Synopsis
When making long-term investment decisions, it’s essential to consider various factors, such as industry trends, company financials, and more. However, one aspect that often proves decisive is whether a company possesses a significant advantage, or edge, over its competitors. This unique strength is what enables a company to outperform its peers when the industry faces challenges. Every sector, at some point, goes through difficult phases – whether due to external factors, internal disruptions, or broader macroeconomic challenges. For instance, while the IT sector is currently facing headwinds, it was the real estate sector that struggled with numerous issues four years ago. Now that real estate is thriving, the best-performing stocks in the sector are those with a solid track record – particularly those known for consistently meeting deadlines and delivering on commitments. The lesson for long-term investors is to look beyond just the numbers and financial reports.
When valuations are not cheap, it is important to manage risks, especially as one never knows when the mood on the street will change. There are two kinds of risks in equity markets. First, the overall market or asset-class risk. The second is individual risk. The first risk is not in anyone’s control. It can hit the market due to any number of reasons – from geopolitical uncertainties to monetary events. And these could emanate from any corner
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