What is wealth?
While the oxford dictionary defines 'wealth' as having 'abundance of valuable possessions or money', but the word 'wealth' is similar to the word 'happiness' in the sense that there is no fixed meaning of the phrase as it differs from person to person and hence its meaning becomes unique or distinctive.
While the meaning of 'wealth' might differ, the basic fact remains that we all want to become wealthy. From Warren Buffett to Jeff Bezos to an ordinary chaiwala (tea seller), we all want to possess the cheat sheet for creating abundant wealth. This is precisely why (arguably) the most googled question of all times is 'How to be wealthy?'
An equally popular question for long term wealth creation is, ‘which are the best shares to buy today for long term?‘ or ‘what are the best long term stocks’ etc.
But before we share the list of the best long term stocks for long term wealth creation, let us first understand the reason why we need to create abundant wealth.
Dalai Lama famously quoted,'No matter how educated or wealthy you are, if you don't have peace of mind, you won't be happy'. Happiness and peace of mind are, therefore, the most important by-products of your wealth creation journey. And you attain happiness and peace of mind only when you achieve your financial goals.
Can wealth creation help me achieve financial freedom?
So, the core concept of wealth creation revolves around the fulfilment of your financial goals and the subsequent achievement of financial freedom. Financial freedom is simply the ability to enjoy life and make life decisions without stressing about the financial impact of these decisions. Simply put,
So how does one attain financial freedom? Don't worry, you don't need to go to the Himalayas and meditate for ages like a sage to achieve financial freedom. Financial freedom is a non-elusive concept and is the result of successful financial planning.
Principles of long term wealth creation
Now that you understand financial freedom, let's understand the principles of long term wealth creation.
- Cover your bases (create a contingency fund): A small hole sank the entire titanic! While investing for the long term, ensure that you have at least 6-12 months of mandatory household expenses maintained in a savings bank account. This will ensure that you don't dip into your investments (or worse, completely liquidate them prematurely) to fund your monthly expenses. It will also ensure that your long term investments stay long term!
- The early bird gets the worm (power of compounding):
One of the most critical factors in long term wealth creation is time horizon. The sooner you start, the more time your investment will have to compound and grow. As illustrated below a mere delay of 5 years can hamper your corpus by a whopping Rs 83.90 Lakhs!
Investor Mr Ram Mr Shyam Monthly Investment Rs. 10,000 Rs. 10,000 Rate of Return 15% p.a. 15% p.a. Tenure of Investment 15 years 20 years Future Value Rs. 67,68,630 Rs. 1,51,59,549 Difference in Corpus Rs. 83,90,918
- Time is Money (Calculate investment time horizon): Before you start any journey, you calculate the time required to get there. This simple step helps you set up your expectations for the journey. Similarly, in investing it is very important to calculate your investment time horizon. If your investment time horizon is only four years, then large-cap stocks would be apt for you. You cannot invest in midcap stocks if you cannot stay invested for the long term. Hence it is crucial to calculate your investment time frame before making any investments.
- Social Distancing: Herd bias is the enemy of any investor. Refrain from indulging in herd mentality while investing and don't invest in stocks only because your dad, friend or uncle recommended it. Their risk appetite, time horizon might be entirely different than yours. What suits them might cause a fatal reaction to your portfolio.
Asset Allocation: Contrary to popular opinions, asset allocation, works in stocks as well, especially in building a long term portfolio. Your equity portfolio should include stocks across sectors and market caps with varying correlation and beta. Putting all your eggs (money) into one basket (stock) is financial suicide unless the basket is StockBasket, in which case you are set for life!
StockBasket is a uniquely curated and hand-selected basket of stocks based on 25 parameters. Each basket is created after processing and analysing over two crore data pointers daily to determine the health of the portfolio and to reduce the risk to a minimum across the portfolio.Each basket contains the absolute best long term stocks with the ability to create infinite long term wealth.
- Long term investing is the key: When investing in equities, an investor needs to commit for the long term. Direct equities have a proven track record of generating superior returns if held for long term. The golden rule of wealth creation in equities is to ‘buy the best long term investment stocks and then give them ample time to grow’.
Check points for successful long term wealth creation
While long term wealth creation is the essential vehicle of your journey towards financial freedom, you may encounter troubles if you don't pay attention to the four significant checkpoints to be kept in mind while investing for long term wealth creation.
- Long Term Commitment: Investing or wealth creation is not a short term activity. It is a long term commitment and hence before you start investing, you need to commit to these investments for the 'long term'. While investing, if you have committed for a time period of 10 years, then even a 50% fall in the market in the next six months shouldn't bother you.
As Paul Samuelson aptly remarked, 'Investing is like watching paint dry or grass grow. If you want excitement, go to Las Vegas!'.
- Understanding the risk-reward tradeoff: Equities, in their very essence, are risky instruments and aren't suitable for everyone. While they have a history of generating superior returns in the long term, they do have their share of bad times in the short term. But remember that fortune favours the brave. So, the higher the risk you take, the higher would be the returns you generate. Equities have proven, time and again, that they are the best instruments for long term wealth creation.
- Big Picture matters: While the devil is in the details, it is essential to look at the big picture and not get disheartened by the market lows. Any and every market fall is an opportunity for you to buy your favourite stocks at a discounted rate and who doesn't love a sale! Remember, Warren Buffett made his fortune by being greedy when others were fearful.
- Stock Selection makes all the difference: Just because something is available cheaply in the market doesn't mean that it's the best stock to buy for long term. When investing for the long term, it is utmost important to be invested in the right stocks and not duds. In an ideal world, you'd want to be invested in Tata Consultancy Services (TCS) and not Tata Communications!
How should I select the best stocks for long term Investment?
While every other person claims to be a stock market 'guru' and gives away free tips to conquer the markets, God himself can verify the credibility of these free tips!
As mentioned earlier, the stock markets are not biased, and both rich and poor are equally rewarded and punished in the markets.
There are around 5000+ listed companies listed in the market. So how will you decide which are the best long term stocks to invest in for wealth creation?
Who will decide whether a stock is worth investing your hard-earned money in or not? Does an ordinary investor have ample resources, time and expertise to study the balance sheet of all the companies in the market and meet their management to take an informed investment call?
Of course, Not!
Every investor, therefore, needs a guide, or a mentor to manoeuvre the tough times and hold your hands in times of crisis, a job brilliantly done by StockBasket.
StockBasket is India's first online platform to facilitate long term investing based on dedicated data processing and analysis. StockBasket uses a unique proprietary model which processes more than two crore data points every day and based on 25 intelligent parameters decides the quality of stocks and only includes the best stocks in each basket.
Which are the best stocks for long term Investment?
List of Best Stocks for Long Term Investment
|Sr. No.||Company Name||Share Price||Market Cap. (in Cr)||Returns after 10 years (in %)|
|1||Hindustan Unilever LTD.||2308.50||5,36,407||862.68|
|2||Tata Consultancy Services LTD.||1869.50||6,82,389||388.50|
|4||Bajaj Finance LTD.||2051.00||1,18,549||4683.12|
|5||HDFC Bank LTD.||2308.50||5,36,407||862.68|
|7||Godrej Consumer Products LTD.||539.00||54,632||457.51|
|8||Jubilant Foodworks LTD.||1484.75||6,486||773.38|
|10||NIIT Technologies LTD.||1118.20||6,975||497.64|
* Share Price as on 27th April 2020
Why StockBasket is the best investment option for Long term Wealth creation?
The above chart highlights our stellar performance against popular asset classes like Equity, Mutual Funds, Gold, PPF, Bank FDs, Real Estate and Bonds.