If you are reading this article with expectations of getting stock tips, you can stop reading now.
Just for background, I'm a CA and also been investing in Equities since my articleship days. I started by seeing how my friend doubled his money in the IPO of Avenue Supermarts (Dmart).
Now, how do we start? Firstly open a Demat account with a Stock Broker. Then I did what a gullible retail investor can do. Started looking for money control for stock tips. They would continuously flash some stocks with some target prices giving a random story highlighting fundamentals by a brokerage. Basically, after years I came to understand that those targets were not based on fundamentals, but on technicals. Whatever was on momentum in the market, either upward momentum or downward momentum would be highlighted and target price would be given after adding or reducing say 10-20% to the current price.
My first stint made me money, I got confident. My next 4-5 such stints didn't pan out so well and what surprised me that the brokerage reports who gave those fancy targets reverse their targets in the opposite direction when the price moved in the opposite direction. So much for the fundamental reasoning in the reports.
This same thing happened this year too. During COVID-19. When all news channels were shouting that sell and go for some sectors like Financials, Airlines, Restaurants and giving absurdly low target prices whether for individual stocks or for NIFTY 50, I decided that this I won't repeat the same blunder of relying on the noise. I did the opposite. I bought the Financials. Not a Yes Bank or some random beaten-down shares. I bought quality names from Hdfcs to the Bajajs to the Kotaks. (p.s. Not a recommendation to buy or sell. Not a SEBI Registered Investment advisor. Just for education purposes. Disclosure: I might hold some names mentioned).
6 months down the line. The bet paid off ridiculously well. How?
1. Ignore the noise
2. Buy low, sell high. We as humans tend to do the opposite. We buy at high out of greed and believe that good things will continue to do good and sell at low prices out of panic.
3. In a sector that has been beaten down, don't buy the lower guy, but only the top 2-3 and you will get handsomely rewarded. The logic for this is when a sector gets hit hard and disrupted, the small players get thrown out very fast and in most cases, they don't have the strength to survive whereas the big player gets stronger at the cost of weaker ones
Overall, I really look for investing in Equities for the long term, hence if some dud stock is doing good in the short term and a quality name is underperforming in short term, I don't pay attention because I look for consistent compounding of money over a longer duration of time.
I invest in shares that allow me to sleep peacefully. The safety of money is the most important factor for me while investing. Not how fast they make me more money. Hence I never gave a single penny to the Ruchi Soyas and Alok Industries and the Adani Greens of the market because for one simple reason. Fundamentally I know they are not worthy of investing.
I know many of you would bash me saying how much money he or she made in these stocks, but I know many more guys who would message me that they are stuck in these as the stock is in a lower circuit and they are not able to sell. Remember one thing: Paper profit has no value. If you can't exit an investment, then that investment is not for me and I'm happy to let go of such opportunities go.
Please let me know how did you like my views and if you would like to know more from me.
The author can also be reached at 360finance.surat@gmail.com
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