested dividends rather than appreciation in stock figures. A meagre, inconsequential income will metamorphose into a fortune over time. Choose stocks with a solid history of dividends, reinvest those dividends, and earn sizable returns on your long-term investments. 

Do not let Volatility Derail you

Volatility is normal – a market life cycle comprising peaks and troughs characterizes a gamut of industries including the financial market. There are going to be severe drawdowns in the market from time to time. It is unheard of any stock only to move upwards. However, when flagrant or obscure signals start to indicate tumultuous times ahead, it pays to stay invested. When you are aiming for successful long-term investing, occasional peaks and troughs are inconsequential, the market prices, at times, are not a pure reflection of the future potential of the stock. Sometimes, it reflects investors’ exaggerated paranoia or palpable excitement. A long-term investor should steer clear of it and should focus mainly on the fundamentals of the company, future growth trajectory buoyed by the long-term stability of the market. Looking at previous drawdowns, the length of the bear markets has always been less than that of subsequent bull runs with any losses suffered during the bear market reversed during the tottering bull runs. Troubled times aren’t a sign to sell everything.

Find expert help

Stocks are usually preferred as long-term investments. But investing in stocks is an arduous and tumultuous journey. It requires extensive analysis of the company and the overall market. It involves various steps from listing the companies, examining the fundamentals of the company, predicting the future growth trajectory of the company, identifying the competitors, forecasting future challenges, and in the end, having a broad market outlook. It also requires extensive calculations such as Price/Equities Ratio, etc. which a layman investor is oblivious to. Investing can be extremely time-consuming, and a layman investor overburdened with responsibilities and assailed with an inescapable amount of work will often find it challenging to find the time and invest in stocks. In such a scenario, we have platforms like StockBasket, where you can invest in expert-selected stocks or a great mini portfolio to build long term wealth or make long-term investments. You have access to a plethora of baskets, which is nothing but a pool of shares, where shares are handpicked to match your diverse financial goals. Also, the baskets are carefully monitored and rebalanced on a timely basis. Stock Basket has generated explosive returns of over 800% since its inception in 2007.

The stock market is replete with examples where a tiny amount slowly snowballs into a fortune catching the investors off-guard. 

E.g. Rs 10000 invested in the stock of an IT company Infosys in June 1993 would pay Rs 2.97 crores in Dec 2017

Rs 10000 invested in Eicher Motors in January 1990, would have been 2.01 crores in Dec 2017 

Here a measly amount of Rs 10000 begets a colossal treasure of money worth in crores, Hence, Long-Term investments endeavours to create a massive trove of wealth while other investments seek to preserve wealth. We must reinstate the tried and tested principles and reinforce the critical habits of successful investors. Platforms like StockBasket with its carefully curated portfolio can provide you with a launchpad to journey towards long-term investments, help accomplish a range of financial goals and ensure success in all areas of life.

We believe that patience, poise, a combination of the timeless investing principles, sound financial advice, and deeper insights can help every investor score many wins enough to turn every captivating dream into a tangible reality. 

Every Investor dreams of outperforming the market and creating wealth like the legendary Investor, Mr. Warren Buffett. But it takes an enormous amount of discipline, patience and perseverance to be a successful investor. Most of the long term value investors recommend the ‘Buy & Hold’ strategy to investment. 

Buy and Hold is a long-term passive investment strategy where the investor is involved in selecting value stocks. Once the Investor identifies the right business, he locks it for the long term, thereby reducing taxes, increasing wealth and enjoying the benefit of compounding. 

Most of the investors bet on the overall economy. Fortunately, India is a developing economy and therefore, has caught the attention of many investment funds across the globe. The long term story of most of the stocks in India has been beneficial to investors. Buy & Hold strategy has, therefore been a boon rather than a bane for most of the businesses. 

Above is the stock price chart of TCS (since the date of listing). The stock has created wealth for its investors, and the value of investment today is more than 1600 times that of the original IPO price (adjusted for share-split and bonus).

In other words, if you had invested ₹1,00,000 in TCS in 2004, it would have become ₹14,40,000 (without considering the impact of dividend). TCS is the second largest company in terms of market capitalization listed on the Indian stock exchange.

Buy and Hold may seem to be a pretty simple strategy when you look at these 16 years at a stretch. Afterall one would have just held on to this stock all these years. But why is it that only a few were able to achieve much higher returns?

