For many of us retail investors, there is a perennial dilemma about two issues. One is about how we should invest and where we should invest. The second one is we always say (or crib) we do not have big enough capital. We never get out of this loop. Which stock to buy or where to invest is decided based on what was read yesterday. Everybody from the top VP of financial firm to any small investors like us, we keep churning out ideas, themes, predictions, estimates, etc. But we do not have conviction in our own ideas. Honestly, I love reading all those ideas as they do make some interesting reading material, but that’s not the way to manage your personal portfolio. .
As year 2009 is nearing completion, I have been reading new predictions and themes for year 2010. It is quite amusing to read what folks have to say. I always wonder do any of these forecasters follow their own advice. Could we take a peek at their portfolios? Here are few excerpts:
This one is from Ashok Sharma, There are quite a few good generic investing wisdom. But few of them caught my attention.
- “As said earlier 2010 will be the most profitable year for investor’s worldwide especially in India”
- “Learn the art of portfolio churning at regular intervals as per your investment style and after a major event like Budget, Election etc.”
- “Never overtrade in margin. Ideally not more than 10% of your capital is deployed in margin trade in volatile times like this”
- “Invest in sunrise sectors in 2010 like logistic, media, power, infrastructure and so on”
This one was published on Livemint
- Kotak Institutional Equities saying, their research has cut its EPS estimate for fiscal 2010 for the Sensex firms by 2.9% to Rs913 after the quarterly results, while it reduced its fiscal 2011 Sensex EPS by 2.8% to Rs1,098. So if they have to cut the estimates, that means they estimated wrong last time?
- UBS Securities India Pvt. Ltd, “forecasts a Sensex EPS of Rs1,344 for fiscal 2012, and says, we base our March 2011 BSE Sensex target of 20,000 on a forward P-E (price-earnings) multiple of 14.9 times fiscal 2012 earnings EPS.” I wonder when will this be revised?
This one was published on Economic Times says,
- “With the stock market, as per technical analysis, setting itself up for a larger bull run that is likely to begin sometime in 2011, you can look to buy scrips in the mid-cap space next year.”
- Dinesh Thakkar of Angel Broking, “too expects infrastructure stocks to be outperformers in 2010”
- 2009 proved to be the best year for the markets since 2000
- Motilal Oswal expects “2010 to be in favor of the bulls”
I wish someone could remind these folks that there are numerous retails investors who are still in red, even after 2009 being the best year. These folks happily ignore the drop in first three months of 2009. But keep harping 65% returns. Numbers are just numbers, you can make them look good or bad, it’s your choice.
The point is these are all good reads; and entertainment at most. These folks have to write because their salary depends on this BS. As retail investor, it does not help me. One guy says learn to churn your portfolio and its OK to take up to 10% margins (yeah right!), few other folks actually come up with EPS estimates (to be revised later on), one guy using technical analysis says bull run from 2011 (wow!).
I know many of us like to chit chat and highlight that “I got xx% return which is much higher than market” or “I bought this stock which became a multi bagger”. Again, it makes us look good in front of others and we may have indeed had few successes. But the reality is, more than 90% of us have had less than 15% average per year capital appreciation. i.e. less than market average. Make a sincere attempt to calculate your last 10 year return and you will know it. Chalta hai and ignoring your cumulative results will not improve your investing returns. So how does one overcome this?
Time and again it has been observed that emotion is investor’s worst enemy. If you invest without a conviction, without your own process, it is a recipe for disaster. Identify an investing process for yourself based on your risk taking ability. Execute it will discipline.
- In my view, it is perfectly acceptable to trade, if you believe you can follow a process and have time to study and execute in short time. Trading on someone else’ tip has failure written all over it.
- You want to be a growth investor, understand what is/are characteristics of growth stocks, and be one. Investing based on themes and prediction is again setting up for failure.
- Follow value investing only if you have patience and have guts to ignore the media and market. If you cannot, then value investing is not for you.
My conviction is buying high quality dividend paying stocks. I chase the expectation of sustainability over long term. It is my belief that as company earnings grow over time, dividends will keep growing. Furthermore, I also believe that any company that can afford to keep paying good quality of dividends (and keeps growing it), I know my capital is likely to be safe, and returns will be better. I am always happy to welcome downturns as it gives buying opportunities. A scared market always provides opportunities for cheaper stock.
I have to make a prediction like everybody else right? Well, I make two predictions (1) my portfolio will not be in red; (2) my total portfolio dividends will be more than 2009 dividends.
What is your prediction for 2010? Can you share in comments section below?
2010 stock market prediction, beginners guide, investing process, personal portfolio management, risk profile, stock buying process