holding on to multibaggers successfully without anxiety

 the way i try and hold to multibaggers all the way is this

lets say i buy 1 lac in a stock and it becomes 1.3 lacs when i sense discomfort against what assurance chart is giving me

i book stock worth 30000 and invest it elsewhere, holding 100000 still in the same old stock

this cycle continues. 

it is like taking out the seed from plant as safety but leaving the plant planted. u have got one more seedling which becomes plant. the crucial factor though is...where are u investing that 30000? it has to be in a stock as good as the priginal one from where u took it out. 

this way u can hold onto any stock as per your system while letting the forest grow without anxiety

the sweetest Coffee!

 one of the investing methods which tickles me a lot is the 

"coffee can investing"

buying 20 promising small cap stocks worth rs.10000 each (total rs.2lacs), "putting" them in an empty coffee can and opening them after 10 years.

strong likelihood that 9 will be zero or more after 10 years while 1, if 100x....is likely to be worth 10 lacs (worth 40 lacs if 400x)

Mohnish Pabrai's career is filled with many such stories

broom bundle of stocks in bull trend

 suppose we buy 30 stocks. on the day of buying they are like a bundle of sticks tied with a string.

while we often wish that the stocks in the bundle will go this way👇

we fear the stocks actually going opposite way with falling market

but that is a baseless fear which often prompts an investor into wrong actions or unnecessary anxiety

because in reality, it is often seen that the bundle of stocks behave like a broom.

all stocks going in their way depending upon their merit.

all a trader has to do is to try to pick only those stocks where the chances of all stocks/sticks in one direction (up) are higher

In fact,  even if market (index) dips, it momentary disturbs/ distorts the good stocks which again come back to their original track

Something like this

Pick good stocks in bull trend and don't worry about the broader index

Just because the world is going to hell doesn't mean good people and stocks are not living in heaven already. They are merrily marching to happiness and wealth

the class of '87

stocks are like the class 10th bunch. all are together during 10th/matriculation (index). but over time, they all go their way, different from each other and that of the class/index.

so no need to worry about stock price movement wrt the index if the stock selection is right. fluctuations in good stocks on the way up is just a mark of respect to the hiccups of their alma mater.

a portfolio gets torn apart and scattered in different directions like the coagulation of colloidal solutions like milk and blood. that's the formation process of cheese in investing. a balanced portfolio takes care of any churning.

hare and the tortoise

Js: IMO, there is nothing practically different as trader and investor.....trader invests money, and investor trades to buy and sell....

: I'm talking in broad sense....

Devender: So any time frame can be traded

: Effectively and consistently IMO

Js: people with less money have to rotate money more and hence “trade".....those with crores can afford to be lazy and invest those say 10 crore for 1.5 crore return per annum....

Devender: Yes. JS ji..  Pond is small for whales..

Js: who will want to trade when he can afford to invest

: trade for first crore and then turn investor......

: investor is trading in slow motion, trading is investing in fast forward.....self talk

: nobody turns investor because he has to....but because he doesn't need to be a trader any more

: so never worry about trader investor dilemma.....just make money.....keep making money.....and as gradually it swells, increase holding time and start playing golf.

: 10 percent per month return on 10 lac fund or 15 percent per annum return on 1.5 crore corpus......almost equal but huge huge difference in headache

: actually it's got to do with holding time and not necessarily amount.....though it makes sense to trade with less, invest with more

: sip is a classic example of investing with less

: as Robert Kiosaki says move towards auto money.....unless you have unquenchable thirst disorder

: one of my friends worked hard for 2 decades, saved 2 crore plus and is now retired for enjoying life with 20 lacs per annum he gets as annual returns from low maintenance investment

: we should have exit plan in trading career before we enter in this Greek gladiator theatre otherwise we will end up therein after age

: money management= 'win' or 'not loose much' preposition

: trading skills serve as top up or slice out accumulation distribution for investors. as I turn less trader and more investor I will use my trading method to enter in steps and exit in steps......assuming I do not prefer one-time-invest-it-for-fat-annual-return-year-after-year kinda life

: frankly,I don't see myself trading forever......

