I am a believer that our environment, surroundings, and our education shape our thought process. Knowingly or unknowingly our thinking will demonstrate what we have been through in past. It is applicable to every living being including us humans and present Indian population. Still there are very few who think and visualize beyond their surroundings. And it is these few who evolve and succeed over long term.
Our present 20s and 30s generation, of which I am part of, is very vibrant, inquisitive, and very progressive and has a desire to succeed in one way or the other. As they say, life is very fast in today’s India! The IT generation is very impatient which reflects the IT domain’s continuous changes in short one year. What is new today is considered to be obsolete in 2 years. Unfortunately, we fail to understand it is not same in investing. Here are few interesting tidbits:
- We folks in 20s and 30s simply want to get things fast. We fail to realize wealth does not come fast. You can have an acquaintance at fast past, but friendship takes long time to build.
- Remember the euphoria of 2006 and 2007 where SENSEX zoomed to 21000 and easy 20%+ returns. We thought it will never go back to 9000. It did. The higher you go, the harder and faster is the fall.
- We focus on 40%+ returns since March 2009. But we fail to realize it is still 25% below its late 2007/early 2008 peak.
- After continued lows of 2008 and Satyam fiasco, many of the 20s and 30s investors have lost trust in long term investing. But we fail to realize, a failed ones are still in market albeit in different form. SENSEX is still there, players and experts are still there, and even Satyam is still there. If fundamentals are strong then it will continue to exist.
- We always talk about risk, but fail to really quantify it for our individual scenarios.
- Very few traders, trade with their own money. Most of the time it is other people’s money.
Over the past 10 years, markets have given an average 15% compounded return. However, we ignore 15% sustained return in our quest for that allusive one time 20 to 25% in short time. History shows that probability of trading returns are usually in very low single digits.
A slow and conservative strategy focusing on high quality, low risk stocks should (and will) significantly out-perform the short term approaches. Based on my analysis following are five low risk companies for a long term investor who is willing to look beyond 5 or 8 years.
The 20s and 30s investors must realize that the fast pace investing (or trading) does have potential high returns in a very short time. However, it also comes with very low probability of success and very high risk.
532555, NTPC, top 5 stocks, top 5 stocks for long term investors