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Dear Readers,
Hearty Greetings to all of you on the occasion of 64th Birthday of our Motherland. I hope, all of us to pray for the prosperity of our great nation on this auspicious occasion as well for the souls who laid their todays for our tomorrows.
Its an article by Mr. Mahesh Pidshetti, Bangalore, an active participant of this blog since it’s inception. I had an intention to provide him a platform to inscribe his thoughts as a rep of our young generation, because I usually receives worthy as well genuine comments from this guy bit differ from the age group. So, we should heed him..
Over to Mahesh
We all know that in stock market, Patience is the key factor to enjoy growth. In short term, lots of negativity bombarded to our thought process influenced by Internet, TV shows and analysts, which fluctuates our patience. People wish to be long-term investors, but when short-term shakeout happens they sell it or when they see good price appreciation they books profit in the short term for small gains. When you invested in a good company, why should you sell on nominal gains? Make the shakeout as an opportunity to buy more. Stock market consists several kind of investors, Long Term + Medium Term + Short Term + Day Traders. The interesting part is, market only fluctuates due to M+S+D.
India is poised to growth and you know, why the Govt taking divestment route, trying reducing fiscal deficit? And other changes in policies. Why RBI Bought Gold by dumping Dollar, Why RJ didn’t sold out his holding when BSE hit 7800?, instead he bought more. Why investor legend Warren buffest is focusing on Indian market?. Why NTT DoCoMo increasing its stake in Tata Tele?. Why World’s Top Class Car manufacturers opening new hubs in India? And so on. Because India is @ a nascent stage of it growth. If crisis hits back again, India will be insulated because we have 40,000 tonnes of GOLD reserve, India will have Trillion dollars of assets in hand, and its huge.
Hearty Greetings to all of you on the occasion of 64th Birthday of our Motherland. I hope, all of us to pray for the prosperity of our great nation on this auspicious occasion as well for the souls who laid their todays for our tomorrows.
Its an article by Mr. Mahesh Pidshetti, Bangalore, an active participant of this blog since it’s inception. I had an intention to provide him a platform to inscribe his thoughts as a rep of our young generation, because I usually receives worthy as well genuine comments from this guy bit differ from the age group. So, we should heed him..
Over to Mahesh
We all know that in stock market, Patience is the key factor to enjoy growth. In short term, lots of negativity bombarded to our thought process influenced by Internet, TV shows and analysts, which fluctuates our patience. People wish to be long-term investors, but when short-term shakeout happens they sell it or when they see good price appreciation they books profit in the short term for small gains. When you invested in a good company, why should you sell on nominal gains? Make the shakeout as an opportunity to buy more. Stock market consists several kind of investors, Long Term + Medium Term + Short Term + Day Traders. The interesting part is, market only fluctuates due to M+S+D.
India is poised to growth and you know, why the Govt taking divestment route, trying reducing fiscal deficit? And other changes in policies. Why RBI Bought Gold by dumping Dollar, Why RJ didn’t sold out his holding when BSE hit 7800?, instead he bought more. Why investor legend Warren buffest is focusing on Indian market?. Why NTT DoCoMo increasing its stake in Tata Tele?. Why World’s Top Class Car manufacturers opening new hubs in India? And so on. Because India is @ a nascent stage of it growth. If crisis hits back again, India will be insulated because we have 40,000 tonnes of GOLD reserve, India will have Trillion dollars of assets in hand, and its huge.
Who will prevent the consumption of young Indians?. Indian economy doesn’t have any benchmark like western have developed for their economic growth. India has its own benchmark for its growth; different villages @ different corner of India have developed their own economic growth strategy. That’s the way India growth continues. India has balanced economy (export+import). Lots of revolution happening in rural India. Keep watching ET NOW Starting up show, you will know how people are creating business.
Keeping all these factors of the growth of India, following is one of the best example to give a clear picture about why sticking long term will make you prosperous than short-term, moreover long term investor enjoy more social life, sound sleep as well peace of mind.
If an investor bought 100 shares of Wipro @ Rs. 100 in 1980, 30 Years of Patience
1981 , 1:1 Bonus =200 shares
1985, 1:1 Bonus =400 shares
1986, split to Rs 10 =4000 shares
1987,1 :1 Bonus =8000
1989, 1:1 Bonus =16000
1992 ,1:1 Bonus =32000
1995 ,1:1 Bonus =64000
1997 ,2:1 Bonus =1,92,000
1999, Split to Rs 2 =9,60,000
2004, 2:1 Bonus =28,80,000
2005, 1:1 Bonus =57,60,000
2010, 3:2 Bonus =96,00,000
Multiply CMP * 96,00,000 equal to more then 300 Crore!!
From 1981 to 2010, how many crash have occurred?. Did those crashes prevented the growth of good companies?. There are several other examples for like Titan, Asian Paints, BHEL, BEL, Hero Honda etc.
