Equity from an Informed Investor: 4

Equity from an Informed Investor: 4

Once one decides to start direct equity investment - more specifically Long Term Investment, he starts understanding equity market by reading authentic literature. The information splurge on the business news channel isn't helpful. Kindly note most of the discussion that takes place are for trading purposes. BUY/SELL/HOLD recommendations are from trading perspective. One can't have a long Term view through this cacophony in media.

Some good literature by Warren Buffet - Berkshire Hathway's Annual Newsletters, ....; Peter Lynch - 'One Up on Wall Street' & Philip Fisher - 'Making Uncommon profits from common stocks' will help in getting into the mind of being an equity investor.

Equity Investment Master lessons by Ramdeo Aggrawal (Annual Wealth Creation Study,...), Basant Maheswari (equitydesk(dot)com...) & Ramesh Damani (RD 360....) helped me as I belong to this school of thought. Broking House reports on market, stock specific analysis etc come much later.

Though Rakesh Jhunhunwala is the richest individual investor, his style & temperament isn't a model to me. There are many ways for financial development in the market. One should align & adopt to a style that suits your mind. As far as possible avoid confusing your successful style.    

Instead, what normally one sees:

- Get recommendations from trading boy on the terminal, a so called expert around, more often one looks for tips. That tips can be from anywhere!

- Salaried employees & educated investors will start scanning the Business Newspaper looking for stocks that have hit 52 week Low, someone who is in the know of market will be looking for low PE

/Low P/BV stocks; someone else who sees a Unitech/NCC available at 60% lesser CMP than he saw sometime earlier ....

- Time deficient & Cash rich professionals have a different way. They just buy randomly because a colleague is buying, Media is talking a lot, all are buying.... These become the trend of the stocks to them! 

- Finally, a businessman is looking for a tip from Bombay! Unlike a employee, entrepreneurs & traditional traders have increased risk taking capabilities, courage to admit mistakes & gumption to Think Big, yet, one doesn't find many traditional impulsive businessman being successful in equity investment. That is because it needs calm temperament & its intellectually challenging too!   

Like one hardly sees any example of predictable success in gambling, horse racing and others avenues of chance, equity  investment too wouldn't see success stories when its played like a game of chance. Risk comes from doing what one doesn't know.

After the buying a stock, often, the first hiccuph starts when the stock bought doesn't start rising from the next day, he feels bad for having bought that stock. Still worse, if the stock reacts by 10 -15%, he starts with questioning the stock selection, then the timing, the cynicism in him questions himself, whether its the right place for him to be ....    

There are different styles & strategies of equity investment: Momentum Investment, Value Investment, Growth Investment, distress investment &  Wise Investing (Blue Chip Investing) which will be elaborated the next day

Eid Mubarak

'This and That'