I had subscribed to SOIC for 2 years. I respect them a lot and I am also a fan of Ishmohit. But from last 2 years , although he never gives any recommendation, but based on his videos and his course I invested in
Alkyl amines
Apl Apollo
Astral
Chola Finance
HCL technologies
Deepak Nitrate
KEI
Laurus Labs
Mold Tek Packaging
P.I industries
Polycab
SRF
Divis Labs
So out of my 24 stocks , literally 13 stocks are from their videos and then my study. I know they never recommend anything and I am solely responsible for gain or loss in my stocks. But if I observe from above list…its a mixed response. Reasons can be anything…Global comditions, Headwinds, or entry at higher prices, current situation is such that…
Out of above list
Polycab ( 60%), Apl Apollo ( 40%)and Chola Finance ( 34%) have been good performers.
But Laurus Labs ( -39%) , Alkyl amines ( -16%), Divis labs(-15%) and Deepak, MoldTek, P.I.Industries, SRF all have been in negative. They NEVER recommended, so I am solely responsible. But once they discuss these stocks in such details, then I tend to get the feeling that, I just cant do more research than them and then after reading some Annual reports and concalls tend to buy them. Performance has been not great. In last 3 years, many mutual funds have given better returns than my portfolio. Only positive is that as @nav_1996 said, stock investing grows on you. I have read more than 80 books on investing itself and get to.know so many companies in last 2-3 years, so I am a better informed and better knowledgeable person compared to who I was in 2021. But I get thoughts whether I should handover my hard-earned capital to myself, considering my own limitations and my own idiosyncrasies. I am a patient investor and would like to become part owner of my companies so evaluation period is short, i agree. My concern is more about , how do I know, I would be correct in choosing these companies or time will prove that I am wrong. And I dont mind, getting proved wrong, if my net worth is not at stake here.
Then there are so many issues in leaving our capital at the mercy of mutual fund managers…
They follow market trends and dont hold on to good companies like part-owners. They are more focussed on their next quarter performance and beating their benchmark index.
They are also made to buy and sell as per fund flow into.their funds, against their wish. These are market compulsions and they have no control over this.
After these years, I have understood my nature regarding invetsment is , I am not an opportunistic short term person. I would like to study business and then hold it for long term atleast for a decade. So frequent buying and selling is not in my nature. And this is the most important roadblock in investing in mutual funds or PMS. They have a very short term view and their concern is limited to 1-2 years to showcase their performance.
So I have been wrestling with this for quite some time. Honestly i am a mediocre to okayish stock picker and have done ok. (Plan to put my journey here someday).
Coming to your points.
Apart from people who are exceptionally smart (Ivy League level), as an individual do you even understand the actual core of industries and their businesses. Let me put it this way, how do you as an individual track an industry (for me its pharma, chemicals) if you do not have a clear knowledge of the industry functioning at a deep level. So here is where it comes to the experts. Either you trust them to pick properly for you or you dont.
Learning Curves are important but the whole idea to invest in fund managers/ experts / index funds is to protect a portion of your wealth/ capital. I believe just as having a equity/debt mix is key, as an amateur it is key to have a direct / Expert / MF / Index funds mix. Of course, the way to solve is only invest in sectors/industries you have confidence and deep domain knowledge in. For eg: I do not invest in chemical and pharma now after experiencing losses/sideways for long time.
Some of what i say has been said by @ChaitanyaC also.
Also take whatever i say with a load of salt. I am not in the market to earn 25-30% CAGR but happy with a reasonable rate of return. Those who want to build wealth fast have to obviously take higher risks and venture into uncomfortable zones.
Ok So let me be the contrarian here. What if you are individual who has to work 70 hours a week ala Mr Murthy . What do you do here. I know since i have been in that zone. (Never worked in IT). So again, depends on individual basis. What happens if you are bad at accounting / zero knowledge of financials.
But I agree with you on not telling people to follow so called experts who are mostly selling hopium while filling their Tijoris. 99% of You Tube experts are charlatans or fake experts at best and are should be completely avoided. 1% may be usefull for closing out your own thesis or starting research on new companies. (The way most people ideally use ValuePickr). I also agree with you on MF/PMS strategy sellers.
Completely agree on this point.
Would love your input/criticism on my thought process.
Its not blindly following. I do my own study. But again, since they have already put in lots of efforts, very little is left for me to contribute, as far as study is concerned. Also there are other factors that I check. And these companies are not in the form of tips…They are good investment ideas to start with and backed up by solid research. Now how can you ignore this?
Hi Mudit. I also follow SOIC and learn from Ishmohit and many others but my stock picks are out of my own research. Based on your above picks, I feel the portfolio is Midcap heavy+ Large caps, whereas in last 6 months, Max. alpha is generated from Micro + small caps. It needs lot of reading, analysis, visits and conviction to make money in smallcaps. I believe if someone cannot do Small cap investing, then leaving portfolio to MF or Smallcases is a better option. One cannot generate that excess alpha by Large+midcap investing. All the best.
