Warren Buffett is one of the foremost advocates of the ‘buy-n-hold’ strategy. His classic one-liners “Our favourite holding period is forever” and “Time is the friend of the wonderful business” encapsulate reams of wisdom in them.
Prof. Sanjay Bakshi is also a votary of the same strategy. In his latest talk to the students of IIM-Ranchi, the Prof revealed that the “secret sauce” to make mega gains is to buy stocks which are churning out high earnings and to hold them for long periods of time. This way, even if you pay a high initial price for the stock, the ‘magic of compounding’ ensures that there will be super-normal gains, the Prof assured.
In his latest interview in the BS, the Prof has elaborated on the same theme.
Prof. Bakshi has explained that the first step is to find top-quality stocks. For this, one has to look for companies that are fundamentally strong, with a potential for steady, robust earnings growth. It must have a good business, great management and the valuations must be reasonable. “It’s possible to find companies that you can hold on forever. It’s not very complicated but it requires focus and a lot of hard work” the Prof said. He added that “the formula of buying good businesses run by good managements at reasonable prices will continue to deliver great investment results in the long term“.
The Prof emphasized that the proof that the strategy works can be seen from real-life examples. “If you pick 100 people who have really done well in the stock market over a decade or more, you’ll find the vast majority of them are buy-and-hold investors. There will be very few successful traders in that group” he said.
The Prof was joined by other distinguished experts who also offered advice in the matter.
Tanwir Alam of Fincart explained that the longer one stays invested, the lesser is the chance of loss of capital. For an investment in a 10-year period, the probability of losing money is zero, he said.
G Chokkalingam of Equinomics was critical of the tendency of investors to constantly fiddle with their investments. “Investors set a stop-loss and sell out if the stock moves down 10-20 per cent …. In doing so, they miss out on the big picture” he said with a tinge of regret in his voice. He added that “the key is to be patient” and not to get rattled if a few of their calls go wrong.
Basant Maheshwari chipped in with a philosophical quote “Sitting on profits is a lot tougher than sitting on losses, as investors are insecure about their profits” he said.
So, the next time you go shopping for stocks, make sure that you only buy “quality” and that you intend to hold it for a long, long time.
Someone may please discuss the question stated below.For individual investors, how to asses management quality, what are the criteria,& where to get the required data.
Get the data from screener.in . Analysis is totally depends on which model you like else you can make your own. The most critical and important thing is to calculate management. To analysis this you have to study a lot.