: trading is a way too early retirement for better things in life.....self talk

Sanjeev: small trader can also grow by as investor

Js: even amateurs should invest trader style, but by bit entry and exit based on signals....

: bit by bit

: and investors are value traders!
if somebody has crores, has very less expenses, isn't bored in life and is still swearing in trading,I will not hesitate to ask him "chaahtaa kya hai bhaaiii?!"

Sanjeev: tortoise slow motion always win everywhere

Js: that story is no joke....self talk.....the biggest lesson of life.....

: tortoise doesn't mean slow, tortoise means the fastest in-control, un-hurried slow.....
: tortoise is symbolic....a metaphor
: not literal

stay invested in good stock during mkt corrections

market corrections are rarely more than 33% from the highs

sometimes they are much less, or, the rebounds from the correction lows are so fast that u r not able to get on to the band wagon again.

not only this, u rarely trust the bounceback after correction so easily. u keep on suspecting the recovery and keep hoping that the stock will go down further before u buy back the stock again.

four more logics and the argument in favour of staying put with the good stocks in correcting markets is complete.....

1. any gains in the stock will be totally tax free if u stay invested for more than 1 year! u will save upto 33% tax u were otherwise required to pay! that 33% will take care of any potential 33% decline!

2. u don't miss on any bonus issues or dividends etc.

3. peace of mind.

4. you can always buy more when good stocks decline!

die early, die rich!

recently

i came across a phrase

which initially disturbed me.

"trader who died rich

is the one who dies early."

even livermore died broke!

--

what's the logic behind the above
seemingly un-nerving phrase?

should we not trade?

is trading useless?

i don't think so.

i searched for a suitable answer.

and after some deliberation

i found one.....

---------

if one makes millions from trading

and keeps trading like jesse livermore

he is bound to succumb to

some unguarded moment

and lose it all.

but

on the other hand

if a successful trader

after making millions

was to turn into an investor

he is assured of dying rich

(if at all he ever dies).

slow motion, fast forward

investing is
trading
in slow motion.

trading is
investing
in fast froward.

if you keep this in mind
you will be
relaxed
and can make
better decisions
in both these games.

true investors are like farmers

it is said

'for investing use fundamentals

and for trading use technicals'

these two statements are true lies.

they are grossly mischievous

and universal myths!

--

the first line about investing

is targetted towards those

who are not 'investors' in true real sense.

they are the 'leftovers'

who don't have the know-how and the sense of "investing"

nor do they have the time and sense of trading.

--

they take 'investing using fundamentals' as an alibi.

they superficially check the "fundamentals"

and buy a cheap mask of "investor".

what they take as "fundamentals"

are nothing but clever cookies targetted at their heads

by "hackers"!

fundamentals are not just numbers

fundamentals are foundations!

--

the confidence in the investment is absent

the hearty self-assurance and excitement of having "invested in a promising business"

is missing.

consequently,

expectation or fear of short-term gain or loss

reveals the true colours

of the real "investor" under the garb!

the "investor" absconds!

--

true investors are like farmers

....seeking the potential and promise

of a seed or sapling turning into a tree

or a full grown tree continuing to yield

juicy fruits

season after season!

popcorns!

a farmer

put his bumper maize produce

in the tractor trolley

went straight to the market

sold it all

and returned home

with bagfull

of cash.

--

he put the bag of fortune

on the table

opened it

and gave a bunch of currency notes

to his freshly graduated son

"this is for you, enjoy!!!"

--

he, then

picked up the bag

locked it in the almirah locker

and went straight to the store room.

there

he saw

one last big bag full of maize corns

he had kept back.

he emptied the bag

on the floor

and divided it

into two heaps.

--

"what are you doing, dad!"

his son asked

who had followed him into the store room.

