Real equity investing

When I look back at the last 17 years of Wealth Insight, what strikes me most strongly is how unhappy the first seven years were. I don't mean unhappy for anyone personally but for the equity markets.

We launched Wealth Insight in July 2006. The BSE Sensex was at around 10,000. For the next 18 months the giant bull run continued to peak at just over 20,000. The global financial crisis hit, and the markets stayed below that peak till the magazine was seven years old.

This turned out to be useful. We attracted a core group of subscribers who experienced our unique approach first-hand. Our methodology withstood the stormy phase gracefully and armed our loyal readers with invaluable insights that bolstered their returns in subsequent years.

Let's not forget the age-old wisdom in equity investing: the seeds of loss are planted in prosperity, while the seeds of profit are sown in adversity.

For this 17th anniversary commemorative issue, we return to what is perhaps the most confusing topic in investing, which is small-cap investing, and let me provoke you a bit on that topic:

Imagine you're a pioneer in the wild frontier of stock investing. This thrilling landscape isn't found in the towering shares of Infosys or InterGlobe, but in the uncharted territory of small-cap stocks. This isn't to say that those big names aren't part of the equity investing world - they are. However, if you're seeking the true essence of owning a business and flourishing alongside it, your journey begins with a small-cap stock and watching it evolve into a midcap, then a large enterprise.

What makes these small-cap stocks a daring venture? One word: volatility. Yet, that same volatility is the spark that can ignite them into winning investments. It's a paradox, isn't it? But that's the fascinating crux of equity investing. We intuitively understand that the fluctuating nature of stocks is what makes them such an enticing investment. Some stocks will soar, others will plummet. Some will outperform their current status in the future, while others will falter. This inherent risk is precisely what fuels their potential profitability. The true reward lies in astute investing - identifying those stocks poised for substantial future growth.

Understand that risk and returns go together. There's no great payoff waiting for you to make great choices for asset types with no risk. Do you think there's a fortune to be made in choosing the best fixed deposit? That sounds like a joke, mostly because it is. If this magazine was about choosing the best fixed deposits, we wouldn't have lasted more than a month, let alone 17 years and going strong.

It's not easy, it takes patience and a certain temperament, but the rewards can be enormous. To understand what I'm trying to convey, investors must consider what they expect from equity investing and whether they are willing to put up with the risk and the volatility that is an inevitable part of the same package that also contains great returns. Part of our job at Wealth Insight has always been to help our readers attain that kind of temperament and attitude.

In fact, on this front, we are soon launching something new to help you more - a stock-rating system. However, I'm not going to say anything more - better to maintain the suspense until you can use it!

The other part of our anniversary cover package is as general as the one above is specific. Equity investing - and, in fact, our lives in general - can only do well if our nation itself is becoming more progressive. Sometimes we forget the historic scale of what is happening in India and the kind of impact it's having on the lives of more than a billion people. I hope 'India Story' on page 83 of the 'Wealth Insight' issue will help us gain perspective.