Saturday, March 11, 2017

The Art of Attracting wealth is Knowledge and Expectancy

Most popular question from a stock investors is "when will I see growth of my portfolio?", very often this question is within a couple of weeks if not months after investing. Otherwise it is from an anxious investors who calls up worried about a decline soon after making his investments. The expectation from almost all is that the stock should never decline and must shoot up immeidiately after investing. No one can answer these questions to the satisfaction of an investor who has not based his investing on knowledge, hence this blog.

As Graham said, the investor has the choice NOT to follow what the market is doing now! The primary reason for investing faliure is because an investor is paying undue attention to what the stock price is NOW. Instead the investor must focus on where is the company headed in future, couple of quaters and years down the line. Is the management capable of seeing the changes and are competent to spot and take advantage of the future opportunties. There are challange in every business, but capable management will ride through tough times and prepare to grow in the best times. To give an idea of business cycles and how managment should take a view and excute for growth, take a look at the Letter from Edelweiss financial services. 

There are various philosophies to invest, some focus on investing in companies selling at very low multiples of assets , earnings or cashflows. Others look for undervaleued small companies and wait for their revival. Then there are those that look at margin of safety coupled with detachment from the market but with great emphasis on future growth. There are investors with no time compulsion who look at making VC type multifold returns, they look at the right stocks which are in negative momentum and at a multi year low. They go against the tide as to capture the larger part of the rally during the growth phase.There are those who avoid profit making companies but run by clean managment with potential to come out of the red, they buy when the stock is making a loss and wait for years to make serious long term return.

Each investor has to decide which style will suit his personlality, this can't be borrowed knowledge and he has to build his individual conviction. If shortterm dilution in value keeps you awake, look to exit the stockmarket and invest where you understand and feel secure.

If you have not experienced a bear market phase that can last for years, it is easy to delude yourself that you have nerves of steel. Reality can turn out to be very different making you to exit at the first drop in prices and causing avoidable losses.

Expectancy : you must expect to be wealthy, as Al Koran said, when you were young,  you expected money form your parents, uncle, aunt who came home. The expectancy got us the money. The magic of getting in expectancy.. and Knowledge of course

1 comment:

Anju Shukla said...

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