Since this sub-forum is about the journey, let me start at the beginning.
A few months after I got my first job, I got a whiff of stock markets and started trading. I had no knowledge of finance at all. I did all possible mistakes a beginner does:
1). Quick trades
2). Acting on tips
3). Futures and Options
4). Technical Analysis (I swear… worst thing ever invented).
5). Day trading (On second thoughts, I think this is the worst thing ever invented).
Anwyay, I didn’t make much on a whole (if at all) and frustrated, I just ‘sealed’ up my position and quit. My portfolio had HDFCBank and Infosys and Reliance remaining which I’ve now held for 12+ years (and now I see the profits!).
In the meanwhile, I turned a Boglehead and put all my money in index funds. Again, it was a ‘buy and hold forever’ thing with a 20+ yr holding timeframe.
Lately, I have began reading more about investing and I’ve been struck by the following 2 quotes by Buffett
“Rule no 1. Never lose money. Rule no 2. Never forget rule no 1.”
“An investor should act as though he had a lifetime decision card with just twenty punches on it.”
When I combine this with value investing, it suddenly struck me how much sense it all makes.
Basically, if I make just a measly 20% on each of my 20 trades, I’ll get a 38xreturn so if this is doneover a period of 10 years, say, the CAGR is 40%+. I’m sure some esteemed investors here might be making more, but in my eyes, 40%+ is HUGE.
Mohnish Pabrai of Dhando investor also says that he makes only about 2investments in one year.
So, here’s my wealth allocation / investment strategy now.
50% of my investment is in index funds with a 20-30yr tie horizon.
25% of myinvestment is in debt funds.
I rebalance between these two yearly.
Remaining 25% is either in debt fund or in 1-3 stocks which I carefully choose. I believe 1-3 is enough,especially from a value investing point of view. “Bigger bets, fewer bets”.
I only invest in proven companies, where I can confidently say that the stock should go up around 50% (this is the margin of safety, if I can see a 50% upside, I can say that therisk of investing is minimal, and a 20% upside is nearly guaranteed). These situations are rare, but hey, I’m onlylooking for 2 on an average in a year. If I happen to find amultibagger obviously, I won’t even need that much. So thebottom-line is I’m a firmbeliever in the 20 punches quote by Buffett. It has taken many missteps on my behalf to firmly come to this conclusion, but I’m happy with this. I can sleep peacefully, and carry on with my life with no worries (Buffett manages $100B+ and still plays 16+ hours of bridge every week).
Recent investments have been RS Software and Mayur Uniquoters (won’t discuss those, find detailedanalysis elsewhere in the forum). Already these are up 50% in my portfolio and I expect RS to go up further.
Would love to hear thoughts and especially any experiences if someone has been practicing this.