--

"this heap, son

is for making popcorns

for all of us

for the rest of the year.

and that heap

i will sow back

as seeds

into the field

for next season's harvest!!!"

son heard this

and went out.

--

the farmer put the two heaps

in separate bags

put them aside

and came out!

--

and there he saw

his son

re-counting the money

he had just got!

"now what are you doing?" the father asked

"this bunch, dad

is for my luxury popcorns

and this one

is for investing!"

don't let your investments sink

if a stock has moved 200 points in 1 year
how many points can you make in investing in that stock?
obviously not more than 200!
now, if i told u that
this stock
fell by 200 points
and not the other way round
what will be your answer?
again, obviously, you will say
that what to talk of making 200 points
you would have lost 200 points
by remaining invested in this stock
in the last one year!
--
well,
i am talking about reliance industries!
it fell from 1111 to 911 in one year!
--
will you believe me
if i tell you
that there are people in this market
who have made more than
1000 points in reliance industries
in this one year
and that too
when they were
caught
INVESTED
in this stock!!!
yes, it is true!
reliance industries
travelled this 920-1120
delhi-mumbai route
more than 10 times in last 1 year or so!!!
this makes it more than 2000 points!
so, making 1000 points out of this is not a big deal!
--
but how did they do it while staying invested on the long side?
simple
while they stayed invested in the stock
they protected their investment
whenever it took a clear down-trend
by buying put options. --
out of 2000 plus point movement
they managed 1000 odd points.
and that too when the stock's net movement was just 200 points!
while pocketing all the dividends
and making the investment tax free!
--
protect your investment!
it will reward you doubly!!

identifying a trader among the investors

lets admit it

majority

if not all traders

are into stock trading

not just for money

but

subconsciously

also for the thrill

excitement

and kick

we drive out of trading!

the day we don't trade

or don't get the chance to trade

we feel so uncomfortable!

that is probably

the reason

we make trading opportunities

where none exist!

that is also a probable reason

why we

overtrade!

--

we can't extract the same thrill

from investing

or swing trading

where waiting is substantial.

moreover,

we can't wait

if we keep looking at the score!

--

that is why

majority traders are mentally

not best suited

to be investors!

and there is nothing wrong about it,

it is ok!!!

--

it is not a co-incidence

that i rarely see

a serious trader

who has the habit of drinking!

i can immediately tell

whether the person in the stock market

is a trader or an investor

by just asking one thing

"are you a teetotaler?"

if he is one

i know i am talking to a trader.

if not

then either he is an investor

or he is into an exciting co-occupation

or he is broke

or he is gonnabe...shortly!

--

trading and drinking

are clear signs

of a sinking ship!

--

investing is either for the rich

who have surplus money

and who are in no hurry

to listen to the daily ringing of coins

in the money box!

or

it is for those traders

who are already getting

the adrenalin pumped

from other sources

and are into trading

only for money!

--

trading is one of the biggest

intoxicating

and motivating

and boosting

occupation

or passtime

in th world!

it can delay the suicide plans

of a rich guy!

besides bringing the dead souls back!!!

--

not just the spirit

you will rarely see traders using

or frequently changing

brands

and gadgets

and other costly habits!

they get all the requisite joy

from trading

leaving these toys and lifestyle

to the broke or to the rich investors.

--








(note : i am a teetotaler and strongly recommend the same!)

best stocks for investing and trading

for investing

large caps are dangerous = many will not be the tops in next 5-10 years and slump

mid caps are the least dangerous = many are likely to become large caps in next 5-10 years

small caps are the most dangerous = many are likely to vanish in next 5-10 years

--

for trading

mid caps are dangerous = these can fluctuate a lot even in short term

large caps are the least dangerous = they are least likely to fluctuate big in short term. if they do, they are likely to recover if fundamentals are intact.

small caps are most dangerous = these can fluctuate wildly including in circuit locks

--

caution : only companies with decent corporate governance are being talked here. rest are not worthy of touching except when gambling is acceptable!

tomorrow never comes

a labourer won

"creator of the year" award

by the stock traders' society

for building

a 100-storey sky scraper!

