“Cash is King”
“Risk comes from not knowing what you’re doing”- Warren Buffett
By Suresh Padmanabhan (author of the international bestseller “I Love Money” and also creator of the world famous “Money Workshop”. Know more at www.themoneyworkshop.com or email at: suresh@themoneyworkshop.com )
Right now it seems:
Stock Market is a bad word
For investing we need to have one compulsory certificate: the cardiogram report
It is better to gift Shares than Sweets for the Deepavali for they will turn out to be cheaper
Apollo Hospital can be a good scrip for many will land there soon….the way things are going
What will be the index some months from now……. “O” from where it all started and did not Indians discover Shoonya or “Zero”
Racing at a top speed of 200 kms per hour, with the cool blast from the ac, and music blaring your favorite song, on an express way, everything is excellent in that moment except. .. that there are no brakes in the car.
Life in the stock market can be a crashing experience if one does not play with Rules. In the vegetable market people go to any lengths to do astanga yoga with onions and potatoes to check if it is of right quality, but when it comes to investing money in the market they just would not bother to invest lakhs at the advice of anyone ranging from the so called stock market experts or the grandmother who now a days watches CNBC rather than popular soaps, to the shoe shine boy who recommends his best picks.
Let us learn a lesson from the legendary investor Warren Buffet who happens to be the richest human being on earth even at the most turbulent times of the US markets. Investing from the age of 11 right from day one, he embarked on a remarkable journey with clear rules of investing which he has not violated all through his life.
Having Created Money Workshop, which is all about discovering the Instructions Manual of Money, I know through the experience of lakhs of my participants on the values of having a clear blue print of Money.
The market had run off to a very big high at the start of this year, and it was unrealistic. I had a seminar on the stock market in Rajkot where I suggested from the stage to about 300 participants some of whom were also experts that the markets are going to tank soon. And as predicted the markets started crashing from Jan 24 onwards so much that it shook even the sturdiest players.
The BSE Index is a reflection of just 30 stocks out of more than 5000 stocks which are listed in India. So one should avoid index fixation and rather focus on investing in good companies. Either ways people react doing up or coming down. Even today with a one to two year perspective the markets look very good and will give more than 20 % returns if not more even on a conservative outlook.
The markets are so dynamic that one needs to be updated on a daily basis. Crude was ruling so high at 147 dollars and now is at 62 dollars , which will change the dynamics of the markets. Any change in macro economics can change the outlook. Stock Markets factor any change super fast and is reflected in the prices because the best brains work out here.
Everyone just favored the Reality and the Infrastructure sector and look now at the prices they have crashed beyond imagination. There were all indications but people do not read the signals and have to suffer. Another example is the Tea industry suddenly finds itself very good in the last 10 years with prices firming and am sure that they will earn healthy profits. So investing in tea sector can pay good returns.
But I am surprised at the foolish people who would gladly keep money in savings account and happily get 7 % per annum but would want a min of 100% return from the Stock Markets. Crazy is a much understated word here.
People have to map their life and get into a conservative, moderate or aggressive approach to the markets. 30 % of the surplus in the stock markets, 30% in debt, and 40% cash is the best proportion today. Till this year end one mantra for stock markets is “Cash Is King”.
One of the sectors to watch by the year end is the Banking sector especially good quality Private banks and some PSU banks which can give good returns next year. RIL and RPL also should be in the portfolio for returns exceeding 20%. Companies like Punj llyod which have been beaten down can be bought because of good management. Stocks like HLL, P and G are very defensive scrips and should be in portfolio now. Infact there are several companies which look super attractive. But I strongly detest advising as People have got into a bad habit of begging for Tips rather than learning to Fish.
There have been many Random Selection theories some very funny like: In 1988 the Wall Street Journal began a contest that was inspired by Burton Malkiel’s book A Random Walk Down Wall Street. In the book, the Princeton Professor theorized that “a blindfolded monkey throwing darts at a newspaper’s financial pages could select a portfolio that would do just as well as one carefully selected by experts.”
This is like saying that a monkey hitting computer keys at random will eventually produce a great novel. Did you know that the same monkey selecting stocks randomly will ALWAYS produce average returns that beat the experts?
