Though Nestle is a cut above the rest thanks to monopoly.
The only index funds (like the Nifty 50) are appropriate for a buy-and-hold strategy when the index is held for very long period of time it thought to be one of the smartest and safest investments. By the nature of how the index works, it automatically gets reconstituted year by year, which nullifies a particular companyâs or stockâs longevity and moats getting shorter. Based on the performance of the companies and on fulfilling the eligibility criteria, the elimination or inclusion of old or new stock is done. For middle-class investor the Index funds can only be consider as buy-and-hold strategy for long term important goal setting. A Simpler and disciplined investment can help portfolios perform well over a period of time
2 Likes
Yes, your point is mostly right.
I have recently entered 2 IT stocks during last six months of 2022, because now those 2 IT stocks are looking marginally undervalued or fairly valued, i.e. HCL TECH and TCS.
So I generally being a risk averse person, tend to buy mostly undervalued stocks from 3-4 years perspective and would sell those once I believe that, next 4-5 years price is already priced into its CMP. Since this is my strategy, I generally tend to sell stocks little early but that is as per my strategy.
I have not entered any PSU Banking or Infrastructure stocks as they do not fall in my Buy zone either based on valuations or the risk.
4 Likes
To my understanding, the issue is less to do with Stock Markets but more to do with Paradigm shift in human psychology and behaviour.
Try to remember the times when our fatherâs generation and even earlier than that, people were consistent. My father worked ONE job and retired and so did many other Bank employees, factory workers, mill workers, people working in mines (Coal, Steel, Iron etc.) and even the businesses, big or small which we often ridicule that the Kirana shop guys are not ready for change with new age and go digital.
In the age of instant gratification and the availability of enormous amounts of information on the internet, we arenât ready to simply wait for long-term and watch our wealth grow at snailâs pace. Top it up with all these influencers and fin-fluencers gig inducing FOMO. âYe lelo, ye bech doâ and so on.
Imagine your teen seeing his friend bring an iPhone to school and show off and good luck to you explaining why he needs to wait for 5years to save enough for an iPhone. Add some flavour to it by all these crypto hustle and get rich overnight schemes with no actual use case.
Blockchain tech has made it to the curriculum however, do we even have one example of a company/Institution which has hacked its growth using blockchain and become a world leader already? The answer is NO but the buzzword is a real fad. Just like few years back everyone would use buzzwords like Cloud, Quantum computing, and currently AI / ML.
So just concluding my thought that in the current age, humans need immediate results and would not wait long-term for wealth generation and for people who are still calm enough, a decent 15-20% XIRR, ex-brokerage, and other expenses and ex-taxation is a great deal rather than holding long-term with anxiety in the most volatile times which is today.
10 Likes
One a different note, I appreciate the availability of the many choices we have today than in the past. While there are few time tested models which can be relied upon, when many pockets are changing w.r.t finance, and some changes not necessarily for good, I would not sit in the same bus until it reaches my destination, if there are many more vehicles to make to my destination quickly, which in the past were not available. So the effort that I need to put in changing many vehicles is alright.
The outcome would be limited, despite having best efforts and time invested, if there is an absence of certain opportunities, which to some extent the previous generations experienced.
So for those who want to dabble, experiment, try or learn, there is that chance today.
Of course, just because something is available does not mean that, it suits us, and the onus is to know what it is. Personal finance, caveat emptor etc.
I have a long term PF but I look at short term opportunities to trade, and I have some interest in the derivative segment, and I guess whatever little knowledge I have today is because of the varied products available for us today, which is helping me look at things from different angles, having different perspectives towards the same thing, take better decisions and mature as a market participant.
Just my thoughts.
5 Likes
There are many sides to investment effort, even a long term strategy.
(i) It is impossible to time the market theory- this is right for self-styled long term investors like me. I can never forecast the market for today, tomorrow, a month later or the next year. So, people like me are long term investors because they donât think they are capable of trading.
(ii) Will you stick to a share while the rest of the market gallops away? Show me a person who has not regretted missing the API rally in 2020 and the Defence, PSU & PSB rally in 2022, while sticking to IT?
(iii) Try to be nimble, keep up with the momentum- this comes after you have missed the waves. But then what happens? As soon as you sell Infosys and buy Bharat Dynamic, the trend will change.
(iv) Even following the price momentum has its hilarious moments. Tiger Logistics has less revenue this quarter, but the profit is up. You stick with it for two days, while it keeps falling. Then after it has fallen by more than âš50, you sell. And there is buying in the stock.
(v) It is about emotional balance: One would keep emotions under control when you know the intrinsic strength of the company, but its stock is falling. But when you have bought a comparatively unknown company and it proves you right for a few months, but then when the results are bad, all doubts about the management start surfacing, and you get out of the stock as far as possible.
So, it is about thorough research and emotional balance, but research is told to go stand in a corner, while your emotions take the centre stage as soon as the results are bad, or the stocks fall badly, and you realise that the stocks that that kid suggested to buy have doubled.
