Fully agree. I can say that I still see people who have been in the market for last 20 years seeking and investing in tips. As bull market peaks so do tips and in the ensuring severe corrections, people often exit their trades at losses or meagre profits.
I have also decided to stay with quality names and intend to hold them for a very long time for compounding to work magic. From time to time I’ll miss the rallies in odd sectors or small/micro caps but I’m OK with that. As you said sleeping peacefully is more important to me than worrying about market volatility.
It seems to me that the last few posts are missing a very important point - the availability of time in hand.
Lets assume a hypothetical situation - 7 years timeframe - 25 lakh capital -Target 4 cr.
Now, do you still think the approaches suggested above are acceptable strategies?
My view - Approaches need to be tailored to the context, the need and the skill level of the situation. There are tradeoffs everywhere, and no guarantees, All we can do is maximize our chances of hitting our goals without getting wiped out in the process.
To convert even 25 lakhs into 2 cores, let alone 4 crores, in 7 years, you will also need loads of luck. Someone, for whom 25 lakhs are pocket change, can take a lot of risk with that capital without losing sleep. For someone, whose life saving is 25 lakhs, risk management is only sensible strategy.
It’s easy to get emboldened by the stories of investors turning their 1 cores in 50 crores in 5 years, but one needs to watch out for survivorship bias. For every single such case there would be hundreds of adventurous but bankrupt investors that newspapers or YouTube won’t talk about.
Risk management is the only strategy that works in all context. Protect your capital at any cost and you will make good money in the long run. And while you are doing that manage both greed and fear, the biggest enemies of returns.
To quote Warren Buffett, “The first rule of an investment is don’t lose your money. And the second rule of an investment is don’t forget the first rule."
One thing great in favour of long term is less frequent pain of tax. My recent turnover in the portfolio has reduced me to howling to the sky, as the tax has mounted (due to selling) and the portfolio has not gained (in buying).
What about 3 Lakh to 3 cr in 8 years? This is what I have achieved and process is on going. Started with 3 lk capital in 2013, grown it to 1.1 Cr till Nov 2017, cashed out 40 lks to pay off home loan, two International trips. Invested capital dropped from 60 lks to mere 10 lks in March 20. From March 20 till now grown portfolio to 3.4 cr in Jan 24. cashed out 40 lakhs in between two years. closed 12 lk invested property loan, 7 lks for my new Honda Elevate, sold equities to pay off advance tax. 6 dometic family travel trips. Money invested from Salary and bonuses, Loaned capital, lumpsum investment, over period of 8 years close to 65 lk, encashed amount 80 lks. Net investment negative as of now. PF value 3 Cr.
Most important part of this is efficient use of leverage. You can’t make big in stock market without efficient use of leverage. Some key stakeholders for this journey
Tata Motors, Force Motors, AGI Green, Apollo Tyre, Phillip carbon black, shoppers stop, AB Cap, HSIL, kalyan Jeweller.
Here is luck factor which is always true and u can’t give yourself full credit. Money lost from 2018 to 2020 was in below stocks, Rpower, R Infra, RCap, PC Jewel and final nail in coffin by Yes Bank, lost close to 17 lk in yes bank and sold stock at 10 rupees in Jan 20. Remaining capital dropped steeply to 10 lk in Mar 20. So lost 60 lks in 2 years out of 70 lk.
March 20, i took a call on 5000 Tata motors, put in Voda Idea at 3.3 rate, capital 3.6 lk. Never knew it will rise to 12 in two months, that was turning point.
Learnings: no hot stock play now, avoid stocks with unmanageable debts, no Infra company, no Banks, careful investing in cyclical businesses.
All grace and love of God:pray:
Net liabilities have dropped to mere 10 lk and assests have crossed over 10 Cr now, still real state is making 60% here.
If you want to make big than only u can do it on your own conviction. My strategy is bottom approach, i am looking for a fairly large sustainable business trading low due to some foolish decision by management and turnaround is seen in future. Major alpha is created here as stock is hated hence valuation is cheapest. Take large bet, inspired by Mohnish Pabrai. If dont bet big you dont make big.
Kudos for some remarkable feat. You are right. Leverage is key to making big money. It’s also a way to lose lots of money. It’s essentially a gamble with both unlimited downside and upside.
Zerodha recently published a study that said 99% of traders lose money, leverage being the main culprit. I know someone who made lots of money with leverage and lost most of it again due to leverage (by sheer habit of gambling).
So hats off to you for your talent, gift of timing and risk taking. You are among 1 percenter in the market.
Also with that talent you can always find stocks that can give similar returns without risk of leverage. There are plenty of stocks, mostly penny, which invested would have given you better returns without having to wait for a black swan event like covid.
Take Waaree Renewable Energy. Stock was 10 apiece in April 2021. Today it’s 1400. If you put your 3 lakhs in this stock you would have made by now.
Strategy you have highlighted here and below (taking large bets, picking good businesses in hated zone) is nothing new and yours truly and many investors I know follow that. But none of have done what you have been able to achieve.
I see lot of sarcasm in appreciating language and that is justified.
SEBI statement is 100% correct. There is only one thing i don’t do in stock market is F&O. Fortunately i lost small sums in Market during 2009-2012 in option trading however someone recommended one up on wall street by Peter Lynch in 2013 and that was turning point to move to value investing.
