Caveat: I like equity markets, as a family my father started investing in 1950s, I started investing in 1979, have enjoyed the process so far. I am completely indifferent to YOUR views on the market and whether you invest, hate, love or are obsessed with the market.

Article:

The equity markets are one of the most misunderstood markets and you have people with very strong views. Let us examine them:

1. You can make a lot of money in the equity markets: Even for big brilliant investors like a Warren Buffet or a Vallabh Bhansali, remember it is a few right calls, and YEARS OF SITTING on good calls. It is the power of compounding that has worked. In case of WB about 99% of his wealth was created AFTER his age of 50 years. Remember he started at age 11?

2. If you had invested in 1994 till the year 2014 you earned LESS than PPF: Only an absolutely idiotic person can write such an article. One needs to remember that even the index scrips would have paid about 3% annual dividend. Now if this dividend was REINVESTED in the same index, the returns would go up to about 7-8% over a 20 year period. ET’s Innumeracy.

3. Some people argue ‘What if I had invested in Satyam or Silverline instead of Infy or Wipro?: Look you genius, if you do not know how to pick stocks stick to mutual funds. If you know how to pick stocks, be vigilant. Stock picking is not Rocket Science – like riding a cycle – but it has to be learnt. People like Pattabhiraman (of Freefincal.com) can learn, but obviously lacks time. To learn about markets you need time and intellect. Having one cannot be substituted by the other.

4. Taking a view of the market is not my cup of tea I do not understand interest rates, technical analysis, fundamental analysis, etc. And I find it difficult to watch TV on a 24 hour basis: Well the good news is YOU need not know why somebody is raving and ranting about the Chinese economy, US slow down, Indian election, etc. Even assuming that all this is very important, if you pick a good company with a good business model, and have a long term view, the short term machinations of the market should not bother you. Just keep the media out of your investing life.

5. My father lost money in Harshad Mehta scam, CRB scam, Ketan…..Look it is not as if these people came to your father and asked him to invest. He chose to invest in companies that he did not understand, with the help of people who said money could be made. Be dispassionate in the analysis, stop blaming the markets. Do you stop sleeping on a cot because your grandfather died while sleeping on a cot?

6. There are short cuts in the market: I have not found them. It takes time to build contacts, understand markets, understand many things from Anthropology, Aviation, Ethics, Biology, Geography, Psychology, Philosophy, Accountancy, Human Behavior, Mathematics, Statistics, Equity Research….it also helps if you know some top Accountants, Lawyers, Research guys, Brokers, Fund managers, Fund analysts, Fund sales guys, etc. If you think you could read a couple of websites and make tons of money, revisit your thoughts.

7. WB’s techniques will work for me! Sure, when you reach the size of WB. Stop believing you can invest like WB or Mukesh Ambani. You cannot. Somethings can be achieved ONLY by size. If I buy 2000 Tata Power and 3000 Coromandel International – I should not confuse my self with a Rakesh who buys 500,000 in one shot, and can buy another 200,000 after a week. Or like another friend who bought 2 million shares in a company where I have under 40k shares. Size matters. Research matters too.

 

 

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  1. Hello Sir,

    Point 5, 6 and 7 in this article are not readable. Perhaps an alignment problem. Can u please check? Your articles are different and interesting.

  2. Great insights, Subra Sir !!

    Investing in stock markets is a daunting task. Normal mortals like me, even if we do lot of arm chair research and analysis, can only touch the tip of the iceberg..

  3. yesterday only, i read ET article, but i got the same message as you mentioned in 3 ; if you do not know how to pick stocks stick to mutual funds. If you know how to pick stocks, be vigilant.
    however you added one more point to be in equity for long term , the 3% dividend yield then and in subsequent yrs would result 7-8% increase in cagr now after 25 yrs.

  4. one more point you are requested to make a post: some are considering current as fully valued comparing the nifty p/e near to 22 , whereas some arguing reasonably priced comparing the sensex p/e near to its historic average @18 , some are arguing it as cheap comparing it with 2008 peak in dollar terms then! what do you think?

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