This will make you as investor. Magic to increase your wealth with MOAT companies

Trading and investing are way to make profit in the stock market, but they pursue that goal in different ways. Retail investors enter into market without understanding the different between these two and loss money in the market. Before enter into market they have to decide they want to become investor or trader? This will make you as investor.

Are you investor or trader?

Traders jump in and out of stocks within weeks, days, even minutes, with the aim of short-term profits. They often focus on a stock’s technical factors rather than a company’s long-term prospects. Traders do gambling in the market and try to earn money in short term. Investors have a longer-term outlook. They think in terms of years and often hold stocks through the market’s ups and downs. Investors takes time to select a stock. Once invest in the stock, they hold it for years to get profits.

Investor aim for 15% annual return and Trader aim for 15% monthly return

Trading is all about making frequent, short-term transactions with the goal of “beating the market,” or generating greater returns than you’d expect to receive by buying and holding over a longer time frame. Whereas long-term investors may aim for a 15% annual return each year, a trading goal may be a 15% gain every month.

The goal of investing is to gradually build wealth over an extended period of time through the buying and holding of a portfolio of stocks, baskets of stocks, mutual funds, bonds, and other investment instruments. Investor review his portfolio monthly once and add new portfolio in his investment strategy.

Traders follow the market whole day, Investors spend maximum 1 day in a month

An investment approach will ensure success in a longer period of time. It will also allow you the much-needed peace of mind that traders never get in there attempts to time the market. Traders in the market for survival, Investors in the market for long term wealth creation.

Retail investors enters into market and do trading. They waste the time by monitoring market for whole day and trade without basic understanding of trading. Most of the time you are approaching the retail investor with trader mindset. They will scare you on investing and stop you from investing in the equity market.

Which is Better Suited for a Retail Investor?

Power of compounding works best in investing. What compounding means is that the longer you hold stocks the more it earns returns and therefore the more your returns earn returns. Investors often enhance their profits through compounding or reinvesting any profits and dividends into additional shares of stock.

Retail investors should do investing, not trading.

Start your investing by analyze a company fundamentally, invest in the business, remain unperturbed by the market noise and stay invested to reap long term benefits. List down the best stocks for long term investment and buy monthly in small bunch. Accumulate wealth by investing small.

Before start investing, list down the company with the MOAT

An economic moat is also referred to as a “competitive advantage“ that a company enjoys for a certain time period. No company can enjoy the advantage forever. To create MOAT in their business, company must do everything to create a preference for its products and services. Thus it creates value for its customers. The higher is the value creation, the more it will restrict customers from switching to other brands or products.

MOAT stocks have customer preference, value creation, and restriction to switching can build a wide economic moat for a company.

How to identify the company with Moat:

Superior Quality Product: It all starts with the quality of goods and services offered by the company. No matter if the company is small, if customers like its offerings, sales/profit will grow. It is one reason why good companies spend considerable resources in the research and development of their products. Asian paints is good example of superior quality and it is company in MOAT in paint business.

Unique Products : The company will have unique advantage in the goods. ITC has unique advantage in tobacco business. Newcomers can’t enter easily into the market. ITC is stock in Moat due to its cigarette business.

Low Cost: A good company keeps a balance between quality and cost. A customer may reject even the best quality product if they perceive its price as expensive. Cost is a critical ingredient of value creation. It is one reason why a low-cost producer beats its competition in the market. Shree cements is low cost cement and it has it own advantage in the market due to pricing.

Brand Value: It gives customers a sense of pride to own its products. There are certain brands whose products are considered more reliable than others. Some brands become a status symbol for people. It takes time and effort to build a brand name, but it’s worth an effort. It can give a huge competitive advantage to the company by ensuring value for all stakeholders. TCS, Infosys has the brand value. They are most preferred software service companies due to their brand value. Eicher motors has brand advantage.

Sales network: In the last few decades, it has gained more traction in value creation for existing customers. There will always be some customers who will face problems with the products or services of the company. How a company handles such customers is very crucial. Making happy a dissatisfied customer is great. Such customers spread goodwill by word of mouth. It, in turn, can bring new customers to the company. It is important that how fast the product reach end customer once launch. ITC delivers the product to customer’s hand within 3 days of product launch. Their sales network is very strong and well connected stream to customers.

Market share : Few company has market share advantage. Their market share is stable and strong. you can select the company which has more market share in their business. Maruti Suzuki has 50% market share in Indian passenger vehicle market.

Business moats are generally put up by the company as some sort of competitive advantage that would act as a barrier to entry for new entrants. These could be in the form of brand identity, patents, size or market share, low-cost production, etc. Retail investors should select MOAT stock for long term investment. It will help you to create wealth in long term.

Retail investor should invest in MOAT stocks for long term wealth creation

Top Moat companies in India:

Following list is my MOAT stocks in the market. You can list down your moat stocks and start your stock investment. To know the basic of stock market for investing, learn fundamental analysis in zerodha