--

during the award ceremony

a journalist asked

"how did u make such a huge sky scraper?"

he looked around

and replied

"brick by brick!"

--

the entire auditorium

erupted with a big round of thunderous applause!

--

before the applause died

a business tv reporter asked"

is this sky scraper

an outcome of investing

or positional trading

or swing trading?"

--

the labourer

again thought for a few seconds

and honestly replied

"day trading!

i don't know any other form of trading.

my grandfather had told me that none other exists!

he told me that everything else is a multiple of day trading

and an excuse to take a holiday

or to justify bearing loss!!

the builders never give me more than one day at a time

to build a building.

i have just one day at my disposal.

they don't even give me a tomorrow or even day-after-tomorrow!

if things go wrong

i safegaurd and repair it same day

irrespective of how long

the building is going to take

or how long i intend to be in the trade!

if things are going ok

they still not allow me to work more than a day at a time!

day is all i have got

and day is all i take care of and worry about!

the week

and thereafter

the month

and the year

take care of themselves!"

did you fall in trade?

how do we choose our life partner?

we fall in love with somebody

we decide to marry

and when parents come into picture

we start looking for reasons

find some good ones!

but the fact is

we are always decided much before

we start thinking!

(probably, that is the reason they call it

FALLING in love!)

--

just like the sales maxim

"customers decide emotionally and justify logically!"

--

similarly,

how do we invest or trade?

we like a stock or situation

we decide to marry (i.e.trade)

and when parents (i.e. logic, left brain) come into picture

we start looking for reasons

and indicators,

find some good ones!

but the fact is

we are always decided much before

we start thinking!

(probably, we should start calling it

FALLING in trade!)

where to invest?

investing is the most profitable form of trading!

it is a myth that you invest in a company.

the reality is that you invest in a management

and

you invest in a business!!!

if the business is bad

even best management can't do anything for long!

for a moment,

let's assume that the business makes business sense.

then, there are 4 types of "managements" available for investing:

1. good management going thru bad times
= this is the best investing bet, a multibagger!
give then time and they will give you a wonderful gift!
e.g. tata motors' journey from 110/stock to 1376/stock
present example = mahindra satyam

2. good manangement going thru good times
= hold on, this is the best momentum play
stay with them till they are around
e.g. hero honda (since inception)

3. bad management going thru good times
= stand near the exit door if you can't avoid the bait!
e.g. suzlon

4. bad management going thru bad time
= stay away!

and the winner is.....

3 years ago I started a monthly SIP (Sytematic Investment Plan) with SBI Mutual Fund's Magnum Tax Gain'93.

I started it not because of my prudence

but because of

a) repeated edging by one Mr.Vijay (a real gentleman financial advisor whom I now trust utmost) and

b) the reason that I wanted to save some tax under section 80C but in a way which gives more return than traditional life insurance

(I believe that one should buy term insurance for life insurance and mutual fund with or without SIP for savings!) (the above mentioned fund gives 80C benefit besides market investment returns)

Frankly speaking, when i started the SIP with a small monthly contribution I was least excited!

Reason?

"It will take ages before the monthly systematic investment will becaome a fortune!" I thought.

Still, I did start with the SIP and gave 12 cheques to Vijay.

Every month it was an irritant to part with the instalment.

Many times I decided to stop the SIP after the committed 12 instalments.

But after around 8 months, one day I was pleasantly surprised to receive a dividend cheque from the MF.

It was a decent amount but it appeared many times bigger due to the surprise element!

Besides, my corpus had grown!

So, I continued with the MF after the first year as well.

Here, I wish to share that I started the SIP when the Sensex was above 20000 just before the crash!

But because of it being monthly SIP, my instalments kept entering the market at every stair in the staircase.

My SIP instalment went into the market at 20000 as well as 7500, 15000 as well as 9000, 12000 as well as 10000......

