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.
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
