Good to see various experiences and lessons learnt by fellow investors. Valuepickr has been a wonderful platform to retail investors like us.
(I may sound a bit boring with lengthy writings, sorry about that).
-
I started investing in equities directly in 2013, after a mutual fund broker tried selling MF SIP products whose 5 years track-records were not impressive. Being, an amateur investor I picked stocks based on the recommendations provided in money-control. My first investments were LIC Housing finance at 165/, Voltas at 65/ and Aurobindo at 200 odd levels (before split). I did no research about company like what products company sells, market opportunity, their competitors, financials, reading annual reports. These stocks started appreciating, as I made excellent returns, increased my greed. In the meantime I was introduced with a word called “multi-bagger” and I started googling the word and that in-introduced me with a few bloggers claiming that they have a multi bagger idea getting released next day just before market hours and blah. They wrote rosy pics about company using a good articulation. I bought some of those ideas. As it was a bull market and every tom dick and harry stocks were hitting circuits, it gave me an impression these bloggers were right. Also, I had read a quote from Buffet that “holding period of his stocks are forever”. I applied this rule on the stocks suggested by bloggers (;)). I started averaging at peaks. After they fell significantly, I booked losses. But the same bloggers were giving new idea every week/months and not uttering a word about the earlier ideas. As the initial capital was small the losses did not impact me much. This experience is wonderful taught me some good lessons. The bloggers might have an ecosystem of 100 to 1000 or more people and each buying a few hundred shares of an equity can cause demand-supply issue, giving an illusion that their idea is really a genuine. Keep away from such tips.
-
While going through above experience, an introspection had already kicked-in in my mind. I started reading some books fortunately. I came up with a frame-work of selecting stocks (like reading 3-4 years ARs, management interviews, scuttle-butt method, balance sheets, size of opportunity, threats to business, competition etc). Diversified my portfolio with 15-20 stocks. This approach worked well for me, I had good 40% CAGR in 2016 and 71% CAGR in 2017 and portfolio is down by 25% from the peak. But the businesses have been reporting good numbers and become cheaper. When the core portfolio is appreciating, I was sceptical of averaging when stocks were at 52-week high, which lead me to find other cheaper ideas. During the market peak in 2017 year-end, I invested in these cheap stocks which got hammered to a point that they lost value by 50%. My temptation to stay invested 100% costed me badly. Again these 5 cheap stocks were like 10% of my portfolio impact was not high. In the recent steep correction sold these 5 companies and bought more of my core-portfolio stocks which also fell but by lesser %. Lesson I learnt: When not finding great ideas, keep the cash in debt instruments like FD and during correction use it to average core portfolio. Staying 100% invested is a myth per me.
-
Diversify: Instead of investing 100% in equity, diversifying across asset-classes where keeping allocation for direct-equity HIGH. I diversified into following: direct-equity, one reputed non-hyped value-investing mutual-fund, a few real-estate(luckily bought really early) and some debt-instrument like FD. No leveraging. It depends on age as many famous authors suggest, early in career take more risk, as portfolio becomes sizeable start diversifying into other asset-classes.
-
Give time for investments to ripe: I invested in a company called Excel-Industries in 2014 June at around 150-odd. Their products related to chemicals, sanitisation, veterinary APIs had really caught my eyes but due to frustration of a few bad quarters I sold at 280ish levels but now it turned around and CMP is 1400ish. Had I kept quiet with patience reminding myself of initial conviction I had developed, story would have been different.
-
Dont trust the news items blindly. I had invested in a stock called Associated Alcohol at around 80 Rs/Share. Conviction was high on the contract-manufacturing, capacity-expansion and branding of own-products. One news daily reported that promoters on the run due to ED notice/ride related to black-money. Google-alert popped the news and I exited at 175/ share. In few weeks stock hit 400 levels & Dolly-Khanna had bought 1% odd-stake.
NOTE: Not invested in any stock-names mentioned above.
Any reflections, appreciated.