....and it is still continuing........

The annual dividends I get fund my kids annual fees automatically! Alternately, it leaves me with a handsome amount to do anything I wish to! Last year we had a grand annual family vacation in Kullu & Manali!

And the beauty is that the corpus is growing.....

.....in compounded fashion just like the prize money in Kaun Banega Karorpati (Who wants to be Millionaire).......

What was an irritant every month is today a monthly reminder of the assured and growing prosperity!

Every month I thank Vijay hearts of hearts for somehow forcing me into this equity-linked savings.

Jokingly, I have been playing a race between my savings in this MF and the growth in my self-trading earnings.

I have no hesitation in admitting that I have been left gasping behind the MF especially after this recent bull spurt!

Why I shared this story with you?

Two reasons.

First, to recommend SIP based Mutual Fund investing to everyone!

Second, to share a strange phenomenon mentioned below.

I have

never ever

never ever

never ever

thought of selling my SIP savings!

I just think of investing more and more......

I just think of topping it up whenever market is in oversold state!

whereas I rarely survive the itch to book profit in my trades!!!

What fantastic paradoxical opposite faces of my same self!!!

One is willing to not only hold all investments forever but keep adding to it! (The fund manager keeps rotating the investment into sectors and stocks as per the situation)

The other is dying to run away with the pennies after every round!

One full of stress!

One full of pleasure!!

I have least doubt who will win this race.

It will surely be the tortoise this time as well!

A crash course in Day Trading!

A young farmer went to city to learn futures trading in wheat.

But there, he saw everyone day trading.

"Who knows what will happen overnight? Day trading is better." he heard.

"One bird in hand (intraday profits) is worth two, even 10 in the bush (swing trading or investing)" someone said.

"Only day trading can ensure sound sleep at the night irrespective of what is happening in Europe or US in the meantime!" he overheard.

"If all of them are doing day trading it must be the better thing!" he thought.

So he decided to learn day trading instead of futures swing trading his father had asked him to.

"I will surprise my father when I go back. He will be pleased." he thought!

For the next 5 days he learnt the "smart tactics" from the pit traders in the fish market terminal room.

On Saturday he went home with his neck held high!

"My entire village should be proud of me" he was sure!

When he reached home he found that his father had gone to his relatives in adjacent village for 2 days!

"I have 2 days to show results!" he thought.

Next morning he went to his fields.

Small wheat shoots had come out of the seeds planted a few weeks back.

The sun was shining and the sky was clear!

A good crop was on the cards.

He then went to his friend's house and had a nice time for the rest of the day.

Next morning when he woke up, he saw the sky overcast....

Dark thick clouds everywhere.

He checked weather forecast on TV.

"Severe Thunderstorms!!!" they announced.

He went to his fields.

It started to drizzle.

Clouds roared in the sky above.

Lightening flashed.

It was all too scary!

"Bearish signal!" his trained trader mind whispered!

"This is going to destroy the crop"

"I must prematurely book whatsoever crop profit I am getting. Greed of any more profit may leave our family with nothing."

He went to the garage, took out his combine harvester and razed the half baked crop in just half an hour.

He was happy at his trading skills!

"Now I am assured of good night's sleep despite whatever happens in US or Europe overnight!" he proudly said to himself.

"...a bird in hand is worth 10 in the bush!" he was reminded!

He went home and found that his dad had returned home as well.

He proudly narrated his "achievement"!

"I am proud of you my son!" his dad said.

"With your day trading skills, you have surely harvested enough food for our cattle for the rest of the season! Now take me to the city tomorrow morning to learn day trading. For I have no other way left to feed my family after your achievement!"

The son was shocked!!!

He remained silent for what seemed like ages!

He realised his foolhardiness!

He went out and saw the clouds receding!

The lightening had stopped flashing.

The drizzling had stopped.

