Book Summary of Get Rich Carefully
Wall Street Veteran and Author James Cramer have written this book and in this he has mentioned about the perception of Stock Investing and strategies and Techniques to make astute decisions in Stock Investing. He explains in a simple and engaging way how every investor can get rich with a prudent and methodical approach.
Lesson 1 – Conservative investors need not shy away from stocks
Most people view stock markets with a lens of caution and often avoid investing in stock markets due to the perceived levels of risk. Due to this, it can be said that many people are actually afraid to invest in stocks. However, that need not be the case. Whether you are a conservative investor or an aggressive investor, it does not matter. All you need to do is understand the Stock Market.
To create a successful stock investing experience, investors can reflect on the following themes which are made to last. These themes that have tremendous potential and can be considered as multi-year investment opportunities
- Technology ( Cloud Computing, Software, Mobile and Social Network)
- Health and Wellness ( Pharma, Hospital, Wellness, Diagnostic centres )
- Specialty Chemicals and Fertilizers
- Company with high innovation and patents
Lesson 2: Invest in ‘bankable’ management
The people at the helm, the CEOs and senior management steering the company, matters the most. This gives rise to the concept of ‘bankable’ management. While investing in a company, it is very important to evaluate the senior management. Knowing their record and character of the CEO, how he has previously contributed to this firm or other firms that he might have worked at, and what he can bring to the future of the organisation will determine, more than any other factor, whether you will be able to get rich investing with that leader and very likely that that the investors make good money over long term.
Lesson 3: Macro trends and policies are highly relevant in stock investing
Another important lesson to learn is that we can’t just put our blinkers on and look at only a few factors while considering stock investing. The world is becoming increasingly globalized with the boundaries between countries dropping. This means that there are a host of factors, both micro and macro, that impact the fundamental value of a stock. Thus, it is important to first estimate the world’ growth, then estimate the sector’s growth within the world’s prospects, and then focus on figuring out how a given company is performing in that sector and what management is doing to exceed the average performance of companies in that sector. Measure your company’s growth rate against both the rate of growth in its own sector and the rate of world or Domestic Growth.
Lesson 4: There is no substitute for doing your own research
Research is one of the main building blocks of stock investing. When you put money into stocks it is important for you to understand the core essence of stocks and also of the companies that you are investing in. Make an effort to understand important terminology related to stocks. What stocks mean, what is price, what is market capitalisation? Once this is done, make an effort to understand research terminology. What are earnings, what is growth, what is a P/E ratio. Knowing these can help you make better stock investment decisions. Do not look at factors in isolation. Instead, make a note of all the factors that can impact a company’s stock price, take advice from trusted experts, and then weave all these inputs together to create a holistic picture. Thus, make an effort to understand your investments. Ignorance is never a good strategy.
Lesson 5: Keep a long-term view on investing
To successfully avoid market pitfalls and mitigate the volatility that is accompanied with stock investing, it is important to adopt a long-term approach to investing. When you invest in good companies, you need to keep holding them to reap their true benefits. This can only happen over the long-term. The best way to strike a balance between greed
A viable way to gain exposure to equities is through equity mutual funds. These funds are professionally managed where the fund managers invest in the stock market based on a specific investment mandate and pre-determined risk levels. Further, investors can choose from various equity schemes to suit their risk-return requirements. This can help investors get the desired equity exposure. The main thing is that investors must start their investment journey ‘now’.
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