I have recently completed 10 years with Valuepickr. It has been a hugely rewarding association for me, as I am sure it must have for scores of fellow investors.
The idea behind writing this note is to share my experiences over the last 20 years of active investing in a hope that it helps young investors of today to realize the potential of attaining financial independence within a reasonable span of time.
I started my investing journey at the ripe old age of 36 around the turn of the century so most of you already have a head start! The start itself was accidental, in that I happened to read Peter Lynch’s “One Up on Wall Street” & it rang a bell! Lynch wrote at length about buybacks, mgt. buying, about share prices following a Co.’s earnings & many such gems that made a lot of sense. I guess being an entrepreneur for 15 years prior to reading Lynch, I viewed investing from a promoter’s perspective & not necessarily as an investor buying 100-500 shares in a Co.
Reading is one sure way of getting better at the craft. There is no dearth of investment classics, & I benefitted enormously from reading & re-reading them. You need to make your own private library of books from which you derive solace & comfort. It will surprise you that each time you re-read a classic, you are quite likely to learn something new that had perhaps skipped your attention earlier. Or it may be that as you evolve as an investor, you are able to relate better with the author.
Random thoughts on investing:
- The starting point for any investor is to know yourself, your temperament, your nature & then being true to yourself, not trying to be someone else that you are not. To be able to think for yourself & have the self-belief to back your judgement. Don’t worry about being wrong, the investing game allows it, but make sure you don’t repeat the same mistake twice. I probably made more mistakes than anyone that I know, but it’s important that the moment you realise your mistake, you cut your losses asap, preferably the same day if possible. The inability to take losses, is perhaps the biggest stumbling block to wealth creation. Yes, your pride does take a hit each time but if you cannot take a loss, then perhaps you are better off not wasting your time on this journey.
- It helps a great deal if you are an Optimist & believe in India’s growth story. Being cynical about life in general or having a negative disposition makes the journey very tiring. It is difficult to change one’s nature/ temperament, but one can always make the effort. Don’t worry about things that are not in your control, like markets being manipulated or playing on an uneven field. Focus instead on what adds value to your portfolio by being aware of all the developments relating to your investments.
Stay with what you understand. You will make fewer mistakes. It doesn’t matter if your circle of competence is limited. Humility is the key, & any kind of arrogance is a recipe for disaster. The markets won’t take long in humbling you as most of us have learnt the hard way! The key is to remain a lifelong student.
- You have to enjoy the process of research. This is critical and I am not sure if it can be acquired. Perhaps learn to enjoy your own company as the journey is somewhat lonely. Investing, as I see it, is all about taking a gut call on the basis of available data, as you interpret it, without looking for re-assurances from others.
- It also helps if you do not take yourself too seriously, & even have the ability to laugh at yourself with all the mistakes that you will make along the way! After a few years you know whether or not you are cut out for this game. If you decide that you are unlikely to enjoy the journey, then focus on whatever you enjoy doing but start an SIP on the Sensex or Nifty and you will still beat 70% of investors like us who eat, sleep and breathe the markets but are still unable to beat it!
- Each investor has his own style as each one is different. I always took a few concentrated bets at a time & backed myself. Heavy bets are not taken in one go & you add as your conviction grows, as the story unfolds to your liking, no matter that the addition is made at higher levels. You have to make your winners count. They have to take care of all your mistakes/ losses. I did not believe in making shares “free of cost” & holding them forever. If there is merit in the story then why sell & if growth has plateaued or valuations are not in your comfort zone, then exit in total & look for the next story. The investment corpus is limited & the idea is to maximise returns. Hedging your bets by remaining invested in non-core ideas will lower your returns.
The rewards, however are hugely gratifying. A decade of focused investing can take you close to financial freedom. The real game only starts thereafter as you let the power of compounding work for you, and you start playing the game for the sheer joy of playing it! And then, if you are honest with yourself, you will realise that you are sitting on far more than perhaps what you deserve, certainly much more than what you would have bargained for!
Thank you @RajeevJ for writing this note. It helps each of us to learn from your journey. I am more young at investing journey with only 8 years experience starting at more ripe age of 40.
Would you be able to share atleast one of stories of your biggest successes and biggest failure ? How did you build conviction in the success story especially as you are small cap investor?
