What are the best ways to make money in the stock market for the long term?

Building wealth in the stock market is not limited to investing in hot stocks or capitalising on ongoing trends. Instead, successful long term investors focus on strategies that defy market volatility. The underlying principle here is growing a portfolio over years or decades.

There are several ways to do that. For example, some investors lock in a profit by selling their profitable assets and holding on non performing stocks. But this is just one way to do this. In this article, we have mentioned ways in which you can make huge profits from investment in the stock market in the long run.

Begin with Well-Researched Stocks

Begin your investment in the stock market by doing a quick fundamental analysis. You can do it by deeply analysing factors like financial statements and industry trends. Indian markets are volatile, but regular SIP investments help average costs and avoid panic selling or overbuying. Success in equities comes from staying invested consistently over time, not from timing the market.

The fundamental analysis of stocks uses three sets of data:

• Historical data about the industry
• All the information like revenue, debt, profit margins or announcements by the company that are available in the public domain
• The third one is tricky and you have to dig deep to know how the company is doing crisis management

Fundamental analysis of a company’s stocks also gives an idea of whether its shares are priced at a fair value. As a long-term investor, buy stocks below intrinsic value. If Infosys' true value is ₹1,200, buying at ₹1,000 offers a margin of safety. But if the intrinsic value is ₹950, buying at ₹1,000 isn’t wise. Some other examples of long term stocks are HDFC Bank, Asian Paints, Bajaj Finance and Nestle India.

Index funds tracking Nifty 50 or Sensex offer broad market exposure with low costs and passive management. Historically, Nifty 50 has returned about 11–12% annually. For most investors, index funds outperform stock picking and expensive mutual funds, making them a simple, effective way to build long-term wealth in India.

Choose a Trusted, SEBI-Registered Stock Broker

The right stock broker can help you mint profit from investment in the stock market. Therefore, you should always look for investment advisors who are licensed by SEBI. These individuals have the legal licence to offer you investment advice and also manage your portfolio. Unlike mutual funds or insurance agents, SEBI registered advisors work on fee models and they do not earn commissions by referring to financial products.

Other key benefits of hiring a SEBI registered investment advisor are as follows:

• Your portfolio is built on your financial goals
• Unnecessary risks are filtered out to prevent financial damage
• The main goal of the advisor is to do financial planning by matching your risk tolerance
• Adhering to strict SEBI regulations and compliances

A SEBI Registered Investment Advisor has to assess a client’s risk profile in detail before providing any recommendations for investment in the stock market.

Use Mutual Funds and Equity Funds for Diversified Exposure

Equity or mutual funds come in handy when it comes to reducing risk for a long time. The stock broker invests in shares of different companies through equity funds thus diversifying your portfolio. This spreads the risk and leads to better long-term returns contrary to fixed deposits or debt-based funds.

Equity mutual funds offer attractive returns in the range of 12% to 15% to long-term investors. Thus, it is most suitable for long-term goals like retirement planning, children’s education, or wealth creation.

However, equity fund performance is subject to market fluctuations leading to high risk. One of the most effective strategies for investing in mutual funds is through Systematic Investment Plans (SIPs).

Starting early with investments also helps to get the power of compounding. For example, investing ₹5,000 monthly at a 12% annual return from age 25 to 55 can grow to over ₹1.75 crore. Starting just 10 years later may yield less than ₹50 lakh. The earlier you begin, the more time your returns have to generate their own returns, exponentially growing your wealth.

Here, investors have to contribute a fixed amount regularly on a monthly or annual basis. SIPs also benefit investors from rupee cost averaging for investment in the stock market.

Some examples of top performing equity funds are Motilal Oswal FlexiCap Fund Direct Plan Growth, HDFC Flexi Cap Fund, Invesco India Flexi Cap Fund, and WhiteOak Capital Flexi Cap Fund.

Upgrade to Portfolio Management Services (PMS) When Ready

Portfolio Management Service should be on your action plan if you are pitching for a long position in the stock market. But what is it? PMS is the process of managing an individual’s investment with the idea of maximising their earnings. It works like a SWOT analysis for investments, matching options with your goals and risk level.

Designed primarily for HNIs (high net worth individuals), you can also avail of this service if you fall under any of the following brackets:

• Limited knowledge of investment in stock market
• Don’t have time to monitor or rebalance your investment
• Want to safeguard your investment from market volatility
• Spread your investment across multiple asset classes such as stocks, debts, equities

PMS is not only revered for its risk dyeing capabilities, but it also has some other advantages listed below:

• Portfolio managers consider tax implications to maximise the returns
• It offers a customised investment plan which is tailored to your unique financial goals and preferences
• PMS reduces risk while aiming to increase returns by spreading investment across different asset classes and sectors
• Professional portfolio managers use their expertise to implement strategies that focus on strong returns.

Review your portfolio annually to ensure your asset allocation aligns with your risk profile and goals. For example, shift toward debt instruments like PPF as retirement approaches. Rebalance to prevent any asset class from dominating and maintain tax efficiency.

Explore Alternative Investment Funds (AIFs) for Advanced Diversification

Alternative Investment Funds (AIFS) are privately held investment instruments which collect capital from selected investors. The experts invest the capital into non-traditional assets like real estate, private equity, venture capital etc.

These funds offer diversification and high return potential but carry more risk and require a longer lock-in period.

Unlike mutual funds, these investments in the stock market are not open to retail investors. AIFs are designed for HNIs with a minimum investment of Rs 1 crore. SEBI regulates AIFS under the AIF Regulations, 2012 and classifies them as companies, trusts or LLPs.

AIFs are divided into three categories as listed below:

Asset Management Services (AMS) manages investors' assets strategically thus helping them to create a balanced portfolio. The AMS experts carefully analyse market conditions and investment opportunities to allocate assets effectively. This approach ensures steady growth and protects against excessive risk. In turn, this helps investors to grow their wealth slowly. Additionally, it also safeguards investment in stock market against market volatility in the long run.