They may have covered a lot, and it could be true that there is little to contribute from your side, then bring in something of your own to the company you are interested in, it need not be anything quantifiable, it could be intangible, your perspective, your view of the business, even if it does not match with the analysis provided by them.
We can get an idea from anywhere in the world, but if we can add something of our own to it and go forward, I guess that would feel better. And you can follow the stock on your own, and even if the people who have analyzed the business stop talking about now, you can see if you can hold the stock for some more time, considering you have added your own view and are following the stock. There exist a lot of approaches if we want to go forward, many ways to skin the cat.
On a lighter note, I think you don’t know what he does, he is a CA.
This was meant to be generic and not at a specific comment on Mudit. We are all aware of how good the overall retail community in India is where people invest without looking at any sort of metrics completely on hearsay and tips.
Thats true. I have kept holding and kept studying the companies even after soic sold them.
Examples like Alkyl Amines, p.i.industries, Divis, Astral etc I am still holding and studying, even though I know that they dont hold in their portfolio as I am confident of these companies doing good over coming decade, even if currently they are subdued amd not in tailwind region. I only take help at the start, but later on i hold them in thick and thin, if I am confident of them.
I am a DIY investor and I enjoy it because finance, investing, business and economy is interesting to me. In fact, if someone asked me what I would be if I was not a software developer (which is my main profession today), I would say I would be a research analyst.
My approach is a combination of DIY + leaving to experts. I do a combination of mutual funds and stock picking.
I invest through mutual funds because there are fund houses that I trust for one reason or another. These include PPFAS and Kotak MF. AMC’s have their limitations, but they will aim to beat the index and my hope is that they will. In theory they will have more resources and information at their disposal than I will ever have. If someday I loose the trust, I would go 100% direct.
I invest in stocks directly not with the aim to outperform the mutual fund or any index. I do it so that I can learn about the companies and see if I am right or wrong with my hypothesis.
There are three reasons why I think I have an edge as compared to an AMC:
I have negligible capital (in the grand scheme of things), so I can buy any stock regardless of it’s market cap and not influence it’s price. AMC’s cannot do this.
I can wait out through years of underperformance as long as I believe in a certain company. An AMC would need to show profits every year or they will loose a share of their AUM. This puts pressure on the fund managers which I hope I do not have. Ideally they should sit tight, but that might not be the case.
I get to learn the intricacies of individual companies when I own it’s stock. You could argue that I can do that even without buying a stock, but at least for me, I find that I am more invested (literally!) when I have “skin in the game”. I read up more on the stock if I own the stock.
As of right now, if I compare the XIRR of my equity mutual funds v/s stock picking, I am doing better than the mutual funds by 0.9%. Considering the size of my portfolio, this additional 0.9% is negligible amount and I could have made more money probably by investing that time in my main source of income. However, I feel like I am learning and I am feeling more and more confident about my skills today as compared to when I started.
I will give you a simple example. If I never invested directly, I would still not know how to read the annual report of a company or enjoy the well written books like Coffee Can Investing or The Unusual Billionaires. I love that I can see numbers on screener.in and know what they exactly mean.
I could be wrong, but I think many people invest directly because it’s exciting to do so. It gives you a sense of control over the outcome and you feel better either way because it was your call after all.
The Answer to this Question lies in the book of Legendary Investor Peter Lynch (My Investing Guru) "Beating The Street " where he clearly explains how retail investors can outperform the experts with limited resources they have…He emphasizes using simple rules and not make investing complex in a way even a child can pick a stock perfectly!!! It is a must read…even I had this doubt at the beginning and got enough confidence and moral boost to go 100% Direct after completing it…
Interesting discussion. My 2 cents are as follows:
In my humble opinion, there are two basic criteria for leaving it to experts:
When you are super rich (according to me over 100 crores of Networth). And you are rich because of your inheritance, windfall gains etc but not by your own effort. Then better leave your money with expert in reputed PMS firm or MF Manager because they will protect the capital atleast. Otherwise these categories of rich people will ruin themselves financially while investing.
When you don’t have time or passion to do study, analyze, keeping notes, collecting and analyzing juggling with historical facts. Then better leave your capital with experts in MF industry because atleast they will protect capital and provide inflation/FD beating return in the long term (atleast 10 years)
Otherwise, it is extremely rewarding for retail investor to invest directly in equities provided he has spent alteast a decade of time in reading, observing, analyzing market and industry data before deploying significant networth in equities directly. The investing in equities has to progress in gradual fashion from bank savings to FD to PPF/NSC to Mutual fund and finally to direct equities. These are my learning. If someone tries to become over smart and in lookout for quick money in short time either way he will be wiped out mercilessly.
