Wealth Creation Tips: Markets may not be always be pricey or cheap, says Helios Capital’s Samir Arora

In an interaction with Zee Business Managing Editor Anil Singhvi, market veteran Samira Arora said that the markets may not always be cheap or expensive but valued reasonably, emphasising the importance of careful stock picking to beat safer asset classes consistently over time.

“Over any cycle in any market, the stock market investor can earn a higher return by over 5-6 per cent per annum in comparison to the government-backed securities,” said Arora in a special Zee Business segment dedicated to wealth creation.

Investors with a rather healthy risk appetite may use market downturns to carefully square off positions in select stocks while leaving the rest of the portfolio intact, as the market has a tendency to evolve and recover in due time, said Arora, Founder and Fund Manager at Helios Capital, a provider of investment and portfolio management services (PMS).

Here are five other tips shared by veteran fund manager Samir Arora that investors may use to build long-term wealth.

Do not liquidate your portfolio in market downturns

Investors should avoid redeeming their entire portfolios during market downturns, said Arora.

Citing the examples of the COVID-triggered market turmoil and the 2008 global financial crisis, he said that while such events lead to significant loss of wealth for investors, but only to recover later. If the risk appetite allows, investors can average their positions and use such downturns to invest more, which helps in building wealth over the long term.

Any cycle delivers returns superior to government-backed securities

According to Arora, equity investors can earn returns to the tune of the upwards of 5-6 per cent per annum over any given market cycle, superior to government-backed securities, but these returns are “erratic and do not come smoothly”.

Large, new-age investors often aim at garnering a 25-30 per cent return from equities annually over the long run, which is otherwise not possible, he said.

Nevertheless, one can realise 15-18 per cent annualised return which is world-beating, according to Arora.

No one knows with certainty that a stock will yield multibagger returns

Analysts can tell you that a stock can run up 40 per cent per annum in two years going by its initial value and an assessment of its fair intrinsic value, but they cannot predict its true long-term prospects, explained Arora.

He advises investors against rushing to take a very long-term view, of say 10 years.

How to pick a stock

After analysing the market thoroughly, one may pick a heavily beaten stock available at a low price and showing the tendency to recover, said Arora.

Picking a stock that has staged outperformance in the last 5-6 months and matches your criteria is a successful strategy that Arora often finds successful.

Focus on your career and appoint a fund manager: Arora’s message to new investors

New investors should initially focus on building their career and strengthening their core-competencies, and consider taking professional services for creating wealth over the long term, said Arora.They can appoint fund managers who charge a bare-minimum fee, the market veteran added.