It surely isn’t the most straightforward strategy. For he who had done it, would have fought a hard battle and faced the following;

  • The temptation to sell after seeing handsome profits. 
  • Refrain from shifting to more attractive stocks.
  • Stock ticker tape, which made its presence felt every second.
  • Not bragging like his fellow investors who made an instant profit.
  • Sentiments of the market at the time of a bloodbath. e.g. the 2008 US Financial Crisis. etc. Avoiding panic selling.

This is correct. Identifying the right stock is just 50 per cent of the overall success. There are millions of traders sailing in the same boat, but their earnings tend to differ materially. Timing, price, time frame and temperament decides the returns from your investment as well. The long term growth depends on corporate earnings. However, the short term price fluctuations are based on sentiments. The earnings reported quarterly, but the price of the securities change every day. 

Did you know?

Warren Buffett is one of the most successful investors of all time. His shareholding list is available to everyone. Yet only a few could make a fortune like him. There may be many reasons for this, but it can be narrowed down to only one – ‘Unrest’.

There’s a famous quote by Blaise Pascal which says- All of the human unhappiness comes from one single thing: not knowing how to remain at rest in a room. This is one of the great lessons for an investor who believes in the power of long term investing. He would not only buy and hold but will look for quality businesses that would sustain through the toughest of recessions. Long term investing is all about understanding the value of the business and not the price of the stock. One who understands the difference between the value perceived and the price of the stock – can become a successful investor.

However, if it was so easy to make money in the long run, why are most of the investors not following the same strategy? Also, if the long term story is optimistic, does stock picking even make a difference?

Well yes, business dynamics change from time to time, and so do the emotions. The behavior of other investors and the market conditions affect the investment portfolio. In changing business environment, it is of paramount importance to regularly review your existing portfolio and look for forward-looking opportunities. 

And that’s why holding on to stocks – the ones that remain high quality – is elementary yet not as simple as it sounds. A profitable business today may or may not continue to stay profitable due to the business dynamism. 

Although Buy and hold have provided immense wealth to many, who follow it. But it has undoubtedly been a wrong choice for some too. This is the chart of wealth destroyer Reliance Power since its IPO.

This is the chart of Reliance Power. If you had invested ₹100,000 in Reliance Power in 2008, you would be left with mere ₹1600. 

Had the Investor reviewed the stock at regular intervals, he would have exited much before the crash and could have avoided erosion of capital beyond a point. In addition to periodic review, the Investor should also deploy risk management techniques to reduce the losses beyond a point.

How can one assure wealth creation in the long run?

As the business dynamics keep on changing, businesses may or may not remain profitable for the longest time. E.g. Automotive and fuel industry may become obsolete after the introduction of electric vehicles. 

A long term investor should review a firm’s viability, scalability and sustainability before making a decision. He should be well equipped with the fundamental changes with the company, i.e. change in management, business model, geographies, product range etc. These are some of the ways through which an investor could make a fortune in the market.

To conclude, Buy and hold investing can be thought of as sowing a seed into the ground and just watching it grow to the fullest. You may not get the fruit in the immediate future but will surely receive ample of them after a certain amount of time.

Why was StockBasket created?

Problems pave way for invention. Similarly, StockBasket was introduced to eradicate several problems of investors. Before trying to know why StockBasket was created, let’s dive into the major problems associated with investing. 

Problems of investors:

  1. Wealth destruction strategy: Many investors are unaware of the fact that only less than 20% of stocks are good quality stocks and the rest accounting around 80% stocks don’t beat the expected returns. Here is the study of  the StockBasket research team: 

Many investors fall prey to investing in wrong stocks due to lack of knowledge or inadequate research and hence they walk on the path that ultimately leads to wealth destruction.

2. Churning of portfolio: It has been found out that investors churn their portfolio way too much. The average holding time for investors is just 2 years! Due to this, investors don’t benefit from the power of compounding. 

Introducing StockBasket

SAMCO presents StockBasket – India’s first buy and hold investment platform with an objective to create long-term wealth.  

StockBasket research team has handpicked excellent quality stocks with its authentic research based on its proprietary framework of over 25 parameters of evaluating stocks.

StockBasket is a basket of expert-curated stocks designed for long-term wealth creation. With reasonable diversification of stocks of around 6-20 good quality stocks in one basket to produce optimum returns for you.

StockBasket is designed with a minimum investment horizon of 5 years so that retail investors don’t churn their portfolio and enjoy the benefit of compounding in the long-run of investment. 

Who should invest in StockBasket?

