Dont try to sell winners early. If there's a reason to exit, book profits and keep some 10-20% and dont mess with those. (Unless something's severly wrong)
(tax on profits, cant get multibagger too etc)
Markets give money when one's uncomfortable. Dont spoil a running position. If the idea is good, keep averaging up!
Buy a lot of shares of a company if you think its price is going to increase. If it is a steal, why would you allocate just 5-10% of the PF? If the idea is great, BACK UP THE TRUCK AND BUY!
(Learn the difference just wanting a big trade vs Investing a lot - REMEMBER - Great ideas are rare!)
In a bull market, Valuations are decided by market, dont try to judge them. A strong uptrending stock would have buyers at any miniscule fall in prices.
- Do not be scared of good businesses even if Valuations are a bit extreme.
- Come out of self-limiting mindset. Look anywhere and everywhere!
- Keep searching for new themes. There will always be opportunities in a country as large as india.
- Opportunity cost to risk-reward ratio should always be in back of mind.
- RAMESH DAMANI - "You need to be a bit a maverick to take huge bets. You need to tell the world that you know what you're doing and they don't."
- "Have the integrity of independent thought and strong belief."
- Read Annual Reports and Earnings Transcript everyday! 365 days is alot of time to cover the majority of stocks and sectors.
In small caps, credibility of management is supreme.
One should only hold those stocks which they could hold for life. When the fall by 40-50% - he wont be compelled to sell, but BUY.
- ALWAYS TRY TO FOLLOW THE SMART MONEY.
Never confuse bull market with brains.
Cheap investments don't work nowadays. Need to buy quality + growth cos which are relatively cheaper.
Make single A4 page notes of researching-cos. Get back to the notes, when making a BUY/SELL Decision.
Any potential investment should be able to 2x in 3 years. Else don't bother - or stay put with current cos. AGAIN, SELL ONLY WHEN THERE'S A SIGNIFICANT CHANGE.
**RAMDEO AGARWAL - "Ultimately, you have to bother about your 20 stocks and leave the 2000 stocks alone! There are always crackers bursting in the market. Leave envy aside."
Identify the tailwind.
If external environment is changing, just the price of stock is changing, not the VALUE OF THE COMPANY.
- Even the best fishermen won't be able to fish if there are no fishes in the sea.
Separate capital and trade with 30-35% of it. Rest in 2-3 year-d bets.
Divide your bets into trading vs investing. For trading bets, use Trailing SLs. If SL is hit, recheck on the company and then place bets.
- While researching stocks, remember - YOU KNOW EVERYTHING YOU KNOW, BUT YOU DON'T KNOW WHAT YOU DON'T KNOW.
An uptrend is something which should be noticeable by a noob. Small details needn't be worried about.
Rather than finding good cos, try to learn to reject poor ones ASAP.
Various risks at individual stock levels are mitigated if enough good ideas are generated fairly quickly.
Market Cap to TAM ratio should be extremely low.
Dont need to become a long term investor in a bad business. Just buy them tactically, make a ton of money and EXIT.
Try to avoid small positions. < 4-5% of PF - shouldn't be bothered with.
Always look at the bigger picture and the runway. Don't be bogged down by short term turbulence.
Dont go for 10-20% returns. Go for 5x-10x of capital in next 3-4 years.
Fancied stocks and sectors should be avoided since they're owned by many people and hence are fully explored.
Dont try to invest everywhere.
If logic doesn't play - then you also don't have to play. Like mentioned above, there are always crackers bursting in the market- just focus on your stocks.
Dont try to excessively focus on numbers like PE, ROE, ROCE etc. Look at the bigger picture. Numbers will follow eventually if the management and the business is good.
HIRED VED - "We all have cobwebs in our heads and we think this or that won't work. How we refrain from insanity and still evolve as an investor, is the next big leap."
The companies, esp small and mid-caps don't know their worth most of the time. They also have a blindspot.
Simple businesses can be scaled, not complex ones. The more the moving parts in a business, the difficult it is to manage while growing it.
Don't try to make all investment decisions on original ideas only. Try to avoid that personal satisfaction. Pay attention to other people's successes and ideas.
- Investing is all about having an independent thought process yet not being egoistic.
- Some companies will always compound irrespective of the overall market trend.
Dont try to make HOPE trades. Sometimes, you can be very lucky to buy the stock before a particular event and look smart, but the amount of time wasted, and drawdowns you have to take is not worth it. Its better to pay 20-30% extra and buy the stock post event as a 100% confirmation of the event.
Most of the CAGR Killers come from "Potential turnarounds" hope trades.
HIRED VED - "Unfortunately, we have never made money in DEEP VALUE BETS. Either it never happens, or something else happens before it happens, or you sell it before it happens!"
Some people say that when valuations become expensive, you should get out. BUT YOU HAVE TO REALISE THAT THE SWEETEST MONEY IS MADE IN THE FINAL BULL RALLY TO THE TOP. So without being too smart, try to capture that last market movement.
The main idea is that when you don't find value in your spectrum of mid-sized companies, you can look at investing in stable businesses - where the growth is moderate so you still can make some money.
There are always parts of market doing better than market.
- If one company is doing well in a particular sector, there is an entire ecosystem that has to deliver on the same metric. It doesnt normally happen that one company is doing well and other aren't.
eg - TVS, BAJAJ and HERO MOTO - all did well from 90s to present day.
But when an industry is going through a downturn, even the best managements can't do much about profits.
- Most managerial mistakes happen at the peak of the cycle, as high capital is deployed due to extrapolation of profits from last 2-3 years.
VIJAY KEDIA - "I used to tell my childhood friend - in life either I dont want anything or I want a lot of things - but not to be in between. I was so used to living at zero level that I was not afraid of being at zero level"
Nobody ever teaches how to invest. You have to spend time with experienced investors and read between the lines. You should know what to learn, unlearn and relearn.
One should not sell shares just to book some profits. He should be focused and think long term.
Till the time you dont get over your past sins, you wont have mental space for new ideas.
With an unpopular but good, growing company, at cheap valuations, the train could be late, but one cant go wrong.
Come out of regrets ASAP.
Keep focus on the companies where you can make substantial investment. Dont waste energy over small allocations - there is a price to that energy.
Don't ever overpay for Quality or Growth. Either wait, or keep digging deeper!
We are always in a loser's profession, we either lose money or lose opportunity. It's always better to lose the latter.
Dont pay up - unless the stories are being converted into profits.
