I have recently completed 10 years with Valuepickr. It has been a hugely rewarding association for me, as I am sure it must have for scores of fellow investors.
The idea behind writing this note is to share my experiences over the last 20 years of active investing in a hope that it helps young investors of today to realize the potential of attaining financial independence within a reasonable span of time.
I started my investing journey at the ripe old age of 36 around the turn of the century so most of you already have a head start! The start itself was accidental, in that I happened to read Peter Lynch’s “One Up on Wall Street” & it rang a bell. Lynch wrote at length about buybacks, mgt. buying, about share prices following a Co.’s earnings & many such gems that made a lot of sense. I guess being an entrepreneur for 15 years prior to reading Lynch, I viewed investing from a promoter’s perspective & not necessarily as an investor buying 100-500 shares in a Co.
Reading is one sure way of getting better at the craft. There is no dearth of investment classics, & I benefitted enormously from reading & re-reading them. You need to make your own private library of books from which you derive solace & comfort. It will surprise you that each time you re-read a classic, you are quite likely to learn something new that had perhaps skipped your attention earlier. Or it may be that as you evolve as an investor, you are able to relate better with the author.
Random thoughts on investing:
- The starting point for any investor is to know yourself, your temperament, your nature & then being true to yourself, not trying to be someone else that you are not. To be able to think for yourself & have the self-belief to back your judgement. Don’t worry about being wrong, the investing game allows it, but make sure you don’t repeat the same mistake twice. I probably made more mistakes than anyone that I know, but it’s important that the moment you realise your mistake, you cut your losses asap, preferably the same day if possible. The inability to take losses, is perhaps the biggest stumbling block to wealth creation. Yes, your pride does take a hit each time but if you cannot take a loss, then perhaps you are better off not wasting your time on this journey.
- It helps a great deal if you are an optimistic person & believe in India’s growth story. Being cynical about life in general or having a negative disposition makes the journey very tiring indeed. It is difficult to change one’s nature/ temperament, but one can always make the effort. Don’t worry about things that are not in your control, like markets being manipulated or playing on an uneven field. Focus instead on what adds value to your portfolio by being aware of all the developments relating to your investments.
- Stay with what you understand. You will make fewer mistakes. It doesn’t matter if your circle of competence is limited. Humility is the key, & any kind arrogance is a recipe for disaster. The markets won’t take long in humbling you as most of us have learnt the hard way! The key is to remain a lifelong student.
- You have to enjoy the process of research. This is critical and I am not sure if it can be acquired. Perhaps learn to enjoy your own company as the journey is somewhat lonely, with investing. As I see it, it is all about taking a gut call on the basis of the available data, as you interpret it without looking for re-assurances from others.
- It also helps if you do not take yourself too seriously, & even have the ability to laugh at yourself with all the mistakes that you will make along the way! After a few years you know whether or not you are cut out for this game. If you decide that you are unlikely to enjoy the journey, then focus on whatever you enjoy doing but start an SIP on the Sensex or Nifty and you will still beat 70% of investors like us who eat, sleep and breathe the markets but are still unable to beat it!
- Each investor has his own style as each one is different. I always took few concentrated bets & backed myself. Heavy bets are not taken in one go & you add as your conviction grows, as the story unfolds to your liking, no matter that the addition is made at higher levels. You have to make your winners count. They have to take care of all your mistakes/ losses. I did not believe in making shares “free” & holding them forever. If there is merit in the story then why sell & if growth has plateaued or valuations are not in your comfort zone, then exit in total & look for the next story. The investment corpus is limited & the idea is to maximise returns. Hedging your bets by remaining invested in non-core ideas will lower your returns.
The rewards, however are hugely gratifying. A decade of focused investing can take you close to financial freedom. The real game only starts thereafter as you let power of compounding work for you and you play the game thereafter for the sheer joy of playing it. And then, if you are honest with yourself, you will realise that you are sitting on far more than perhaps what you deserve, certainly much more than what you would have bargained for!
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