Can I become a millionaire by investing in stocks?
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- Updated On:26-Sep-2021
- Replies:2
Short Answer
Investing in stocks can make you a millionaire, provided you follow the necessary steps. These include investing regularly, picking good quality stocks, and most importantly playing the long-term game rather than trying to make a million in months or a couple of years.
Detailed Answer
Why is Investing important?
Investing not only helps you to grow your money but also makes you financially free in the future. Investing is important for every individual to retain their earned money and also grow it. If you keep your hard-earned money idle, it will lose its purchasing power due to inflation. Therefore, it is necessary to invest and diversify your investments to keep the risk low and increase your returns.
Can investing make you a millionaire?
It is possible to become a millionaire by investing in stocks, but you will have to do this consistently over a long period of time in order to achieve your desired benchmark.
Investing in stocks is the best way to beat inflation and increase your money at the best possible rate. The key to getting good returns is to invest in good companies and to do it regularly. It also requires you to stay invested for a long time. Investing is never about a get-rich-quick scheme. Instead, you can get wealthy by investing small amounts at periodic intervals, over a long period of time. Rakesh Jhunjhunwala, Warren Buffet, Radhakishan Damani, are live examples of successful stock investing.
There are some key elements that you should keep in mind while investing in stocks, they are
1. Invest in good and fundamentally strong companies
This is the most valuable lesson when it comes to stock investing. If you follow this, you are set to become a successful investor. Many cheap penny stocks look like a bargain but remember they are cheap for a reason. Have you ever seen top companies like TCS, Nestle, or Reliance trading below Rs 50 or Rs 100? The answer is definitely No. Good companies won't trade at single or double digits because buyers are willing to offer a higher price for the stocks. Penny stocks may go up 50 to 100% in a very short period of time but they eventually come down in a similar fashion. Buying good companies will ensure that your capital stays protected and you also receive regular dividends as an added bonus.
2. Diversify your portfolio and invest regularly
Diversification is important to mitigate your downside risks and also to get regular returns in the process. Diversification essentially means investing your money in different asset classes like equity (stocks), debt (bonds), cash (fixed deposits), etc.
Making regular investments is equally important to get wealthy in the future. SIPs (Systematic Investment Plans) help you to get an average cost for your assets so that you get better returns than lump-sum investing.
Conclusion
To conclude, investing small sums over a sustained period can make you a millionaire. The key is to start early and let compounding perform its job. You can invest as low as Rs 15,000 per month and get to $1 million or Rs 7.3 crores in approximately 27.5 years at a 15% annualized return. But if you bump up your initial contribution to Rs 30,000, you can achieve the same mark in just 23 years. This shows that investing is not that difficult and one can simply invest in an Index fund and beat inflation by a broad margin and enjoy the returns of good quality stocks collectively.
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Discussion (1)
Short term and long term investments are the two types of investments, allowing people to invest in assets which can help them to generate a profit in the future. Both are important in there own ways and it is important to diversify also. An investor needs to be mindful about investing in both.
There are various terms that play a huge role in determining how to choose stocks for long term investment such as P/E ratio, dividend consistency, etc. For a more elaborative information head below and read the explanation given for better understanding.
For significant returns, one can look forward towards stock funds, real estate investments, dividend stocks, target-date funds and so on. Each one of these investments does offer something better to investors based on their capital of investments made.
One can either invest in bluechip companies or research extensively on the companies they feel would give returns. It also comes down to the type of investment they are ready to make. Hence, figuring out the different companies could take time, experience, and research.
Undertaking fundamental analysis and proper research is essential before investing in any particular stock. Apart from this, you should also consider asking seven key questions like 'What does the company do', 'How is it placed among its peers', 'How is the management of the company', etc before investing in it.
There are about 89.7 million active demat accounts as of 31st March 2022, i.e., about 5-6 percent of Indians invest in stock market. Let's gather some more details on the percentage of Indians actually putting their money in the share market.
There are several investing choices accessible for Indian students that might assist them in beginning their future savings. There are several options for students to build their money and make financial plans, including standard savings accounts, term deposits, and mutual funds.
Every Equity Investor should maintain some part of their portfolio diversified into foreign companies. This can be achieved through Foreign brokers or Mutual Funds and ETFs that invest in abroad markets. Investing abroad has many benefits such as exposure to the top global companies like Facebook, Amazon, Ford, etc. The tax implications on investments made outside India are different as foreign Equity is taxed as Debt Mutual Funds
A bear market is the tendency of the financial market to take a negative turn for a long period of time, typically at least 2 months. The market experienced a general drop in prices for at least 20% from previous highs over at least 2 months.
Blue-chip are stocks of reputed and financially sound companies. Investing in blue-chip stocks comes with numerous benefits. Let's see what are the advantages of putting money in blue-chip stocks.
dm.smifs
One can become millionaire by doing a job, business or investing. Thus, the answer to the question is yes, you can become a millionaire by investing. In fact, as an investor you can become a millionaire, the odds are in your favour.