Raamdeo Agarwal, co-founder of Motilal Oswal Financial Services (MOFSL), is famous for his risk free and balanced investment strategy of wealth creation. He has a real time net worth of $1.6 billion according to Forbes. With more than four decades of experience in the business and investing, investors can learn a lot from Agarwal’s experience.
This can not only help them in becoming better investors but even better human beings. The following are five crucial takeaways from his investment philosophy.
The QGLP investment framework
Agarwal’s investment philosophy is reflected in the QGLP model, i.e., Quality, Growth, Longevity, and Price. He would prefer to invest in those companies which are managed by quality management, having a track record of consistent growth, and with long-term stability at a reasonable price. These criteria have been utilised by him for successful investment in companies like Hero Honda and Infosys.
Key investment lessons
- Avoid taking debt for investment: Agarwal advises against investing in the stock market on borrowed money. As the losses can get magnified during a bear market. That is why financial discipline is crucial and your risk taking limit should always be kept under check by avoiding loans and debt.
- Focus on quality and growth: He attaches the highest importance to quality companies with long-term growth prospects. Here the focus is on throwing weight behind solid management that has a track record of consistent growth along with the concept of compounding of profit growth.
- Long-term strategy: Agarwal is a long-term thinker. Warren Buffett is his inspiration. He aims at the buy right and sit tight approach. Saving money but not indulging in frequent profit taking is the key here.
- Don’t invest emotionally: He believes in having a calm mind during periods of market fluctuation and not investing based on emotions. Not only this he also aims at continuous reading of good books and letters on finance. For example: Warren Buffet’s letters to shareholders. This as per him helps in building knowledge and assists in taking informed decisions.
- Go the mutual fund way if you lack experience: To optimise returns, one should seek professional help to invest in those schemes or mutual funds that yield maximum returns after tax. This is even more important if you lack experience in direct equity market investing.
Application of a disciplined approach
As Warren Buffett’s famous saying goes, “Price is what you pay. Value is what you get. Agarwal follows the same simple investing idea. He aims at purchasing stocks at cheap valuations and then stick with them for wealth creation as earnings compound.
He also believes in continuous flexibility and learning in the constantly changing world of finance. He appeals to investors to observe market patterns and economic oscillations but not forget their long-term objectives by focusing on the concept of compounding.
Therefore, by combining such observations with a prudent investment plan, an investor can build a solid and successful financial foundation that will be immune to the volatility of the market.
Hence, to conclude, Agarwal emphasises on betting on quality and growth. He highlights the importance of deep research before taking investment decisions.
Lastly, it is important to remember that reaching out to a Securities and Exchange Board of India (SEBI) registered investment advisor is the best way to clear any investing doubts as it always saves investors from suffering financial reverses in equity market investing.
Disclaimer: Investments in the stock market are subject to market risks; past performance is not indicative of future results. Always conduct thorough research before investing.