India will have more young (productive) population, who will spend more than their parents. Our parents had saving mentality, we have spending mentality to maintain the status along with glamour. India will have more entrepreneurs who in turn create more jobs which in turn create increase in consumptions and the cycle continues. Next decades are the youngster’s decade. We are in to age of rampant consumption; the consumption is driven by youths. Youth demands good quality from every angle, whether its food, car, mobile, e-commerce and of course good salary too, which leads to rising income which leads to creation of more middle class families and a report says we will have 80 crore middle class population by the coming decade.
Regards
Mahesh Pidshetti, Bangalore
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Dear Mahesh,
ReplyDeleteYour argument is correct. It is always better to go with long term investment as it is more stable when compared to short terms. Here are a few thoughts though -
1. Thought timing the market is not possible always, it plays a very important part in your profits. Returns from past decade for US market has been around 0%. So blind buy and hold wont work all the time. If you are not comfortable with markets at a particular time, sometimes it makes sense to stay away from it breaking your 'Long term' rule. Obviously I am not talking about Sensex going up and down by 1000 points and all but extreme cases.
2. I have seen interviews of RJ where he claims that he is not a pure long term investor but does a lot of short term investments too. But all the short term gains goes only to long term investment. It is good to make use of the opportunities in the short term. Again, I am not talking about quitting long term view. But I just want to say that we should accept the fact that short term opportunities exist (I am not talking about technical graphs here), and it does make sense to give it a shot at times.
3. When the market is very high as right now and if you are fully invested in the market, I don't think it is right to claim your long term theory. Again, if you are not comfortable with the market, better start moving out of it gradually. Take your money out of it (if you are heavily invested), and wait for a dip and then come inside.
Thanks,
Madan N
Excellent Article..... This shows ur depth and understanding of value investing and that too with flavor of Long Term....
ReplyDeleteNice Selection of Pictures of this type of Content...
We will see many wipro's very soon in our life...
Hi Madan,
ReplyDeleteThank you for your comment you made good points :). Here are some points related corresponding to your points in sequence.
1. Your sentence "Returns from past decade for US market has been around 0%", caught my eye. one more example i can give is "berkshire hathaway made only 5% CAGR in last 5-10 years". US Growth matured, why ?, because you see everywhere McDonals, everywhere starbucks, everywhere coca cola etc. No expansion left in US. Sales has matured etc. I am no way concerned with index, index is much loved by hard core traders :).
2. If RJ told that he is not a pure long term investor then why he is holding Karur vysa Bank since from 1993 if i remember correctly. He made lots of money, and he use most his liquid fund for trading in cash/F&O, i heard that he employeed some people to trade in his RARE office. And yes as you said all the short term gains goes only to long term investment :). Yes There are short term opportunities based on some parameters.
3. Market always trades 2-3Q’s fwd earnings, keeping pressure on earning on companies, if company didn’t meet the high expectation of investors, then stock takes a south direction(Fall). Same happened in DotCom burst, investor kept very high expectation on technology companies and when they failed to meet expectation, crash occurred. That is called growth trap.
People now chasing growth stocks. When they pay high price compare to intrinsic value keeping in mind of growth for the company, then return on that stock is bound to suffer if company didn’t prosper as per investor expectation. They get stuck in to growth trap. Many people stucked up in infosys during 1997-2000 dot com burst, but people would tell that if one entry level for growth stock is right, one can never get in to growth trap. But such entry level is reserved for promoter, PE/ angel investor and VC’s J (sequoia capital made $400m by selling Youtube to google by investment of $11m J, in just 1 year 9 months.).When valuations are high then stay away.
Thank you :)
Nice Mahesh..Thanks for article:)
ReplyDeleteI think making huge money in stock market is simply not possible for everyone , even investors is planned for long term statergy.
Long term strategy is a painful effort which needs for investor to study his holdings frequently, checks is emotions and learning atttitude from his & others mistakes.
1/ He needs a solid long term statergy and stick to the game plan
2/ very importantly he should learn to take losses and let winners run. Most ppl does other way round :) , this is simply because they are too attached to there money, which compells them not to book losses.
3/ try to become rich slolwy like fine wines, which mature slowly. :)
4/ take good advises from experts like from our Shabu Sir, as we can't do everything ourself. You certainly wouldn't study medicine in order to remove your own appendix rit :)
Atlast, tremendous profits comes with lot of pains either in stock market. Stock market pains are booking losses of non performing holdings and pain to hold the gainers for long term :)
Regards
Venkat
@Venkatesh,
ReplyDeleteWonderful points :).
@Praveen,
Nice to hear your encouraging words :).
Keeping reading and investing :).
Thank you :)
Sir,
ReplyDeleteThanks for giving Mahesh opportunity. I read all his comments in this blog. But I made mistake by posting comment in your previous article before reading his comment properly. Sorry for the mistake.
Dear Mahesh,
I start following your comments since your comment on bio-fuels in this blog. I subscribed to your friend feed after reading that comment. Hope to see more articles from you in future.
Dear James,
ReplyDeleteThank you for your encouraging words and reading my comments. :).
Another good example is of Infosys which has made Rs 9500 of investment in 193 since IPO to 4 Crores today
ReplyDeletehttp://www.wealthbazaar.in/