Saturday, December 27, 2014

5 Stocks that are ready to Zoom

Frankly there are no such stocks to offer. Such has been the caption in ads of brokers who are taking advantage of the bull markets witnessed in last few months. Why are you in a hurry to deploy cash when you have a lifetime to do it? Why are you in  a hurry to invest when you were doubting all these days? This is a good time to start buying but not to burn out. What you start today should be a marriage that lasts a lifetime. Just as you would invest and manage in a relationship through its highs and lows, so also you need to persevere in stocks.

One of the most beautiful messages I heard recently was, the whole world is the sum total of results of the actions of a few individuals who have realized and actualized their full potential. We can count the people who have made a difference around be in business or in social enterprise. Many of us may not be able to achieve that in this lifetime, this is the harsh reality. But what we can indeed do is to be aware of that fact and also be aware of those gifted individuals and partner with them. That's to me what the stock market provides as an opportunity. It is definitely not a platform to park your limited and time bound surplus cash with the hope of making a killing in a few months. As Thomas Phelps puts it, Fortunes are made by buying right and holding on. An average investor would sell his stock once it appreciates by 30% and then he looks for another idea. He does so to avoid the regret of losing his potential gains, should the stock go down. The market requires a lifetime of dedication and patience.

A stock is bought for a future value that you can fairly predict today. The future is may be 10 or 20 years from now, so you actually get it for a small percentage of its final value at vesting. Honestly this is over simplifying investing, as there are many variables during this period including emotions, cycles and business changes that can happen over the long term. Hence it is paramount to monitor them and make course corrections if required, but broadly that should remain our main job as investors.

Recently I was meeting an investor retired from a PSU who was asking me what ideas I was working on. He seemed fairly knowledgeable about the markets and he was aligned to my philosophy of business like investing. We got talking and then I asked the seemingly middle class person about his holding. When he revealed the figure, I was pleasantly shocked and asked him how he managed to do that, to which he replied ‘I never sold’. Most investors ask me why they would invest if they can’t sell, or if they can’t book profits. I go back to the basis of business like investing. If you were running a very profitable and successful hosiery unit, would you sell it? How does it change when you hold the stock? Hold to your stocks as long as their earnings are increasing year after year. Anybody who does not believe in this philosophy is looking at stock market as a gambling den or purely to keep himself busy.
Investing is a boring profession. You are better at it if you have other occupations that can keep you busy.

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