Safal Niveshak

Wit. Wisdom. Value Investing.

‘Great’ Stocks are Bad Investments for the Long Term

Infosys was a great stock in March 2000, but has returned its investors only 32% since then.

HUL was a great stock 10 years back, but has generated returns of just around 34% over these years.

The list of such ‘great’ stocks is endless – stocks that were loved so much by investors but failed to return much over the long term.

Let me clarify one thing here – ‘great’ here means stocks that investors love so much that they are willing to pay any price to own them.

This makes ‘great’ stocks really bad investments for the long term.

Confused?
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How to Find the Next Infosys

My eyes were stuck at a newspaper headline that read – “15 companies that can be the next Infosys”.

And then there was something I read online that said, “Find the next Infosys”.

Another suggested, “How to build a fortune with blue-chip stocks that don’t even exist yet!”

Bam! How do I invest now in stocks that don’t even exist yet?

You see, business media is replete with such claims that they know of the ways investors can find the next Infosys, or HDFC Bank, or L&T (or future blue chip stocks that don’t even exist now!).

But ask them whether they were able to identify the first Infosys (i.e., the real Infosys) when it came out with its IPO in 1993 or even after that, and you’ll stare at dumb looks.
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Investing in Stock Markets: 4 Reasons People Get Stuck

The leading American entrepreneur, author and public speaker Seth Godin has had a great influence on my life as a writer and thinker.

His snappy blog posts and pithy remarks on the irrationality we see around us are worth a read.

I recently came across his post about being stuck.

In this, Seth described four reasons we run into problems when trying to tackle any kind of project:

  1. We don’t know what to do.
  2. We don’t know how to do it.
  3. We don’t have the authority or the resources to do it.
  4. We’re afraid.

Well, these are four deceptively simple reasons to explain any kind of impasse on whatever we are working on.
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Are You Ignoring This Huge Risk to Your Investments?

“Investors lose over Rs 2 lakh crore in two days over economic slowdown” shouted a leading business daily on August 19th.

The BSE-Sensex had plunged almost 700 points over the previous two days. That was not a small drop. It amounted to a 4.2% decline in the index.

Yet few headlines reminded investors that the Sensex was still up 98% (excluding dividends) from the market lows 2 ½ years ago.

But ‘2 lakh crore’ was made out to be a sensational figure, at least the way the headline was framed.

Of course the past few weeks have been very volatile for stock markets. But what is interesting is that this has led millions of investors to completely reverse their view on the future of equities.
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The Sensex can rise by 50%, or it can fall by 50%

“See I told you that the markets are going to rise,” was what the anchor’s face suggested as he read through his Friday market update on the business channel.

And why not, given that the BSE-Sensex’s 6.1% rise during the week gone by has raised hopes that what we saw during the past few weeks was just a passing phase of correction in stock prices, or so it seems.

“All is well!” the anchor said.

The expert on the other side of the table was confused whether he had just heard a statement or was it a question.

Anyways, he was called on the programme to give his views, so he said, “Well, I would say that things are definitely looking better now. And if people don’t buy shares now, they will regret after 18 months!”
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How Sachin Tendulkar Would Have Made You a Richer Investor

320 runs. That’s what the Indian cricket legend Sachin Tendulkar has scored in his last 10 innings in England.

For someone who has a test match batting average of 56, with 51 centuries, spread over a record 181 test matches, the recent form must be a cause for worry.

Anyways, does this poor form over the past 45 days make Tendulkar a bad player? A majority of us would say, ‘No’.

But what about the poor run your stock market investments have seen over the past 45 days? The BSE-Sensex has lost 10% during this period.
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The Easiest Way to Go Bankrupt

Dictionary defines bankruptcy as the state of being or becoming bankrupt. And you are bankrupt if you are unable to satisfy any just claims made upon you.

Some also define bankruptcy as a legal proceeding in which you put your money in your pants pocket and give your coat to your creditors.

These definitions apply to you once you are already bankrupt.

But the question is – How do you go bankrupt?
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This Big Investing Mistake Can Cost You Heavy

Do you remember the 2009 swine flu pandemic that caused worldwide panic? An estimated 14,300 people died of this virus.

If you think that’s a big number, you would be surprised to note that more people die every year due to seasonal flu.

But even then, swine flu caused much greater panic than the regular flu. What could be the reason for that?

Or consider the following example. In the months after the September 11 terrorist attacks in the US in 2001, travellers made the decision that travelling by car was a far safer way than by air.
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It’s 2008 All Over Again

I hate to sound pessimistic, but it looks as though the global banking system led by European banks is edging its way towards another big collapse.

That means in just a few short months, stocks could be back at their 2009 lows.

And if the last few weeks are any indication, the impact will also be felt in India…as it did after Lehman Brothers collapsed in September 2008.

But don’t expect things to capitulate so fast. At least not given that central bankers in the US and Europe will attempt one more Herculean effort to ‘save’ things.
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