Successful Investor attributes
This post is based on what I have seen, observed and understood..I am biased because my sample size is extremely small – and I have not spoken to many people about their success, net worth, etc . I have not really seen the process for a beginner to get rich. I have largely seen the rich get richer. Much richer. Here are my (naturally biased) view:
- Most of them are calm: when the market dances wildly, they can remain calm and act like an uninterested bystander
- Being calm made them rich and being rich allows them to be calm. I am unable to say which came first.
- All have created non equity cushion too – in the form of Rented properties or tons of debt investments
- All of them know how to use advice – as well as research – and all of them are good judges of quality of advice/research
- Most of them are good with numbers – simply numerate.
- Happy to book losses and let profits run – being calm helps perhaps.
- Almost all of them understand value and will not keep chasing ‘growth at any price’..but a few have some money with VCs. One concept that hasn’t changed since Graham’s days is that “the present value of future free cash flow determines the value of a financial asset.”
- All of them understand how a company makes money. So they can see why media fragmentation and a big spurt in logistics can hurt HUL or why ITC’s stupid foray into FMCG can hurt HUL but not make money for ITC.
- they can think probabilistically and can quickly see impact on EPS, and market perception (PE)
- they surely suffer from biases – but constantly seek outside opinions and take corrective action
- Most of them took some time to understand but did exit RIL say 6 years ago..after spending decades with that scrip
- they are quick to act and many of them seek views EXACTLY contrary to their own – either to act or to just add to knowledge
- Can focus on position sizing – will not put 3 days effort to pick up a small quantity
- Almost all of them can buy a share at 15, 30, 55, 80 and 160 without saying “I already have it” . I remember a friend buy Kajaria ceramics from about 35 right up to Rs. 800….
- Will read more..or talk a lot to people who read more
- Many are part of small, tightly run investment clubs – dramatically helps cut bias – because the guy giving you CONTRA view is a guy just like you, has no axe to grind – is not your broker, the other member is saying all this on the basis of a position that he has – SKIN IN THE GAME –
not sure if i have summarized well…it is for you to decide…:-)
jatinder gupta
Is this post is saying either or way???
shajan
As usual an excellent post. I have noticed that people who have a sizeable position or “skin in the game” are often the quietest lot whereas those who don’t have a position in a stock or is waiting to flip it in a week or so bang their drum the loudest. And they always underestimate the luck factor. However skilful you are timing and luck plays an important role. Love overcomes all shortcomings; in stock market low valuations and entry price overcomes all shortcomings!
Arhant
A lot of friends built their portfolios with RIL as the core. I think a lot of people did at the time.
I went with SIPs mostly, and when i look at fund portfolios, very little RIL holdings. While most of my friends are still sitting on it. I dont know who is going to have the last laugh?!?
I want to know from Subra sir or any other reader here, why is RIL share price languishing at a PE of 11-12 when its sales and profits have increased over the years, when its cash flow is good. And when mr. ambani has the power to bend the will of governments.
Whats with the company that the share just refuses to increase? or
is it a sleeping giant waiting to run??
Confused!
Asking just out of curiosity!
Krish
Not only RIL, most of the big whales exited all the so called blue chips like Infy, TCS, Wipro, L&T, Dr.Reddys, Cipla, DLF, ITC,Sun Pharma etc.. Hardly gave any positive returns in last 5 yrs. Barring large cap MFs and some trading through derivatives by retail investors, seem to me that hardly anyone is buying these scrips for long term.