Now coming to advantage of direct equities is that if you reach a respectable capital to invest say 1 crore then making 10-15% will add you one year of yearly expense equivalent. And once your corpus start gaining momentum then in 5-6 years time you can double your AUM easily without taking much risk. Later then you will start adding atleast 25-30 lakh per annum (with conservative 12%-15% gain) in your AUM which will put you in a very comfortable situation financially. Later the key aspect would be to avoid taking unnecessary risks and play it safe and result will be taken care automatically and perpetually.
Please Note: Direct investing requires lot of hard work, study, understanding, analyzing various sectors, market data, look out for potential risks and finally great deal of asset allocation understanding across equities and debt instruments. There is nothing like buy and forget kind of scenario if the significant newtorth (e.g. 70%-80%) is invested in equities. Risks need to be monitored periodically. Are you really prepared for that? If not then better do index investing and nothing else according to me.
Nice viewpoint.
One query- you have said that once the capital reaches 1 cr, then 12-15% yearly increase will also be good enough. So may be you are indicating that once you reach 1-2 cr, then instead of subjecting your sizable capital to your own risk, it should be handed over to mutual funds and be satisfied with average returns of 12-15%, which will be good enough…is that what you meant or i read it wrong?
Thanks for sharing your perspective. My limited point was that in order to make big in stock market, you will need to find hidden gems on a consistent basis. Gems which not many people are aware of, mostly belong to small and micro cap categories and have a good runway in ahead of them. You won’t find these gems in YouTube videos. Have you ever wondered why these YouTubers never disclose their own holdings and price point at which they entered and exited any particular stock with the reasoning. All the stocks that you mentioned that you bought based on YouTube recommendations are well known companies and very seldom you will find that they give good returns and one of the main reasons is that many people chasing these stocks.
Muditji, no I didn’t mean that. Sorry if I sounded like that. My point is that once an retail investor learned the tricks of the trade then he can manage his portfolio by himself with proper risk management. This will save him with annual % fee of his AUM which will be 1.5%-2.5% translating it to around 2 lakh per year approximately initially plus earning 1%-1.5% of dividend yield on his portfolio translating it to around 1.5 lakh per year approximately. So he can earn/save 3-4 lakh per year easily in this manner and the PF if it gives 10%-15% return then he is done from equities with minimum risk. The compounding magic of PF comes into play after 5-7 years of time.
Therefore, if one has time and passion then of course one should manage his own portfolio of large sums.
I think finding hidden gems consistently is tough even for seasoned investors, I mean not all their multibaggers are of the same proportion, and some of these investors hold these companies for years. It is said that even if one cannot find such multibaggers one can still make money with compounding, creating processes, models, and invest across sectors, even add value buys along with growth, participating in momentum too. I think even a deep value buy which is discarded by the market could become a potential multibagger if the tide turns.
My limited point is that, there are many ways to make money in the markets, and personally I am glad that so many opportunities and choices are available, which I guess previous generations did not have.
Nice discussion.
So called experts invested via anchor to Mama earth. Would you trust them?
More than 50% MF lag behind index at least in large cap.
I have bad experience of investment via PMS.
As per me the expert is only index fund and etf. Said so am in direct equity as I like the learning process.
I think I had provided my thoughts on this earlier in some thread in one of our discussion.
Most points already covered. I will give some pointers I have in mind -
The total percentage of NetWorth which one invests in equities is important and most critical factor in defining investing style and approach. A 12% CAGR on 70% of networth is much better than a 30% CAGR on 5% of networth. Then it doesn’t matter if 12% is via stocks or mutual fund. An extra couple percentage point is good to have via either means though…whichever is better…
If the invested networth is less than 10% (just for sake of example), then neither Direct equity nor MF would cause meaningful difference unless we keep finding multibaggers.
This feeling of MF vs Direct equity is cyclical . Even other thoughts of trying various investing styles maybe cyclical… When MF do extremely well, the peak is that I wish I was more in MF and when MF go through a lag… I am so much better and let me share all XIRR comparisons…Last few months/year…BSE Midcap has done great and must have beaten many investors who invest in selected well known midcap/small largecaps…hence this thought is common to have now…Its natural…
The biggest positive of being in direct equity IMO is an upside risk if the monkey within me hits the right dart…the well researched human fails to pick up the right company at the right time and in right amounts all the time!
EDIT: Adding one more point -
Biggest benefit of Mutual fund can be capital protection. The downside risk in one of our major holdings in direct equity cannot be ruled out…
. What do you do here. I know since i have been in that zone. (Never worked in IT). So again, depends on individual basis. What happens if you are bad at accounting / zero knowledge of financials.