Ultimately you realise you have ended up paying more brokerage than the profit you made in the market.
8 Likes
Nice summary of different perspectives. Heâs a small excerpt from William Greenâs book to add to it.
1 Like
Just bought the Greene book.
2 Likes
He also runs a podcast on YouTube âThe Investors podcastâ channel. A great learning place.
3 Likes
May be many would have already replied. How can buy & forget ever be a strategy? Sometimes it is important to create a catch phrase to convey a message and this catch phase is so misused that the original intent of âdo not keep hopping! research, invest and stayâ is completely lost.
No company will ever attain the status of âChiranjeeviâ; it has to change its form to stay relevant, even if it continues with the same name. When GE canât qualify as buy & forget investment today ~ change in just 20 years for a company with 100 year history can say something.
Buy & hold strategy when followed by a lot of people will help fund managers. Right now, the volatility is caused by sells from institutions; if retail investors become very active, both retail investors & the institutional investors will have too much work to do. Retail investors rarely can swing the market and thus should both buy/sell before institutional investors. Is one ready to do the research to stay ahead is the question?
Unresearched buy & hold will most likely result in less than pretax FD returns.
3 Likes
I have been guilty recently of making too many changes in my portfolio, rushing to buy on good result, selling off on a bad quarter. Sometimes even an order received by the company may act like sudden upsurge of voltage, and I jump to buy. Quite often with disastrous results.
This is not an entirely correct strategy, but sometimes one may need to switch to a new sector, and this may entail selling some shares to have cash. For example, I have bought Siemens, CG Power, L&T, Cummins etc. recently. I had to necessarily sell some shares.
This because I had missed the PSU, Defence rally. I did not want to miss the capex train.
It may again may not be the right thing to do, but waiting at the station while the trains pass you buy may feel silly.
By the way, I am reading Richer, Wiser, Happier of William Green these days. It is a great book, but becomes a bit confusing as you go through different ways to wealth taken by the successful investors. And you will be more confused when you see all the ways are espoused by Green. So, one has to find oneâs own way.
One thing though sticks. Look at your proposed or existing investments critically. If necessary, talk to a devilâs advocate. The thread is quite educative because of a variety of comments. More comments are welcome.
Your thoughts?
1 Like
I tend to keep 60% of my portfolio long (3+ years) and try to add more members into whenever opportunity arises. Reading less of investing books actually helped me get my thoughts organized and focused. But I read newspapers a lot, occasionally opinion pieces only to get a point of view and has developed a healthy respect for market volatility ~ Many seem to understand the market, but I have only learnt to admire it and thankful for occasional opportunity it throws up on the areas that I had previously researched.
- When I anlayzed, I get more calls right than some of the successful investors, it doesnât matter how often you are right, what matters is how big you make when you are right and that shows I am still a noob!
All the best. I rarely participate. Glad I noticed this thread.
2 Likes
There is a question that should be answered first, because if that is not answered and not cleared, the journey may feel directionless. Why is one investing?
I have no intention to be rude, but for someone in your position, a retiree, assuming that you have a pension, and all other current necessities are taken care of, and have time and capital, what are you looking at? A number, a strong financial legacy, another accomplishment, productive use of time?
I am sure you know that there are many ways to make money in the market, so if we are clear of the reason, clear of the purpose, we can simple choose to depend on our knowledge, if we have some, or read about different styles and we can choose the styles that appeal to us, which are comfortable to us, match us and start going forward and see how it goes, and makes changes along the way with new learning.
What I have observed from my limited experience is that, when we look at people who have made good money and have created some literature or other content around it, sometimes they can be contradictions. Contradictions can be found with people who manage funds too. They all are correct because they all have made money.
We can surely know about their styles and suggestions, but all of what they have said may not be appealing to us, some perhaps incomprehensible to us, may be those are exclusive to them and some donât apply to us. But all of them may have said something universally useful and applicable, so we can look for such things, because in addition to the limited application of certain things, the context in which they get applied should also be seen. Even a couple of things of what Peter Lynch said may have lost their relevance, and many things may have remained timeless.
More like culling, gather what seem useful to us, what suits us individually and start our journey, along with the clarity of why we are doing what we are doing. And of course, the journey is long, and we donât have to limit ourselves if we donât want to, more so when the market is expanding.
Just some thoughts.
6 Likes
I can answer that first. Unfortunately, most retirees turn their faces against it. On retirement, we get an option to commute our pensions. 40% maximum, and more than 90% opt for this.
What this means is that we agree to get cash in lieu of pension, at 10.50% interest. Then the retirees invest this retirement money in fixed return instruments. Mostly at 7.5% or so.
Then, most investors in the share market are not down and out people. Retirement has given me money to invest. I want to grow my wealth. There are two purposes behind this. One I want to leave Noida and settle down somewhere with clean air. Secondly, after my death my widow should have no financial worries. To this end I will invest some money in long term bonds (one alternative I have looked at).
Do I take risk while investing? Of course I do. Am I reckless? I think not.
