Investing

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Are You Right Because Your Stock Moved Up 200%?

I find a lot of Mrs. and Mr. Right these days in the stock market – people who bought a few stocks in the past 6-12 months and have seen all or most of them sky-rocket 100-200% since then.

For instance, a schoolmate who is a housewife with no business dealing in stocks, has started recommending trading tips in our batch’s online group, “because” she is getting her price calls right!

Then, someone wrote to me yesterday “praising” how my “recommendations” like BHEL, Engineers India, Crompton, Voltas, HMVL and Tata Motors have finally been “successful” as they have risen sharply in prices.

This very person had written a hate mail to me last year when some of these stocks – or let me say, their prices – were down in the dumps. 😉

Such is the way we behave as investors.

Sensex @ 40,000 is Here!

“You’ve got to be careful if you don’t know where you’re going, ‘cause you might not get there.” ~ Yogi Berra

“The Golden Era Begins. Sensex target – 40000 by March 2017.”

This is not my prediction but one from a leading private sector bank’s investment advisory group. I received this report in my email yesterday, and haven’t stopped giggling reading the headline and the report’s conclusions again and again.

The author of the report states (emphasis mine)…

No no, we are not being very bullish, but are trying to value Sensex on the average multiple of 17x (which was seen in the previous bull run, the highest multiple being 25x 1 yr forward).

As per the Bloomberg consensus estimates the FY17 EPS stands at Rs 2000, we think that the FY18 earnings could grow at 20% for the larger companies if the GDP growth moves towards the 8%-9% mark. Hence, the FY18E EPS is projected at Rs.2400. At 17x FY18E EPS, we get a target of 40800 by March 2017, which we think could be a reasonable target to look for by the investors.

We think that the earnings growth would largely be led by the strong developmental focus of the new government and the multiple rerating would be primarily led by the under ownership of equities by the retail investors.

Sensex Nonsense is Back!
If you read Chapter 3 of Ben Graham’s The Intelligent Investor (which is one book you must read now, in these times of euphoria), the heart of Graham’s argument is that the intelligent investor must never forecast the future exclusively by extrapolating the past.

Forget IPL, Even EPL is Fixed!

“IPL is 100 percent fixed and I am only aware of one owner who is directly involved in betting (Vijay Mallya). Mallya is himself involved in betting, he earns 100-200 crores in IPL.”

These were the statements from actor Vindu Dara Singh who was caught in the 2013 IPL (Indian Premier League) spot-fixing scandal.

Singh’s comments aren’t something most of us don’t know of this cricket tournament (and others) that has been mired under betting and fixing controversies ever since its first edition in 2008.

But as die-hard cricket fans, we have come to take fixing as an integral part of the game.

“After all,” my friend, who loves watching these matches in stadium, tells me, “sport has been fixed through the ages – athletes dope, they cheat, they dive and try to fool the referee/umpire all the time… they try and eke out every little advantage they can. It is an undeniable truth.”

“Yeah, it’s an undeniable truth,” I say, “…and thus the cricket lover must beware that what he may be watching is not a game played on the field, but one that’s played in the room full of bettors and fixers.”

Now, if you are still reading this, you may be wondering why I am talking about the IPL and its fixing.

Well, I want to lead you to another kind of betting and fixing that’s going on in a different world that’s far from cricket and sports. And the person who pays a heavy fine for falling for this betting and fixing is…YOU.

Yes, you!

Stop Checking Your Stock Prices. You Can Get Sick!

I was travelling for the past few days with my family, and the last thing on my mind was how my stocks were doing.

In fact, when I am on a holiday with my family, if you ask me my view on the stock market, you would receive a blank stare. During such periods, not only I don’t check how the markets or my stocks are doing, I don’t even remember that I own stocks. 🙂

But things were different in around 2007. Then, I checked prices of my stocks every day, even when I was on a holiday.

I have never traded in and out of stocks in my life, but I still caught this habit of “just checking” what my stocks were doing each trading day…in fact, several times each day.

Just 5 Days to Go! I have my Art of Investing Workshop in New Delhi on 8th June (Sunday). If you want to attend, you have very little time to register. Click here to register now before I run out of seats!

Having my portfolio on an online tracker also helped matters, as I thought seeing stock prices jump up and down gave me control over them!

Investor Sentiment Survey 2014 Result: Mismatch Between Action and Expectation

To check what readers of Safal Niveshak are thinking and doing as far as their stock market investments are concerned, I recently conducted the first-ever Safal Niveshak Investor Sentiment Survey.

The responses I’ve received are interesting, though not surprising.

Before I move on to them, here are a couple of facts about investors from the Safal Niveshak tribe.

5 Rules of Investing in a Modi-fied India

India’s 2014 General Election results are almost out, and the Narendra Modi led BJP is all set to form the next government. There is euphoria in the air, and at no other place is it seen better than the stock market.

Amidst this, here are five quick rules I believe you can follow as you invest in a Modi-fied India that looks promising (at least on paper!). The broader idea to still tread with caution instead of throwing your sense and sensibility to the wind.

