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You may have learned many tips and tricks on how to make money in the stock market, but today we'll share some special tips from India's leading investor, Ramdev Agarwal. Speaking at Motilal Oswal's Passive Fund Conclave, held on March 20th, while addressing the media, Ramdev Agarwal made some important points about compounding and how you can become a millionaire with a 15% return in the stock market.
He shared some key points that could be extremely beneficial for you if you invest in the stock market. So, without further ado, let's begin by discussing some of Ramdev Agarwal's special tips. First, let's discuss how your money will double in five years. There's a 72-digit formula. If you calculate a 15% return, assuming you get an annual rate of return of 15%, your money could double in five years.
How will this happen? The reason behind this is compounding. Compounding is an effect that increases your money very fast, but you just know to stay in it. It is calculated according to the Rule of 72. I will explain to you what the Rule of 72 is. Actually, if you divide 72 by the expected rate of return, like 15 in this case, you will double your money in whatever time you get.
For example, if we divide 72 by 15, then almost 15 7 is 75, that is, 155, sorry, a little less than five, that is, in about 5 years, if you remain an investor at a return of 15, then your money will double. If we calculate this at 10, then 17 72 / 10, so this is 7.2, that is, in about 7 years, if you get an annual return of 10 percent, then your money will double, so according to this calculation So if you remain invested for 5 years at a return of 15%, which the market gives on an average, then your money will double.
Therefore, patience and right strategy are two very important things in the equity market, which Ramdev Agarwal ji mentioned that you can double your money in 5 years if you get a rate of return of 15%. But where will you get this return of 15%, for that also he said some special things. Actually, if you are expecting a return of 15% or more in the long run, that you keep getting this much return for many years, then you will have to select such stocks.
If you always invest in quality stocks for a long period, then you can definitely get a return of 15%. And if we look closely, TCS is growing at a CAGR more than that of Reliance 1 and they have also given the same return. If you cannot do this, then what happens in that case, that is, if you cannot enter into quality stocks after doing research, you cannot enter into stocks with the right value because you have other work to do, then In the case of mutual funds and PMS (portfolio management services), a fund manager (an expert) invests your money because he or she is from that field.
He can better manage your returns, provided you also tell them your goal: to achieve a 15% rate of return and double your money in five years. Value investing and timely averaging are two important tools. He also explained that if you time your investments and engage in value investing, you can still get good returns, meaning you may see returns of 15% or more.
Therefore, regarding the growth sectors in the coming time, he also mentioned IT, pharma, and infrastructure. According to Ramdev Agarwal, these are three such sectors that have good growth opportunities in the future. However, he placed a lot of emphasis on compounding. So, let's understand a little about compounding, what it is.
In fact, if you invest long-term in good businesses, compounding is the key to real wealth creation. Compounding comes in front of you in the form of a key, it is the main factor which gives you good returns in the long run, if you select a company which is giving a return of 15 to 20, then you can become a millionaire, so all you need is to be patient and support compounding, invest for compounding, do not make a short term view and avoid investing in commodity trend based investments, etc.
and always invest in strong companies which have a CAGR of 15 to 20, which you are expecting that for the coming five or ten years this company will keep growing at a minimum CAGR of 15 or 20, you have understood the magic of compounding, but why is discounting important, see discounting, you must have always heard that the market discounts this thing, that thing, like recently the market was very overvalued and it discounted the overvaluation and the market has corrected, now the market will become fairly valued, then Investors will come in, there will be a boom.
This means that the market is always forward-looking. Similarly, it discounts things in advance. Therefore, Ramdev Agarwal also emphasized on discounting. He said that the market determines the value of stocks by discounting future earnings. This means that how the company will perform in the future is determined and it is discounted in advance.
Therefore, high-growth stocks get higher valuations, and stocks with low growth potential get lower valuations. Interest and inflation also directly impact the markets. Apart from this, the sentiment of FIIs and DIIs is also discounted in the markets. If FIIs are weakening or are leaving, then the market discounts this too.
We have seen many domestic investors also exiting from the companies in which FIIs are selling the most. In such a situation, if you understand these two things – discounting and compounding – then you can make good money in the market. Speaking at this conclave, Ramdev Agarwal emphasized on these two things.
Special emphasis was given, but what you should do for long-term wealth creation is invest in companies with strong fundamentals that grow over time. You don't always have to look at where this company will be in the next two years, you have to look at where this company will be in the next 10 years.
If it is growing at a CAGR of 10, 15, 20%, then you only need 5 years to become a millionaire. So you will be able to achieve that growth and achieve your targets. Therefore, ignore the short-term noise and enter only good companies at the right value with a big long-term vision. You can also invest in quality businesses, which is the best way to invest.
If you are not able to understand even this, then you can invest through mutual funds. Diversification is very important in the market. You should focus on the long term and you should not panic sell at every small decline, which we are seeing in the market these days. You should do some averaging, but always quality stocks, which I have been saying again and again.
I am as Ramdev Agarwal ji has also said repeatedly, focus only on quality stocks. Only your right strategy will create big wealth for you. Therefore, you will have to keep all these things in mind like correct asset allocation, risk management, understanding market cycles. But if you are not able to do all this, then do SIPs, invest in mutual funds because there is a fund manager who does all these things better for you and manages your funds.
So, in this way, Ramdev Agarwal has told the key to making money in the share market, if we try to understand compounding, discounting and long term investment in short, then what are your views on this vision of Ramdev Agarwal. Do tell us in the comments and keep watching for such videos. Money, this SIP breaks your sleep, but you have to move ahead, not just wake up, for that you need another SIP.
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