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Key Takeaways Till Now
Most investors in India who follow the common myths around investment in asset classes like real estate, gold and debt mutual funds fail to beat the inflation rate in their wealth-compounding.
While equities as an asset class are better wealth compounders than real estate, gold and debt and real estate, investment in equities is also plagued with similar problems as the other asset classes, in the context of investors taking on undue risk building their equity portfolios. An equity investor in India needs to minimize four types of risks if she wants to generate steady and healthy investment returns— Accounting risk, Revenue risk, Profit risk and Liquidity risk. The ‘Consistent Compounding’ approach to investing in equities in India has three key elements—Credible Accounting, Competitive Advantage and Capital Allocation, which help investors generate healthy returns without taking additional risk (or loading up on beta).
