Friday, January 9, 2015

I Can Make Huge Money In Stocks If I Invest Directly: - Somebody told me last week

I Can Make Huge Money In Stocks If I Invest Directly: - Somebody told me last week

If everyone makes money in equity, then why there are only 3% investors in the stock market? and rests are into FD's, Gold, Real Estate and all ? 

You may be right, Say for example, if you have started investing in equities in 2007-2008, what you may have bought?

Reliance Infra, DLF, Suzlon, Orchid, Rcom, and so on..... (They all were talk of the town).this is better known to the investors who already burnt their fingers. 

I must throw some light here – they all are below their investment price- some are even less than half the price.

It’s always said, Retail investors never makes money as big as Seasoned Investor makes(the one who does research or invest for long term through mf), retail investors come into market when other runs out, they would love to buy stocks when its already in bubble phase and sell it when actually its time to buy stock, or in investment language- over priced High PE stocks, feeling companies are going to make huge profits by selling their goods and earning on the same...agreed...but when markets are low, this companies are available at decent discount / prices, still they value the business when the prices are too high, one of the example is Page Industries (PE of 71 against Industry PE of 41), also one has to understand the underling risk into particular stock – industry, & industry related regulations when you invest directly in stocks.

One can invest in direct equities only if:-

  1. You read balance sheets on regular basis (only if you can analyse it)
  2. You understand P&L, ROE, PE and so on.
  3. You understand Business of the companies you invest in.
  4. You understand the risk in the business such as (market share of business going up or down) etc., etc.,

I came across such question that mutual fund has only grown my money 4-5 times & stocks gone up by 40 times. Hahahahaha,

Some more things to look here :-
  1. 1st thing, You have not invested in that stock which has gone up by 40 times.
  2. If yes, you are the best fund manager and you should not invest through mf.
  3. One should look at holding period of they feel went up by 40times.
  4. Most retail investors sell the stock/mf when it gets doubled; they never hold it till eternity.

Happy Investing,

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