Issues that I have raised are not peculiar to me or my types (retirees), but to all the investors who are confused about the investing style to adopt. In this category, a majority of investors would fit in very comfortably.
Lets continue to bounce ideas. Thanks for your inputs.
7 Likes
Iâve been watching this thread and didnât think it would reach the level of discussion it has.
I think for any investment method you have to understand yourself first.
Some people are day traders as they canât see themselves holding on to stocks for weeks let alone months.
Markets have too much uncertainty and they donât see themselves invested for long.
Some are more calmer and want to take a relaxed approach
Once you know what type you fit into, then you develop that area. Look for resources to further your understanding.
Sometimes you might have 2 portfolios, one long term and one short term
Whatever method you choose there will be a learning process and a loss making period. This is an important stage where you come to conclusion on what works and practice that in the market, and refine that finding.
Once you have completed this phase, the search stops and you have greater confidence that you wonât blow up your account
If you can find a mentor that journey is completed sooner. Your mentor could be younger than you but itâs imperative that he or she has gone through atleast one and preferably 2 bear markets. There are many paid advisors and if they have shown a performance that has withstood bear market drawdown, itâs best to pay them to get their calls and engage with them on how and why they selected that stock.
Out of the many methods, on of the methods is buy and hold. There is nothing wrong with it. If your temperament and your ability to analyse supports it, you should invest in companies that support that kind of growth.
4 Likes
Wonderful thread and enough wisdom has been written by veteran investors on buy & hold strategy.
In my opinion , the important criterias to work this strategy in your favour are if age is on your side to bear huge drawdowns , you as an individual calm & relaxed or FOMO driven personality, personal circumstances throughout this period , emergency fund provisions for unexpected life turning events, face to face experience of atleast one bear market with good drawdowns ( atleast 30 % ) in your portfolio & your discipline to bear that drawdown and finally your stock picking ability including margin of safety assessment on valuation.
2 Likes
Stock doesnât have a rate and nothing is indispensable in this market. All sectors jave corrected by huge margin, be it IT, Pharma, Retail, oil and gas, Chemical, Auto, textile. So that proves buy and hold is a myth, Stock valuations are myth, take example of Delhivery, Naayka, In Logistics and retail sector and compare with other companies. Delhivery still trade at a market cap which is sum of all existing companies. Naayka has annual EBIDTA of 300 cr and trade as market cap of 48000 cr, Aditya Birla fashion, Arvind fashion have combined ebidta of 2500 cr and trade at combined market cap of 26000 cr. Naayka doesnât have any established brand, remaining two hold all world famous brands. Same with Delhiveryâ:joy:
.
Major baffling thing is still MF and DII buy these companies at exorbitant valuations with public money at a liberty.
So its your call to become a fool, ride the storm and get out timely before becoming a greater fool.
I have two portfolios , Core long term and short term trade. Short term trade PR generated 30% returns and i sell at my price. Core has generated loss at 15%
So debate of buy and hold is valid, sell before others sell. The problem here is entry again as it will be huge emotional stress to enter scrip again which is sold at lower level.
Averaging is best idea if you are fully convinced about story.
5 Likes
really helpful. here is my 2 cent.
I do my investment into 3 category⌠A> 40% allocation B> 30% Allocation C> 30% allocation
A> I buy blue chip at consolidation (down by 40%) and sell nearing peak 1/3 and wait for further correct. cycle keep repeating. No hard-work by me⌠Stock selection is already done by someone else.
B> 30 % allocation into tailwind sector based on MACRO . I buy 5/6 cos here where I see tailwind based on industry macro .most of time 2/3 will perform exceptionally well . 1/2 perform decent and may be 1 in loss. I am ok. And churn 100% all when I see or think possibility of tailwind ending. And keep cash & enjoy profit.
C> 30 % allocation to value stock or deep value stock or beaten down sector or contra ion sector ,currently IT & PHARMA. Again I donot buy basket of stocks here. I buy 1 from IT and 1/2 from PHARMA. here. And when I see stock is in stage 2, I will allocate 2 trench here, and give 2-3 yrs. And again sell.
In nut shell- IMO - selling in not sin. or selling is not crime!!!
Kumar
4 Likes
Liked this thread. Mainly because whenever i buy a stock i do it with an intention to hold it for very long term ( except a few of course ).
In my experience, most imp things for success in such strategy are
- Be a loner. Avoid discussing ur stocks everywhere. Cut all noise. Any negative news just evaluate against ur original thesis.
- Management integrity is most imp in buy n forget strategy.
3.Think any risks, possible disruptors to business. Do u think the company will survive next 10 yrs ?
4.usually predictibility is more in mature businesses where growth may not be stupendous.
9 Likes
Forgetting what you buy will not even work for anyone I believe. Yeah, we do hold for very very long periods of time, but we do constantly track our businesses. Eventually, every moat will end someday which hampers the profitability of business. The average age of company to be in S&P500 is reduced to 17 years. We live in disruptive world. One cannot buy something and simply forget. People change, competitive landscape changes, its a dynamic world.
7 Likes