Why Making Money in the Share Market is Actually So Difficult (5 Years of Lessons)?

[firefueled]

@StonePitbull

Exit at right time is important. If you hold long enough you either become rich or you become the exit liquidity.

I bought Kaynes Tech at 3800, saw it doubling at 7600 and it fell to 4000 and then it doubled again and now fell to 3800. I could have booked profits twice at 100% but did nothing. I could have 4X the number of shares but I’m simply sitting idle with my original shares.

[gaurav]

Hindsight is overrated, dont beat yourself up for not knowing the future

[Ankit_Mishra]

Second guessing myself everyday but not yet. Would appreciate any help on capital allocation and exit framework. Identifying a trend seems easier than exiting or building a big enough position

[james_kerala]

Look at these threads.

Capital allocation

Towards a Capital Allocation Framework!

Ever since the astute senior investor (Mr D) brought my attention to it, I have been trying to refine my thoughts on the subject and create my own models. They have reached some shape and structure - that I feel confident of sharing the outcome with all fellow-learners. This is NOT a complete model but rather in the nature of a Work-in-Progress document. While one senior pointed me to it and helps me with refinements, another (Mr M) helped me tremendously in creating the model(s). Both of them…

Exit/sell decisions - few threads you can contribute further

VP Chintan Baithak Goa 2017- Selling decision

As we were setting the agenda for this years annual meet, we looked back on the topics discussed in previous meets. Even though we covered breadth of topics across various investment styles/philosophy, we realized that there was hardly any discussion around selling. All our topics/conversations revolved around stock ideas, buying strategies, investment framework for buying right and allocating capital. We seldom discussed anything related to selling. Even within group, lot of us, though adopted …

As a value investor , when do you sell?

Hi Sachin While I don’t know and no particular strategy is right or wrong but with my investing experience of 12 years have realized that there is lot of wisdom in this line “the best time to sell the stock is never”. If you have done the selection well (right management, good opportunity size etc) and if you can then best holding period is forever. I did an interesting analysis and found something insightful which is the reason for above. I have been buying selling stocks since 2011, other d…

[Investor_No_1]

@firefueled

I bought Kaynes Tech at 3800, saw it doubling at 7600 and it fell to 4000 and then it doubled again and now fell to 3800. I could have booked profits twice at 100% but did nothing. I could have 4X the number of shares but I’m simply sitting idle with my original shares

Investing, specially long term buy & hold, is a constant grapple with human psychology. You dont need to overthink on all that, you need to keep it simple and just think if you need to be in that stock or not….everything else is either a noise or opportunity to build position and not exit for, exit will come into picture only when you do not want to be in that stock.

If above doesnt work for you then you may need to work on techno funda and entry exit with momentum or on contra investing as @cshar mentined earlier and you are not a typical long term buy and hold person. Thats allright, you would need to change your strategy like I remember how @Mudit.Kushalvardhan did and has been doing much better for himself since then, if i am not wrong OR maybe trust mutual funds more to do the job for you while you retrain yourself if you still want to….

[Hanmantk]

Take only the risk you can afford, because the stock market is heavily influenced by sentiment and short-term emotions, not just fundamentals.

[rpattabi]

I’m documenting whatever popped up when I thought about the conclusions I arrived at in my investment journey.

Most of these conclusions are results of my study, and these served me well in practice.

Here we go:

BASICS

• Popular idea does not make us money
• Borrowed idea does not make us money
• Good company ≠ Good stock
• Troubled company ≠ Bad stock

RISK

• Focus on reducing risk. This way we make better decisions. If we focus on increasing profit, we make riskier decisions.
• Large cap ≠ Less risk
• Small cap ≠ High risk
• Price we pay decides the amount of risk we take and the margin of safety
• Kelly Criterion is useful to find optimum allocation that maximizes returns. This requires us to think in terms of probabilities and odds, which is good to think about. Fractional Kelly is safer. As a thumb rule, for any individual bet, don’t allocate more than 5% of the portfolio.

VALUE

• Learn to spot value. Mechanical approaches to valuation don’t always help.
• Cheap stock ≠ Value buy
• If cheapness is due to structural or more permanent change, this is a value trap. If the trouble is temporary, it might be a value buy. The distinction is not always easy. It requires clear thinking, conviction, and courage.

DECISION-MAKING

• Study cognitive biases. Continuous improvement to our thinking and decision-making is indispensable to succeed in investing.

• Reduce the number of decisions. Quality of decisions matter, not quantity.

• Having an investment journal is quite valuable. Writing down our thinking at each stage, helps to clarify our thinking process, identify gaps and assumptions, etc. It is an invaluable tool to retrospect and identify our biases, incorrect assumptions, and flaws in our thinking.

• Practice patience, but don’t be passive. Take decisive action, only when the mind is calm and composed, and after clear thinking of why this action is being taken.

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Disclaimer: I consider myself a novice investor (though I’m not at the beginning my investment journey).

I welcome criticisms, opposing views, and any value addition to these ideas.

[Sanjeev_Tamrakar]

Looking at price volatility is not a right lens to see any business. One must try to look at the environment where the company operates and understand the economics of that business. Then the same volatility will look very interesting because it gives you a chance to take entry at an attractive level.There can be hundreds of reason for fluctuations in prices. As an investor we should only focus on business. If you feel dhandha banega then one need to be invested and buy more if you find them as when it correct from fair value to undervalue.

Attention! Understanding of the environment and economics of business can take years. Then hardest part is the valuations. Then the confidence and courage speaks to you.

[kautuk]

On a lighter note

Why is making money in the market difficult? (Thread’s question)

Ans: “Because anyone who says it’s easy is stupid” - Charlie Munger