I am diversified small.bet guy, but trying again to increase my allocations. Would you say typically how many stocks you remain invested and how big was your current big bet in terms of total PF%. How long you remain in cash, before redeploying it in another idea. For eg,you recently exited Pix. Did you already redeployed the gains to another stock ?
Apologies for this answer, but he is a big investor. Investor in a business in a more direct sense. Remember seeing him owning 1% or so of shares, traveling long distances to meet managements etc. So the scale at which he does is not the same as ours, assuming you don’t have positions like he does, and assuming we are the same. Just saying.
Interested in the details of his endeavors though, because I cannot recollect another member like him quickly, so there will be a lot of learning.
@RajeevJ Your post might look like a few paragraphs of common knowledge to newbies, but for anyone who has been active in the market for some time, these are great words of wisdom, which come only from experience, and all of which, while may not be practically doable by all currently, but if understood will help as the journey progresses and positions scale up. Thank you very much for this.
I kindly request you to share your story, including examples, about how you started your investment journey in stock picking.
I am curious to know your thoughts, views, and doubts during the initial stages when you were accumulating stocks and how the growth story of those stocks unfolded over time.
Additionally, if you have any failure stories from your experience with certain stocks, I believe that would also be valuable to learn from.
Thank you for sharing your journey. It’s been an inspiring read as someone in their 30s aspiring to achieve Financial independence and just starting off on that path. Over the last few months I have started taking this forum more seriously as well, and there’s such a vast ocean of knowledge on this forum! My awareness into finance came through first reading Robert Kiyosaki’s Rich Dad, Poor Dad. He also mentions books by Peter Lynch to get more useful information into the Stock market and criteria for picking good companies. Though my financial knowledge is still pretty basic, im sure it can only grow. and experienced members like you sharing their knowledge reinstalls my faith.
I had tried reading Intelligent Investor, but at the time i couldn’t get into it. would you recommend any subsequent reads as a progression to One up on Wall Street?
Please share a reading list if possible. Thank you!
The more I read your note the more convinced I am about the joy of being in markets even if it’s in a small way that I am in. The money does matter of course but the happiness of being right about a bet can’t be traded for just money
Thanks for sharing your experiences, Rajeev! A well-written piece. Learning a few new things, and a reaffirmation of many things that one knows, from successful investors like you is always so valuable. All the best for the next leg of your journey…
Great points of your journey.
I request if you can give few examples of you investment where you got right and wrong with reasons (mistakes)…this will be useful to our group
Responding to some of the points raised above & a few other thoughts:
As regards to my hits & misses, I have been writing in some detail, of most of my investments carried out over the last ten years on ValuePickr, which is such a wonderful site that I think you can access it all. It will pretty much cover stocks, both, which worked out well & otherwise. I think I may have given my reasons for both getting in & out in most cases.
In terms of the number of shares in the portfolio, your top 10-12 stock ideas should be enough to absorb 90% of your corpus. That too not equally. The weightage for different stocks should be in direct proportion to your conviction levels in each Co. 10-12 stocks is enough diversification and it also forces you to take meaningful positions in stocks where you feel bullish. Frankly, there is no point in being right with your investment thesis if you don’t make it count.
A few thoughts on selling: For starters, losses don’t happen when you sell or book them. They have already happened when the share price fell. With that clarity in place, it becomes a lot easier to sell & cut losses.
I always found selling to be trickier than buying. Stocks tend to have a bad habit of going up after you sell! I try not to track stocks after I have sold them. It helps me in managing stress. Earlier, I used to put down in writing, my reasons for selling a stock as it brought a lot of clarity. Reasons could be any, like valuations getting stretched, lack of growth, a mistake in buying the stock in the first place or simply finding a compelling story so having to sell an existing stock.
Try not to fall prey to the easier option, that of adding to the number of stocks in your portfolio as they do not necessarily help with your returns. I also found it easier to sell while the stock was going up than when it started to correct, more so as your scale of operations increase. When stocks are rising, as is the case in the current bull market, it’s all the more important not to get complacent & to keep revisiting your investment thesis & keep a close eye on the valuations to see if it makes sense to book profits. If its not a buy any more, it could be a sell!
Thanks for sharing your thoughts and experience in brief. i can relate somepoints with my limited experience in market & also feel motivated.