Ever since I can remember, I have been surrounded by people who ‘are in stocks’.
These are uncles, colleagues, friends, parents, enemies and strangers who do ‘something’ in the stock market – a la trading, speculating, short selling, derivaties, puts, calls etc etc.
Funnily, 99 of the 100 people I meet have huge emotional highs and lows. They are high when then make some money and low when they lose all their earnings.
For example, I started trading when I was 16 years old. It was of course what was expected from a good Marwari Boy. I steadily traded (bought and sold over days and sometimes weeks) and saw my Capital grow gradually. Then, in the downturn that came thanks to Harshad Mehta, I lost all my gains and even part of my Capital.
The lessons learnt then, combined with the hard knocks of being an entrepreneur have made me realize the following:
– If I can barely understand how to make money in a business I run day in and day out for years (say my own Internet Gaming business), then how can I even remotely ‘bet’ on a Company and a management team I have never met?
Hence buying ‘individual’ companies just on reading what they do or some random analyst report seems to be the most foolish thing to do. Do get involved in buying Stocks of a Company if you aren’t running the Company yourself.
– Even if I do zero in on a Company, how do I track what’s going on inside and outside? Is that my business?
Definitely NOT
This applies to the old so called ‘Widow Stocks’ – Companies that Widows could buy and sleep at night. Today, with the volatility of competition in the world, anything can happen; that can wipe out 100’s of old Companies.
For example, could a Widow predict that Lehman Brothers would be liquidated and closed down?
– How do I CONSISTENTLY build Capital over the years rather than losing and gaining in bits and pieces?
Its NOT possible if you attempt to be a ‘Stocks Trader’.
You have to have patience, patience, patience, and more patience. You have to have the ability to SIT AND DO NOTHING on Good Stocks (which by the point above are impossible to identify and then track).
About 20 years ago, I was told by a good friend (Sandeep Loyalka) that the Fortune Magazine had interviewed veteran New York Stock ‘Ticker’ Traders ( these were folks who had traded stocks daily for 30-40 years) and quizzed them about their financial progress.
NONE OF THEM had made it big. At the best they had survived.
I believe day traders are unemployed folks who cant get any other real job. Day on day trading is their way to feel ‘busy’ and employed.
Unfortunately, the Capital of these folks pays a heavy price of their disguised unemployment.
Other Conclusions:
– Bankers are the biggest crooks of them all. All these High Net Worth Account managers want is CHURN of your portfolio, so that they earn continuos commissions.
I have yet to see any ‘Trading Account’ managed by a bank that has made a Millionaire a Billionaire!!??
Finally, let me share the best known secret in the whole world.
Let the experts do what they do best. If you know how to run a Chicken Farm, do just that. Think of eggs and chicken feed and chickens hatching.
Let your Mutual Fund manager think of the HDFC Bank Stock – if it should be bought, sold, or kept.
Don’t be a Chicken Farmer pretending to be a Stock Picker.
If you do try, your chickens will die and the stocks you pick will kill you.
Last but not the least – check out the absolute returns made by the Top 15 Mutual Funds in India in the past 5 years.
If you know ANYONE who has beaten these returns (20- 27% CARG!!) then point him or her to me.
I will hatch an egg and eat it too.
RETURNS OF MUTUAL FUNDS IN INDIA – PAST 5 YEARS.
COURTESY – Mutualfundsindia.com
| Rank | Scheme Name | Date | NAV (Rs.) | Last 5 Years % |
| 1 | Reliance Banking Fund – Growth | Apr 8 , 2011 | 108.9979 | 27.6249 |
| 2 | UTI Banking Sector Fund – Growth | Apr 8 , 2011 | 45.43 | 22.9368 |
| 3 | Reliance Pharma Fund – Growth | Apr 8 , 2011 | 54.8012 | 21.5293 |
| 4 | Bank BeES | Apr 8 , 2011 | 1171.444 | 20.9374 |
| 5 | Reliance Regular Savings Fund – Equity – Growth | Apr 8 , 2011 | 30.9398 | 20.7751 |
| 6 | IDFC Premier Equity Fund – Plan A – Growth | Apr 8 , 2011 | 32.7873 | 20.4109 |
| 7 | Reliance Diversified Power Sector Fund – Growth | Apr 8 , 2011 | 73.3983 | 18.7777 |
| 8 | HDFC Prudence Fund – Growth | Apr 8 , 2011 | 216.488 | 17.5811 |
| 9 | Quantum Long-Term Equity Fund – Growth | Apr 8 , 2011 | 22.85 | 17.1876 |
| 10 | HDFC Top 200 – Growth | Apr 8 , 2011 | 216.276 | 17.0827 |
| 11 | HDFC Equity Fund – Growth | Apr 8 , 2011 | 286.24 | 17.0283 |
| 12 | Reliance Regular Savings Fund – Balanced – Growth | Apr 8 , 2011 | 22.4433 | 16.9018 |
| 13 | UTI Dividend Yield Fund – Growth | Apr 8 , 2011 | 33.26 | 16.7353 |
| 14 | Birla Sun Life Frontline Equity Fund – Plan A – Growth | Apr 8 , 2011 | 90.44 | 16.7158 |
| 15 | Reliance NRI Equity Fund – Growth | Apr 8 , 2011 | 40.6158 | 16.1612 |
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*Note:- Returns calculated for less than 1 year are Absolute returns and returns calculated for more than 1 year are compounded annualized.
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