There are many retail investors investing in quite an unorganized way. They ultimately fall prey to investing in wrong stocks that can potentially harm their wealth creation. Also, such investors churn their portfolio too much and hence they miss the benefits of long-term wealth creation

StockBasket is created with a principle that every investor whether he’s big or small, should have access to wealth creation via the Stock market and invest in an organized way so that they don’t lose wealth. Enlisted below are the profiles of our retail investors and their needs:

·       A long-term investor, who knows wealth can only be created by staying invested in quality stocks for a long period

·       A student, who wants to make an investment for the first time.

·       A salaried professional, who started working a few months or years back and has saved up some money to invest in a good and safe asset class.

·       A seasoned investor, who has created some wealth in equity markets and understands the nitty-gritty of the stock market.

·       A senior management professional, who does not have the time to track markets but wants to create wealth in the stock market.

So basically, StockBasket is for anyone and everyone who wants to invest money for the long-term and create wealth.

“Our favorite holding period is forever.”

Warren Buffet

How long should you hold a stock? Buffett says if you don’t feel comfortable owning a stock for 10 years, you shouldn’t own it for 10 minutes. The benefit of long term investing in stock market is unparalleled, provided that investments are made in fundamentally strong companies with a good business model, sound management and growth visibility. Staying invested in the market over the long term has historically paid off. Let’s look at these benefits.

Cost effective:

Most of the market participants blow up a huge amount of money in commission, brokerage charges and various taxes by continuous trading in stocks. The more you trade, the more charges are triggered. Long term Investors will save on all these costs as it naturally leads you to transact less often. Every rupee saved can be further added to your investment capital, which makes long term investing very powerful.

Power of compounding:

“Compounding is the eighth wonder of the world. He who understands it earns it. He who doesn’t pays it” – Albert Einstein. The element of compounding comes into play during long term investments when your investments produce earnings through dividends, stock returns etc, they get reinvested in the stock and can earn even more. The more time you’re invested in a stock, the power of compounding gets larger.  Your investments can grow exponentially over time.

For example, let’s take two people, Ram and Shyam, who have the same starting balance say Rs 1,00,000 each. They both decide to buy same investment on the exact same day and earn the same interest of 10%. They both plan to hold their investment for 30 years. Ram plans to withdraw the interest at the end of each year, while Shyam plans to reinvest the interest and let it compound. Let’s fast forward 30 years and see the difference in the potential returns. Ram who withdraws the interest, would earn Rs 10,000 per year. Over 30 years, his earnings would have amounted to Rs 3,00,000. But let’s see how much difference reinvesting would have made. As shown in the chart below, Shyam who reinvested the interest would earn, Rs 16,44,940 above his initial balance which is more than 5x of Ram. This example illustrates the power of compounding. Long term investment takes advantage of the power of compounding and maximizes your returns.

Highly effective:

Long term investing works because it makes you focus on things that really matter. Long term investors will look at the core fundamentals of the company such as growth prospects, performance, management competency, etc and not look at the day to day fluctuations in stock prices. Over the long term, price movements tend to normalize depending on the performance of the business. Historically, these factors are much effective to predict future returns.

Removes the short term volatility out of the picture: 

The stock prices may show very high volatility, i.e, fluctuations in prices in the short term but maybe growing over the long term.  These fluctuations tend to confuse the investors as emotions take over leading to rash decisions.

The stock prices never go in one direction continuously without any fluctuations. As you can see in the above chart, there are several upward and downward movements in the price, but looking at the larger picture the stock is trending upwards. Long term investing helps investors ignore these short term fluctuations.

Requires Less time:

Long-term investing requires less of your time. Your work is done when you buy a stock which you think is of high quality and will maintain its competitive advantage over the years. All you have to do is to check periodically whether the company is performing well. Trading and short term investing require one to give full time and efforts to it.

No need to time the markets:

It is very difficult for someone to predict when to enter & exit the market consistently and accurately over various businesses or market cycles. You would be much better off to stay invested in the markets. Investors who try to time the entry and exit points tend to underperform the ones who stay invested throughout.

Fulfilment of long term goals:

Are you saving up to buy a house, fund your retirement or your child’s education? Long term investment is the way to go! To prepare for a high cost future, you should cut down your current costs and invest that money for the long term. The earlier you start, the compounding effect gets larger. You must be thinking which stocks to invest in for such long periods and whether the companies will still have strong fundamentals 5-7 years down the line. StockBasket is a product that will take care of this for you. It is a basket of high quality stocks, carefully chosen by experts. It helps you stay invested for the long term, without worrying about anything else. It keeps track of the portfolio and makes time to time changes if necessary Investors can choose amongst various baskets such as ‘Retirement in 2040, ‘4x target in 10 years’ depending on their goals and investment horizon.

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