I recently came across an article on an online portal of a business newspaper that talked about the biggest wealth creators in Indian equity markets over the last few decades. The article spoke at length about many names such as Bajaj Finance, HDFC Bank, Wipro, Avanti Feeds, etc. which turned a nominal investment of Rs. 10,000 into crores.
So what’s the big deal? Most of us know this now, right?
But here comes the most interesting part of the article. The comments section below the article had over 280 comments. While some of those comments were in Hindi and English, some were in Hinglish, a linguistic blend of Hindi and English.
Irrespective of the language used for writing the comments, it was the sentiment which mattered and the most common sentiment which I could decipher from the comments were:
“I wish I had invested in these companies back then”
“I wish somebody had advised me about investing in them”
“I wish I could go back in time and invest in those companies”
So essentially the most important element that I gathered from the comments section was regret about not investing in the right place at the right time and the desire to go back in time and correct this mistake.
We often come across people who say “I wish I could turn back the time.” While there is no proven way to do that presently, the concept of time travel has been often mentioned in science fiction.
Remember the classic science fiction novel ‘Time Machine’ written by H.G Wells, where a brave explorer travels forward and backward through time using a time machine.
Now imagine if physical time travel was a reality, one could simply travel to the future and check which stocks are trading at high prices and come back to the present and buy them.
While time travel as depicted in science fiction novels and movies are still fictional, financial time travel is definitely possible. Like physical time travel, investing is also a form of time travel.
Successful investing is all about looking into the future of investment and deciding what is the fair price to pay for it today. But how do investors know what to look for?
There are a lot of tools available today that enable us to calculate the future value of an investment by calculating the sum-total of all the cash flows that asset will generate in the future.
Key parameters an investor should look at to spot future winners:
- The price-to-earnings ratio (P/E)
- Low debt to equity
- Steady cash flows
- High Return on Equity (ROE)
- Competitive advantage in the market
- Competency of the management team
- Corporate governance policies
Even without physical time travel, it is actually possible to invest in future winners using the key parameters mentioned above.
Nobody can change the past but anybody can definitely make a new beginning. It’s ok if many of us may have missed out on those opportunities which I mentioned in the start which turned thousands in crores. However such opportunities exist even today.
The question is now that you have understood the concept of financial time travel and the tools which can help you invest in the next Bajaj Finance or the next HDFC Bank, how well are you going to use it to ensure a bright and wealthy future?
To peak into the future while investing in our present requires a lot of skill and expertise. If this sounds a bit too complicated, it is recommended to hire an expert who can guide you with detailed research to identify winners of the future.