Here are those five quick rules…

If you have been sitting on the sidelines for the past five years, and itching to surf the high tide now, don’t start at the top of the tide by investing in stocks that are on a momentum (like real estate, banking, and infra). There’s a chance that you will drown again if you start at the top of the tide!
In real life, things don’t change as fast as the stock market may lead you to believe. So be careful of the kind of businesses you are looking to get into and don’t go by what the stock prices are doing. A complex economy like India won’t change in a year or two, however good the governance may be.
FIIs seem to be rediscovering their love for Indian stocks following their faith in the new government. This is what their latest inflows suggest. Don’t take cues from FIIs and their stock trades. They have always been fair weather friends and may leave out of the exit doors before you can even notice and react.
Remember Graham when he said that in the short run, the market is a voting machine but in the long run it is a weighing machine. So avoid investing in stocks like you vote (emotionally). Instead, invest only after weighing the quality of businesses you intend to invest in.
If you own good quality stocks and want to book profits after last few months’ rally or today’s, don’t! Think in terms of the wealth these can help you create over the next 15-20 years, instead of short term profits you have earned from them in recent times. In fact, if you are young, you have to have a high allocation to equities, and for the next 15-20 years.

Finally, one bonus rule for today – Avoid watching election results on a business channel. 🙂

Safal Niveshak Investor Sentiment Survey 2014

The Indian stock market has been on a high since its August 2013 lows. The BSE-Sensex is up almost 37% since then!

Many have missed this rally. Some don’t even know there has been a rally.

Anyways, as stock prices remain on steroids and caution gets thrown to the wind, it seems a good time to measure the sentiment of investors, at least those who are part of the Safal Niveshak tribe.

If you are willing to share what you are thinking as far as the stock market is concerned, I invite you to participate in the first-ever Safal Niveshak Investor Sentiment Survey.

Click here to visit the Survey form, and let me know what you are thinking and how you are acting now as far as your stock investments are concerned.

I will announce the Survey results on 19th May (Monday).

Value Investing Workshop in Mumbai & New Delhi: Very few “Rs 1,000 early-bird discount” seats remain for my Value Investing Workshop in Mumbai (1st June) and New Delhi (8th June). If you want to claim one for you, click here to register now!

How I’m Planning My Life After Retirement

I am not an expert on retirement and planning for life after sixty (if that is what defines the term ‘retirement’).

I am also willing to bet that anyone who has never retired can never be an expert on this subject (you can only be an expert in things you do), however sagely an advice he/she can offer on how to plan a life after retiring from active work.

But in planning and working towards my own retirement, here is one big mistake I see most retirees (and to-be-retirees) make and how it can be a such a dangerous mistake.

I’ve never heard it mentioned by retirement experts. Nor have I read a word about it in retirement books.

Everyone talks about saving money and allocating it well so that you accumulate enough to spend through the 20-30 years of your post-retirement life.

This is a good advice, but one that misses a big point.

Poke the Box: Don’t Pursue Success…Attract It

Let’s Start with Safal Niveshak
Just in case you missed any of this on Safal Niveshak over the last few days and weeks…

My 15 rules of sensible stock market investing. Please don’t follow any of my advice you read in this post. This is what I do and follow myself, and it works for me.
Launched a special page on the website – Ask Vishal – where you can seek answers to your investing and related questions. 100+ new members already joined on Day 1, and around 30 questions got asked.
I am hearing a lot of financial experts outlining their strategies for the Indian stock market post the election results on 16th May. Some things are indeed useless!
If money worries keep you awake at night, you must read this.
Opened registrations for my Art of Investing Workshop in Mumbai (1st June) and New Delhi (8th June). If you wish to attend, please register here.

Book Worm
If the thought of losing money in the stock market keeps you awake at nights, here is something very important for you that I read in Peter Lynch’s Beating the Street…

The key to making money in stocks is not to get scared out of them. This point cannot be overemphasized. Every year finds a spate of books on how to pick stocks or find the winning mutual fund. But all this good information is useless without the willpower.

In dieting and in stocks, it is the gut and not the head that determines the results.

Have an Investing Question? Just Ask Vishal

Ever since I started Safal Niveshak in July 2011, I have received 7,500+ emails from readers asking their doubts and questions mostly related to investing and personal finance.

While I must have responded to 7,000+ of those emails since then, I am guilty of missing out responding to the remaining 500 emails, owing to either lack of time, or procrastination (I hold a PhD in it!).

I thus apologize to readers who have not received replies from me till yet…and if they still subscribe to my emails.

Anyways, to ensure that I do not miss out on replying to so many questions in the future, I have created a special page on Safal Niveshak called “Ask Vishal”.

Ask Vishal will be the centralized location where I invite all your questions henceforth – questions related to the following subjects –

General Investing
Value Investing (except stock tips or stock-specific questions)
Basic Personal Finance
Blogging
Reading

Having all the questions and answers on this one platform will also help people with similar questions get their answers without having to ask them again.

Anyways, I also invite members of the tribe to help me answer questions that are received on this platform, so that we all get to share our knowledge and make this a mutually beneficial forum (plus I get to cut down my burden of replying to all questions). 🙂

All you need to get started on Ask Vishal is register here for free, and then log in with your credentials.

Remember, whenever you have an investing question, all you have to do is ask.

Value Investing Workshop in Mumbai & New Delhi: Seats are filling up fast for my Value Investing Workshops in Mumbai (1st June) and New Delhi (8th June). Click here if you wish to attend, and claim an early-bird discount!