What I learnt in one meeting with shahrukh khan

Hey everyone,

Hope you are all shines. The last few days have been turbulent in the markets. I have rarely seen so much gloom in the pink papers, in research reports and in economic updates as I stumbled across in the past week. Almost as if it was a race to eternity, many fiis wrote off the indian markets in the short run while maintaining a positive medium to long term stand.

This intrigues me no end. As part and parcel of any report, I urge the authors to define this short vs medium vs long term. It’s equally important to know what this short term bearishness vs medium term vs long term bullishness means. I recall a famous quote that implies it doesn’t matter if you are right or wrong. What matters is when you are right, how right you are and when you get it wrong how much you lose.

I read a lot of hullabaloo about cries of market falls. Markets are deemed to fall just as they are deemed to rise. In fact there is nothing as a market. What an investor owns is stocks and all he should crave for is to pick the right ones.

Consider while investing, the time horizon at hand. Usually equity investing is for people with a longer horizon as by definition investing is not flirting in and out. I am amazed when I see some fund managers enter and exit the market as if they were in a hedge mode and as if they knew what lies ahead. A prolonged period of dull or low markets is Not a selling time but a time to consolidate and create portfolios. While there are risks of capital erosion, by definition, capitalism itself is a risk.

Investing is akin to capitalism and you should be thankful if markets are in a range as money supply can be better channelized into favoured stocks.

In some sense investing is a mind game more than a guessing game although most like it the other way around. Treat investing as if a kid would treat his piggy bank and drop a few coins in to get a bigger corpus at some time. The benefit here in investing is the piggy bank itself adds interest in dividends, banks on cos that grow their asset base and net worth (though they can also erode it but that’s where selection comes in).

Consider another pitfall in our behavior to investing. Take a situation where we put money in a bank account and do not withdraw it. Would you check balances every day? But with stocks, the moment you buy or sell you want to know how rewarding your decision is. In a humorous way, the poor stock doesn’t even know who his master is and the master wants the stock to be loyal immediately.

I am amused with the view on markets going down. It makes no sense in a logical way except to know how much would your owned scrips fall. The biggest challenge in markets is not in finding the right cos. as information overflow does some of that along with the fact of herd mentality and safety in groups. The biggest challenge is to maintain a temperament when things go wrong. Admit mistakes. Move on.

Coming to the model portfolio, I have nothing much to complain off. Our model portfolio continues to outperform the markets with almost all of the stocks holding up well against an average mid cap fall of 40 percent and an average small cap fall of almost 65 percent. In fact, Since the last post, we have reduced our cost of acquisition further in Wockhardt. As tweeted, I added the stock aggressively at 360 rs odd and have exited the added qty at 460. The residual holding remains and is now pegged at a lower acquisition costs, which gives me comfort.

I am reading up on new ideas or additions but given my busy schedule at work and a very volatile market, expect to detail some thoughts when some stability sets in. I would also share with you that usually high volatility VIX is a buying sign going by historical data. It does not mean markets need to turn immediately but it leaves a base effect of low valuations that in market upturns leave better returns. Usually this is a good indicator.

More soon. Thought will wind up with part 2 of the post but as many investors like comments on stocks, will write part 3 soon. I end with a caveat: to err is human and for you to forgive, Devine. I appreciate the feedback many of you have given last time and trust to have the same again. Cheers.

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