Secrets Of Market Wizards

How often we hear individuals saying these or similar things? In fact, if you check the average person’s view on investing in the stock market, you would be convinced that the stock market is hell on earth. However, once in a while, we also hear about few people making fortune out of investing. In each field of human endeavour, a world class few sparkle brighter than the rest. You may have wondered about how is it that these bunch of individuals make fortune in the stock market, while majority of the individuals end up destroying their wealth. Is there some magic formula?

Majority of people imagine that winning in the markets has something to do with finding the magic formula. Shiv Khera has quoted “Winners don’t do different things, they do things differently”. The truth is that the common denominator among the successful investors we come across had more to do with attitude and approach. Some of the investors use fundamental analysis exclusively, others employ technical analysis, and still others combine the two. Some investors operate on a time horizon measured in a year or even a quarter, while others typically implement positions that they intend to hold for a long period of time. Despite the fact that the investing methodologies vary widely, the outcome remained the same i.e. they have made fortune in the stock market.

Investing is one of the very few routes in which an individual can begin with a relatively small sum and really turn into a multi-millionaire. Obviously, just a modest bunch of people succeed in this endeavour.

Regardless of whether you are a newbie or a veteran investor, you can make better investment decisions by studying the attitude, approach, methodology of the stock market gurus. The market wizards discussed in this report show extraordinary market savviness, which allows them to stockpile earnings in a way that baffles everyone.

It’s truly fascinating to see how the best investors of all time in India built their fortunes, so here are the some of the best investors, in all their glory. 

In the stock market there are ‘n’ number of investors coming to make a fortune. Nonetheless, there are only a handful of individuals who ascend to the highest point in their respective fields. No wonder there are some investors like Rakesh Jhunjhunwala or Dolly Khanna who made their fortunes and a name for themselves, while others consistently burn out their entire capital.

It’s not a fortuitous event that only a few investors triumph, while others never achieve their objectives.

There are certain attributes that set investors like Jhunjhunwala apart from the average investors: They essentially do things differently.

To venture into the shoes of a successful investors, you ought to first begin to think and act like them. This implies understanding their habits and applying them to your own particular approach.

Here are some of the habits of highly successful investors.

1.       They do research:

Successful investing professionals are disciplined and consistent and they think a great deal about what they do and how they do it.” Benjamin Graham

How frequently we see that individuals take their investment decision based on herd mentality and what is the outcome? Either they end up buying junk stocks or they book loss and come to the conclusion that stock market is a gamble. The first and foremost thing while investing is doing your homework properly and doing research thoroughly. There are numerous studies, observations and analysis available about investment everywhere, including TV, internet and other media. Before investing, explore the company’s website, read out the product profile and check the history and background of management of the company, study the business model of the company. After getting acquainted yourself with all these stuff you’ll get a better idea about the business and the better you understand the business, the more confident you’ll feel about your investment. Successful investors have the right reason behind every stock buying or selling decision and hence, it’s important to do proper research before entering into the stock.

2.       They understand the business:

In Indian stock market there are over 3000 listed stocks and lots of them might have the potential to be good investment options, but that doesn’t essentially mean you should invest. Why would you like to invest in a pharmaceuticals company if you don’t know anything about pharmaceuticals?  Stick to what you know well.

If you’re detached with the business and their products, and the industry in which they operate, it will be harder for you to make smart investing decisions. Successful investors always invest in what they know and focus their investing efforts within their circle of competence.  Warren Buffer calls sticking with what you know staying in your “Circle of Competence”.  “What an investor needs is the ability to correctly evaluate selected businesses. Note that word ‘selected’: You don’t have to be an expert on every company, or even many. You only have to be able to evaluate companies within your circle of competence. The size of that circle is not very important; knowing its boundaries, however, is vital.”

3.       Think Long-term :

Loathsome decisions sometimes are taken when we become emotional and involve in short-term thinking. When it comes to investment—be patient and think long-term. It means having patience for months or even years, not just for some hours, days and weeks. All the successful investors are very patient to see their investments bear fruits. When they make an investment after doing their calculations on a business, they are ready to wait to make sure their plan materializes. Ace Investor Warren Buffet has said “Successful investing takes time, discipline and patience. No matter how great the talent or effort, some things just take time: You can’t produce a baby in one month by getting nine women pregnant.”

4.       They stick with stocks, despite volatility:

“I will tell you how to become rich…Be fearful when others are greedy. Be greedy when others are fearful.” Warren Buffett.

Remember the financial crisis of late 2008 and early 2009, where stocks crashed over 50 per cent. Most of the individual investors during that period suffered financial and mental loss as well. We need to understand markets work in cycles i.e. Bull Phase and Bear Phase, it’s important to hold your nerves during the time of crisis. When the stock market tanks, it’s only human to want to run for shelter due to our inherent aversion to suffering losses. And it can certainly feel better to stop putting additional money to work in the market. But the best investors understand their time horizon, financial capacity for losses, and emotional tolerance for market ups and downs, and they maintain an allocation of stocks they can live with in good markets and bad. Buffet has summarised this point beautifully: “Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”

 5.        Learn from mistakes: 

Making mistakes is part of the learning process. However, this is a crucial step that separates a successful investor from an unsuccessful one. How often we see individuals trying to time the market or buying right at the top and selling right at the bottom of the market cycle. They repeat this time and again. They never learn from their mistakes and blame their ‘bad’ luck. Successful investors commit errors yet they are not disheartened by these missteps because they know mistakes are part of the process to becoming a better investor.

Conclusion:

Stock market is definitely a good place to make fortune, but making money consistently is not an easy task. Just like every game has it pre-defined set of rules, successful investing has certain rules to be followed. Sound Research, Patience, Discipline and proper risk management are few important rules to be followed for successful investing. One more thing which an investor needs to understand is that there is no shortcut to success in the stock market. It’s impossible to turn rich overnight! Therefore, it’s important to have a proper investment plan and nurture it.