If you are not a very strong person the markets are a cruel place to seek reassurance. Many of us are brittle – an unanswered phone call can make some of us wonder our worth!! Of course if you are in sales, you are used to calls not being returned, but for the non sales person (who is weak) the market can kill you. Literally.

Markets give you a feedback so quickly, and so accurately, that you are stunned. Most times shocked. You have put a process in place, done the research, sometimes even met the management. And the market makes you look like a fool. Within hours, or weeks.

Or sometimes you decide to buy a little and then do detailed research. Gives you fantastic profits – and you kick yourself for buying too little. A friend was recently excited that Procter and Gamble went to a price of Rs. 7800+. She had bought it in Dec 2013 for about Rs. 1000. Brilliant. What’s the catch? she had bought whole of 1 share. Imagine the agony.

Using the market’s feedback on a daily basis can be very difficult, and utterly useless if you are a long term investor. To me it does not matter that Bharti Airtel, Reliance Industries, and Tata Power may go nowhere in 6 months. With experience you learn to call the bluff too. At Rs. 12 a share in case of Ashok Leyland the market was telling me “ALL is going to close down and the company is finished”. At 90 the market was telling me that the Tata Motors DVR has a lot of problems and it was doomed. Even now the gap between the DVR and the share price is not justified, but hey that is the market’s lie number. N.

There are some investors who respect the market, some who dig in. If I have bought Reliance Industries at 950, I find it difficult to take a view that oil can go to $ 20 a barrel. Or that the 4G is just not round the corner. It hurts. Or that Tata Power has a problem in Mundra. There is nothing that I can do. I can accept my mistakes and move on. Either I stick with these companies or move on to the FMCG pack. Not accepting – and blaming the whole world for what went wrong in Bharti Airtel, Tata Tele Maharashtra, etc. would ruin my finances especially if I had a big stake. These are not EPS accruing, well at least not immediately. My stake is not too big, my cost is low and my patience infinite. If you have all these 3 buy these shares. Or stay away.

Look at EID Parry. It is a share that I always do delivery based trading. I do have a position, but I also sold very heavily at a higher price (around 220 Rs.). So if I do buy it now at 160, I may not be too wrong. However, I am not in a hurry to replace all the shares..so I may be buying in lots. Not long ago EID Parry was at 130….will it go there again? no clue. Will it go to Rs. 110? no clue.

No one is right all the times. Recognizing the market signals is a very important part of your portfolio creation. Look at Crest India – from a high of Rs. 1200 to about Rs. 1.2 today has been one tumultuous ride. Clearly the company is finished.

this is a long topic, and cannot be completed in one post!!

 

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  1. Have been an active investor in SIPs for the past 6-7 years (earlier years have been very stray) with increased allocation every year. Have also built a reasonable direct equity portfolio in these many years with about half of such investments moving in only in the last 12-18 months. I have done a completge analysis (Ball Park CAGR level) of both my MFs investments / direct equity and realise that i would have been better off by just staying put in MF SIPs alone. My money in Direct equity had just remained at the capital level despite having some of the names which you have mentioned. Equal number of DUD stocks to match the ones which did better. While direct equity might have given me some KICK, i guess MFs is way forward for me (guess makes economic sense) Unfortunately ‘Stop Loss’ concept was never adhered to…. and i guess it is very important if you want to be in Direct Equity apart from Time Horizon. Thanks for your few posts in the last few weeks…… Almost made up my mind..

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