Know the time-tested success mantras for equity investing


Equity investing is the most effective way of wealth creation. But very few can become successful in equity investing. What are the secrets of success in equity market? Let us know the success mantras of equity investing which all the great investors follow. Try to remember these success mantras.

All the conscious investors know that equity investment gives the best return over a long time. Lured by the hope of creation of wealth at a very fast pace, many people start investing in equities, but very few become successful in this field. But why most of the investors fail in equity investing? Let us discuss. In this article, you will be able to know the success mantras for equity investing. These mantras have been given by the legendary equity investors of the world. Let us know these mantras.

Stay within your comfort zone

Never, never purchase stock of any company/companies which is/are engaged in such business(es) which you don't understand. Don't purchase scripts of any company, the business model of which is too complicated. Don't try to hide your ignorance. Don't purchase such stocks. Warren Buffett, Peter Lynch, Benjamin Graham and others have repeatedly stated this. Stay within your comfort zone and purchase only the stocks of those companies, whose business model is easy to understand.



Consider the value and price

While short-listing and subsequently purchasing stock, the investor must consider the intrinsic value of a stock and the price of the stock at that point of time. While it is relatively easy to track the price of a stock, it is really very difficult for a non-expert to determine the intrinsic value of a stock. However, in this context, we must remember the notion of Howard Marks, who said that the awareness of the relationship between price and value is an essential component of dealing with the risk successfully. So, you must focus equally on the value of the script and on the price.

Give importance on moats

Warren Buffett has stressed on the importance on moats repeatedly. Businesses which have strong and sustainable competitive advantages are called moats. Such companies with distinct competitive advantages will go on giving profits to the investors years after years. So, an investor who wants to be successful in equity investing must search and find moats, i.e., the companies which enjoy distinct competitive advantages in their respective areas of business.

Behave like an owner

Purchasing a stock of a company means you have become an owner of the company. So, behave like an owner. Analyse the business of the company, the script of which is owned by you. Check its income, expenditure, sales, debt, dividend, strength, weakness and every other aspect like an owner. Thereafter decide about holding the script or selling it. Don't take hasty decision. Behave responsibly and don't pay heed to market rumours.

Patience always pays

As it is already mentioned, don't take hasty decision. Patience always pays. Don't get affected by daily volatility of the market. Wait patiently for the right opportunity to purchase. Wait more patiently before selling a script. All the great investors of the world extolled the virtue of patience in investing. Follow their advice.



Don't always follow the crowd

The greatest investors never follow the crowd. Rather the crowds follow them. Please remember that 'herd' mentality does not ensure success in equity investing. On the contrary those who have conviction and courage to go against the prevailing sentiments of the market become successful. So, purchase it at the correct time and sell when the market is in jubilant mood.

Concluding comments

These are the time-tested success mantras followed by the well-known equity investors of the world. Can you follow these mantras? If yes, you will be successful in equity investing. If you can't follow, direct equity is not for you, shift to equity mutual fund for wealth creation.


Article by Partha K.
“Those who will not reason, are bigots, those who cannot, are fools, and those who dare not, are slaves.” - George Gordon Byron

Follow Partha K. or read 272 articles authored by Partha K.

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Comments

Author: Natarajan10 Jan 2018 Member Level: Diamond   Points : 8

Investing in stocks should not be a wild guess or gamble. Not everyone can become a Warren Buffet or Billionaire, yes some may, but many lose their hard-earned savings by blindly investing or when the tide turns against them.

The value of a stock is not true as it looks to us, the market or price of the stock can be driven up or down by operators and a few big players who trade in lakhs or crores. Many stocks in the Indian market are driven by sentiments for some time.

The average investor should have a religious discipline of studying the actual performance of the stock, the supply and demand, the business value, the order books, the overseas market, political implications, influence of national policies etc.

Timing the equity market is very difficult. Some buy when the stock is having a good run only to realize that it has reached its peak and the next few day starts to fall down rapidly. Some stocks fall rapidly and people purchase it hoping that the bad days are over and it's going to turn around. But for the next few day, it keeps falling. It's like trying to catch a falling knife.

The investment legend, Warren Buffet has said that 'Be fearful when others are greedy and be greedy when others are fearful'. In simple terms it is buying when others are fearful, being cautious when everyone is greedily buying a particular stock.

Investing in equities is a continuous learning process, learn from all possible ways, start trading in small amounts. My personal belief is that equity market is not for the weak hearted, one should be humble when their stocks perform brilliantly and have the courage to hold on when it falls. Never invest money that would make you lose your sleep. Have a group of equity/stocks for long-term investments (few years) and another group for short-term investments (few months).

Author: umesh14 Jan 2018 Member Level: Diamond   Points : 3

Investing in stock is a very precise form of fine business acumen and very few people achieve this.

Investing in top companies or as it is called blue chips is the basic approach with an investment horizon of 10-15 years yielding a handsome growth. Holding good scrips and staying in the market for a long time is required for nice returns.

Those who do not have patience and take hectic decisions lose money in share market.

Author: Venkiteswaran20 Feb 2018 Member Level: Diamond   Points : 4

The attitude towards stock investing has now changed from solid investing to fast trading and turning over.
In such a scenario investors (rather everyone is becoming trader) are impatient to make a quick buck and not patiently waiting for the cream to develop slowly.

In that situation, many of the basic theories do not come into practice. Investors no more look for the dividends from the company but expect fast appreciation in capital.

If investors hold onto the stocks like owners, trading will not occur and volume of trading will be quite less, making people not enthusiastic about the stock market.

A section of the stock market investors go by the principle 'love, but not marry'. That is, be interested but don't stay tied up for long.

Author: Partha K.21 Feb 2018 Member Level: Platinum   Points : 4

Thanks to Mr. Natarajan, Mr. Umesh and Mr. Venkiteswaran for reading this article and posting their valuable comments. There are two types of people found in the equity market. One group wants to make fast money in the stock market. This group mainly depends on technical analysis of the scripts and buys and sells scripts. In my opinion, technical analysis is not flawless and many a time, investors lose money in short-term trade or intra-day trade. In my opinion, this is another form of gambling and there is real chance of losing money, just like other forms of gambling.

On the other hand, some investors want to create wealth from the stock market. They don't believe in short-term trading. They purchase stocks after studying the fundamentals and hold stocks for a long period for creation of wealth. My present article is for long-term stock investing.

Guest Author: Shakti Sahoo27 Sep 2018

Dear Partha,
Thx for your valuable comment on the stock market. I agree with your proposal.



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