There are two reasons for this incredible result.
First, experts cost a fortune while the monkey is paid peanuts.
Second, the monkey picks stocks randomly then holds them, while managed funds trade continuously in a futile effort to find the best stocks.
In the late 1990s, this was called Monkeydex in the USA. It was an index of stocks picked by a monkey, and its performance beat that of many professionals.
There was also this Erection Index where during Japan’s bubble burst in 1990, financial soothsayers in Tokyo used to scan the horizon to count the number of construction cranes busily at work around the city. Optimists viewed the “crane index”, along with its more disreputable cousin, the “erection index” (the height of the largest skyscraper under construction), as visible signs of the bull market’s virility. Pessimists saw them as forewarnings of pending gloom.
So rather than making complex predictions let us stick to simple basics of the stock markets which will work very well for all of us.
1. Invest only your surplus; do not borrow money to invest into the markets.
2. Invest with a min of two year perspective which means that during these two years you would not need the money invested.
3. Keep an eye on the markets regularly because the stock markets are highly dynamic and any event can change the outlook of the sector or the scrip.
4. Invest in good blue chip companies and fortunately today is the best time to accumulate into the blue chip companies which are languishing. Many of these scrip’s have got out of hand of normal investors.
5. Have clear Rules on Investing; keep learning all about the Markets.
6. Have a firm Discipline because you are investing your hard earned money. And most important is your consistency and conviction which should be unwavering.
7. Most important is an attitude towards the market. Have a healthy attitude to the markets most important Love the Markets. Don’t feel hatred or send confused signals to your brain.
8. Always take your decision in a calm and composed state of mind. If your mind is disturbed it is better not to take a decision at that point of time. Sometimes there is a tremendous conflict with your mind and heart (intuition) during those times it is best to listen to your heart or in the least listen to both your head and heart before a decision is taken. Do understand that the Stock Markets behave very illogically and are more emotionally or sentimentally driven.
9. Diversify between sectors and scrip’s so that the average is profitable. You can have a portfolio of about 12- 15 good stocks which is easy to monitor. But if you are super expert have just 5 to 6 multi-baggers for super returns. Put all your eggs in few baskets but ensure the baskets are sturdy.
10. Learn the most important knack called as Regret Management. At the end most of the times you will have regret, learn to manage this emotionally and spiritually. Over time you will mature on your emotional quotient then from there on it would be an easy journey.
11. Accept Losses Gracefully. There is no one in the history of the stock markets who can only make profits on all trades. So don’t attempt to fly with your hands
12. Don’t get excited by the way your scrip rockets across. The real profit is only when you book them. Many have become millionaires only in daydreams. Learn the art of exiting out of stocks.
13. Never speak negative about the scrip, markets, or money. Money gets attracted to all those who value, respect it and have gratitude for money. Love the stock markets with all its idiosyncrasies. Stock markets are a great place to discover and improve your own self.
14. If you are too afraid of the Stock Market it is advisable to start with good quality ‘Mutual Funds” especially with SIP( systematic investment plan)
15. Indian Stock Markets are a great place and each one should take a commitment to invest and also enlarge the investment community.
16. People who use this opportunity will be laughing all the way to the bank 2- 3 yrs from now. Never such blue chip companies available at these prices. Yes start nibbling in the market, keep averiging big in Blue chips eg u buy 10 RIL at 990, it goes down to 900 buy 30 now, it goes to 850 buy 50, it goes to 800 buy 70 . The above is just an example. Build a portfolio over a 6 month period. Look keenly at news for everyday things are changing, as of now gloomy news but sooner than later the changes will be positive then the market will just jump. Even one big FII comes with a big pool of money, the markets will just jump.
End with these thoughtful quotations:
Francis Bacon: If a man will begin with certainties, he shall end in doubts; but if he will be content to begin with doubts, he shall end in certainty.
Laozi: Failure is the foundation of success; success is the lurking place of failure.
Baruch Spinoza: Fear cannot be without some hope nor hope without some fear.
Suresh Padmanabhan: www.themoneyworkshop.com .
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