Leverage i mean using MTF where you can hold stock for an year. If your buy price is right than " stock does not know weather you have bought it for cash or leverage".
I have seen lot of drawdowns in last 7 years and at times had to book losses in leverage as well however strategy has paid well till now however basis rules have never changed until stock passes my screener its not in portfolio .
I have read Peter Lynch, Warren Buffet, Phil Fisher, Mohnish Pabrai, Morgen Housel, Nassim Taleb and Howard Marks. All writers i found Peter Lynch and Howard Marks best and i follow them religiously.
Sir Rakesh Jhunjhunwala said there is only one rule in market that there is no rule.
Rotation, leverage play, short term and long term, i follow all classes which can offer returns. Force motors is longest holding in my PF which dropped from 4000 in 2016 to 800 in 2020, its my strong conviction bet and started paying off after 7 years.
Kalyan Jeweller i entered in Dec 22 which 20% of PF and it has gone 3.5X its core portfolio stock and never touched a single stock till now and will not touch until i see market cap of 100000 cr.
Lot of writing till now, at last " DONT FOLLOW ANYONE IN MARKETS, FIND YOUR STRATEGY WHICH IS SUCCESSFUL AND JUST FOLLOW THAT.
Awesome & congrats for your remarkable achievement. I have heard about similar strategy being adopted by one of better known skilled investor Basant Maheshwari when an individual is starting with very low amount of capital.
What is your strategy in current market ? Is the degree of risk, you are following now, same as earlier ? Or it is being reduced by considerable amount since your portfolio have reached certain size ?
Dear @Amit_Paul , thanks for good words, i will add word that “i was lucky”.
Approach is totally changed now after last crash, positions in core are untouched as long term growth outlook is excellent. Only selective bets where turnaround is visible or trading at below intrinsic value. Current momentum is changed now and doesn’t look to regain old highs, we will see time correction wherever euphoria is buit up. Wait & watch is right strategy with concentrated bets in your high conviction stocks.
Just doing tax loss harvesting and removing weeds.
@Cshar Sir, could you please elaborate in detail(if possible) on ‘efficient use of leverage’ and how did you efficiently use leverage in making it a big in your 8 year journey? If you can give some real life example, that would be great. I have some basic idea about loan against share, but it’s always good to hear from someone who has implemented practically. As a salaried retail investor, we have very limited capital to invest with limited years(may be 15-20 years depending upon the age when we started investing). So I belive it is worth using leverage if the risk appetite permits.
Congratulation on your exceptional achievement. It looks unbelievable without favourable luck factor.
Thanks for kind words @Mehul1. I am also salaried, 11th hour of my career, already working for 27 years now. I am using ICICI direct account. There is provision of MTF trade option where you can pledge your holdings and get a limit for trade. Buying in MTF will allow you to hold your stock for 1 year and u have option to convert it to delivery, square off position to book gain/loss. This is a boon whenever there is severe correction in a bull market as no one has money to buy in correction and curse in a bear market as prices will be down only.
I have 50% of leverage rule at max of my total portfolio.
Positives
Arvind ltd bought in MTF Last year at 90 rupees and just carried over till 230 rate. 5000 quantity. Total gains 7 lks.
Shoppers stop bought 5000 shares in 2022 at 270 rate. Kept holding till 600.
Done it for several other stocks including ABFRL, AB Cap. Tata motors, too many.
Negative
Bought dreamfolks at 790, after Apr 23 results stock tanked to 480, booked at 540, 1000 quantity loss 2.5 lks.
Booked MTF losses of 10 lk in march 23.
This game is not for all however if you are disciplined than you will gain. My rule is max leverage 50% and optimum 30%.
@Cshar Thanks for the detailed response with example. Do you need to pay any interest on MTF position? If so, how much in percentage terms?
I have my account with Axis Direct and they are also offering similar thing called ‘E-Margin’ but the rate of interest is too high (18%) so I have never try that option.
As a disclaimer, I am mindful about the risk involved with leverage investing
Icicidirect offers 9% per annum. Lowest one across all. Negative point is brokerage is .1 %. Best strategy is start with 5% of your PF in MTF. Hold position for 2-3 months, look for 20-30% return. Than u can take a decision to convert to delivery or square off. Trade less with large holding periods.
Note: avoid all hot stocks which are in momentum else u will burn your fingers. Its just equivalent to buying cheap assets on leverage and waiting for markets to recognize and reward. Do a proper fundamental and technical study for anything you are adding in MTF.
Every catch all principle has a shelf life … this strategy of buying stocks not in Mutual funds list works to the extent that it is a deserving company but is ignored because it is small. It may continue this way for a long time. and Mutual fund analysts have a lot of smarts …
and people still invest in marquee names like HDFC etc… because India is still small by world standards … so when economy grows they will also grow … with less risk ( usually people ignore risk in unknown names )
Many of this multi bagger stories like Waree you mentioned have an insider element in them… if you knew greatness of this company you would have invested more than 3L just as a validation… so luck and serendipity plays role than your investing skills… many examples like a Suzlon or Reliance Power fits this logic… If all your stocks were like would you call it an investing strategy ?
