Long Term Capital Loss
Subra I have been holding these shares since 2008 and I am yet to make money on this share, what have I done wrong?
Which share is this I asked.
It was Suzlon. Bought for Rs. 279.
I said “tell me another story”.
He said he lost in a reputed group with reputed groups! Tata Power, Tata Steel, Tata Motors, ….and lost money in all of them.
His argument sounded correct.
An important learning therefore is that Long Term does not work? No. The learning is that what works in a portfolio does not work in a single share. If a person had invested in the index in 2009, she would have got 10.8% over the past decade.
Remember, it is very easy to lose a lot of money in the equity market. This happens when you invest without an INVESTMENT PHILOSOPHY STATEMENT, asset allocation discipline, and portfolio sizing logic. Sadly people ONLY think of stock selection and also think that stock selection is the be all and end all of stock market investing. This is like believing that all you need in a car is an accelerator. You can’t just wish away the importance of the clutch, brake, headlights, wind-shield, gear – some of them look like they are retarding the speed, but you know the importance, don’t you? We need lamp posts too, but we should use the lamp posts for illumination, not as a prop – like a drunk uses it!
To make money in the equity markets you need
a) a good portfolio – since we can’t pick a portfolio ourselves, we choose a good fund house with a good process rather than an individual. Too lazy to do this? Just Index your portfolio.
b) invest as much as you can as often as you can.
c) Ensure that all other “risk” areas in your life are covered. People like me got lucky that we did not touch our portfolios (for expenses) over 40+ years. So medical emergencies, other major expenses, etc. were covered by current income/ dividend income. Uninterrupted compounding with a long ‘n’ is an amazing tonic. Like lube oil to an engine.
d) patience, understanding and forbearance. Didn’t understand? see the Shirdi Sai Baba statue – Shraddha and Saburi.
e) real long periods of time. Wealth is not created over-night. Birla’s wealth is 170 years of compounding. Tatas is somewhat similar. Don’t look at TCS and say only this company makes money. They had the money and the vision to set up TCS in 1968 – imagine! Remember it is not a start up….it has completed 50 years on the planet! The money for this came from Steel, auto, and chemicals!!!
f) the BRAINS to know that it is the top 4 and not your Brain which is causing the wealth to grow.
Krish
I don’t know what is wrong these days but even fund managers being educated from elite universities/colleges, specialized in finance and dedicated to only investing side and long experience are not able to generate positive returns in equity markets (look at small cap and mid cap), what chance a normal person has even he constructs a portfolio. Equity has also become like MLM where in few guys are making money at the expense of many innocent investors.
On the other side, we have ADAG, YES, ZEE, DHFL and IL&FS who employed highly educated staff and yet they can’t do due diligence of what they lend.
People who aren’t having finance background like Engineers, Doctors, Lawyers, Govt employees (State & Central), Operations, Maintenance and sales etc., shouldn’t get into Equity.
Pandu
OR Get into equity thru Mutual Funds. Keep Small Cap allocation Max @ 10% of your total portfolio.
Rahul Joshi
This is a common mistake that most investors do. Investors should not run after getting profit in every single investment instead they should see what a stock is adding to their portfolio and overall returns. Portfolio management and risk management are a better approach to stock market investments.