Legendary investor Thomas W. Phelps once wisely said, “To make money in stocks you must have the vision to see them, the courage to buy them, and the patience to hold them.” The essence of successful investing lies in that simple quote.

Let’s break it down piece by piece:

Vision – Identifying Opportunities

To spot potentially lucrative stocks, you need the vision to foresee where the world is heading 20 years from now. What products or services in their early stages could become commonplace elements of lifestyle down the road?

Take the IT sector for example. It has generated tremendous returns for investors over the past 30 years. We’ve all heard stories of turning Rs 1 lakh invested in the 1990s into Rs 16-18 lakh today, thanks to stocks like Wipro and Infosys. Back then, if one could envision computers and software becoming indispensable after two decades, immense wealth could have been created.

So, where is the future headed next? As an investor, train yourself to spot emerging or underappreciated trends in their infancy stages.

Also Read: How to make your first Rs 1 crore in 5 years

Courage – Taking Calculated Risks

Many investors opt for only minimal risk investments out of fear of losing money. But have you considered the potential upside being missed by not taking risks? As economist Robert Kiyosaki wisely put it: “The biggest risk a person can take is to do nothing.”

Here’s a comparison – over 20 years, Sensex has provided around 15% annualized returns. Rs 1 lakh invested back then in an index fund would have grown to Rs 16-18 lakh. But the same amount in a 7% fixed deposit gets you only around Rs 4 lakh. Three-fourths of the created wealth is lost due to not taking enough risk!

As Kiyosaki says, “It is the investor who is risky, not the investment.” Don’t blame the asset if your strategy and conviction falters.

Patience – Holding Through Volatility

Even after investing, many are quick to hit the panic button when fears arise – be it geopolitics, financial data or even a single quarterly earnings dip. But smart investors analyse long-term impact rationally before taking such drastic steps.

Take the COVID crash – within months, the Sensex eroded 50-90% across stocks. But it recovered fully in barely 8 months in a V-shaped rebound. Those who sold at the bottom lost fortunes, while long-term investors multiplied wealth as markets scaled new highs.

The lesson? Even the worst black swan event in a century couldn’t keep the markets down for long. Maintain conviction during bouts of volatility to reap rewards.

In closing, the ability to identify long-term potential, courage to purchase despite uncertainty, and composure to hold through stock cycles is the key. Stay invested across market phases – that’s the simplest path to building wealth over decades.

(By Ravi Singhal, CEO, GCL Broking)

Disclaimer: This is the author’s personal opinion. Readers are advised to consult their financial planner before making any investment.