"My son! Never worry about Clouds whether in market or fields. Never worry about lightening. There will be many every other day! Never worry about thuderstorms. Never worry about what they predict in the forecast on TV. If you have faith in the crop, wait patiently! The sky is not falling and neither is the world going to end tonight whether here in India or Europe or US! This is what I learn from my father - your grandfather, and this is what he had learnt from his father!"

liars on the dalal street

"30% festival off!"

"upto 50% off!!!"

"50+30% discount"

"Buy 1, Get 1 free"

"Buy 2, Get 3 free"

"upto 90% off!"

These are some of the funniest and most amusing lines I see in the markets!

Everyone asks for discount before buying!

Every shop worth his trade ensures that he gives discount after some tantrums!

Before even that he ensures that he has changed 400 price label with 500!!

Abraham Lincoln was probably wrong when he said - "You can fool some of the people all of the time, and all of the people some of the time, but you can not fool all of the people all of the time...."

Discount culture has been fooling all of the people all of the time!

Or, put it differently, all of the people have being deliberately yearning to be befooled all of the time.

In still other words, all of the people have been befooling themselves all of the time!

It is a mirage we all know but we all love to ignore!

Afterall, what does a 30% or 50% or 80% discount mean?

Why should anyone expect a discount and why should one give a discount?

Why not price it fairly?

A discount can mean one of the five things:-

1) Either you were being overcharged earlier, or

2) There is a problem with the product or service being sold now, or

3) They have jacked up the price before window dressing it with "discount" or

4) They are selling it now at a loss, or

5) It is a distress sale.

Distress sale doesn't happen everyday, everywhere and with every product or service!

Also, obviously, nobody sells at loss unless it is a distress sale!

So, the truth lies somewhere in the first 3 lines.

=======

The same logic applies to stock prices

1) Either it was earlier overpriced, or

2) There is some fundamental problem with the company or sector or economy, or

3) The "insider" brokers along with the "friendly" media create an impression of a "discount" after a jacked-up price!

=======

An aware trader or investor should be sharp to spot the reason and call the bluff!

Majority of the trades in the market are bluffs

Learn to know the real worth of a stock, catch every liar on the dalal street!

when to catch a falling knife!

A stock is compared to a falling knife when it is falling fast and non-stop.

If a not-so-famous small or midcap is falling, nobody pays any notice.

Everyone says "it is falling, so it must be a bad bet"

Consequently, those small and midcaps fall more and faster.

But if it is a Bharti or Satyam or Suzlon or Reliance or RNRL or Ranbaxy that is falling

the same statement changes dramatically!

The brand pull of these stocks is big enough to lure anyone!

Many tongues start coming out of their dens!

Many eyes start popping out of their sockets!

This is often a trap for traders.

Countertrend traders are lured to latch onto these stocks.

"It has never fallen this much. It is surely a steal at these levels."

"It can't fall more than this."

"Lets start entering in steps"

Arguments given are numerous....

Many "I am smart" traders don't even announce their intentions in their friend circle and silently start accumulating these falling apples (they don't yet know that it is a knife!).

One thing they forget in the excitement is - why is it falling like this in first place?

Are the big players nuts while dumping? Afterall, this is not a routine correction! The market is going up and this apple is falling?

When the apple keeps falling

the "I am smart" traders start realising that what they have caught is a knife instead!

----------

A stock falling due to fundamentals is basically a sell-on-every-rise.

It is not wrong to leave it alone if you are not sure about the fundamental logic!

So what is the best time to catch a falling knife?

Never!

falling knife....never!

fallen knife....again never!

knife.....never!

so when to buy it?

...when it is no more a knife but a spoon

....a golden spoon

Very often, a stock knocked out of the fundamental orbit remains free floating and wandering for a long time.

First it keeps falling.

then it keeps consolidating while the management realises the mess and starts working on the cleanup act.

Finally, when the poor stock has come out of the long oblivion

big players start pumping money into it....

That is the time when the stock starts showing life!

It is no more a knife now but a golden spoon.

Its graph makes a higher low!

That is the time to put this spoon in mouth!