When you choose a career do you expect to get rich overnight? It took a lot of effort for most rich people to get where they have, have they not?
I do not see any reason why people should THINK that they will get returns exceeding 12-15% p.a. in their stocks portfolio. Of course there are some IFAs who keep flaunting higher returns. It looks IMPOSSIBLE – but like they say ‘the market is a great humiliator’ and I hope to be around for 11-15 years so I refuse to say ‘it cannot’!
For most investors it is not necessary to invest in direct stocks -the efforts may not be worth be the effort. Many of our good fund managers have an impeccable track record, and have walloped the index by a nice margin. So an index fund or a good well managed multi cap fund should do the trick for you. However, if you MUST pick stocks what should you do?
- buy one or two shares a YEAR – if you start at age 27, you will have 50 shares by the time you retire at 55, that’s ENOUGH.
- only about 100 companies have created wealth for the long term investor, stick to this set of 100. Ignore 8900 others.
- remember trading is not investing
- when you are investing think of being invested for the real long run
- i do not know what technology will kill a Facebook and Google, but shampoo, soap and medicines will be there for 100 years…
- take a very careful artist kind of an approach – you have 364 days of study to buy one share.
- decent data analysis is available on moneycontrol – if you are willing to pay CMIE has an excellent data base to analyze
- use these screens to reach the 5-10 companies that excite you.
- Balance sheet access is easy these days – the companies website will give you the full annual report
- Start by reading the AR from head to toe -IF YOU ARE A serious investor. It may take you 3 years to come to grip!
- Look at shares OUT OF FASHION, not the current favorite. So at this point in time it is infra, pharma and software
- At this point in time the shares to avoid are OBVIOUSLY banking (June, 2017)
- try seeing the top shareholders, and see if employees own shares in the company – that helps!
- keep your eyes and ears open – big share transactions are reported in the financial press, as well as the ESOP allotments
- i like companies still run by owners rather than professionals – it has worked for me
- my best finance companies are ones which are run by the ORIGINAL promoters
- what worked for your friend may not work for you.
- i do not like India’s biggest infra company – just does not work for me
- be alert to corruption / bad news about promoters, be willing to be shocked
- do not ignore small items..like an important person shunted to a low job..it could be a demotion for corruption
- look for accounts easy to understand. If it is complicated, move on – understanding is vital
- read MDA see for contradictions from time to time
- ask the management, if they do not answer what you ask, go to the AGM and ask. Or just sell off.
- You are the owner, you are entitled to the answers even if you own just say 5000 shares
- vote against raising salaries if the market cap has fallen – if you have lost, the ceo too deserves to hurt
start with 25….
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