Since April 2012, I have undertaken the task of trying to beat the market and so far I have failed miserably. In summary, during this period (April 1, 2012 – Nov 8, 2013), the market (represented by the Sensex) has gained 18% while my portfolio has declined 4%. So in simple terms I have underperformed the Sensex by 22% points.
The intellectual and financial rewards of beating the index over a long period of time are extremely worthwhile so I am not throwing in the towel just yet. Here I am trying to summarise what I have learnt from my very costly mistakes over the past year and a half .
1. Sasta roye baar baar, Mehenga roye ek baar : Trying to buy cheap stocks is a losing strategy or at least I am not cut out for it. It is far better to pay a fair price (even a slightly higher price) than trying to buy cheap businesses. Usually they are cheap for a good reason and you usually dont come to know till it is too late.
2. Cut losses early : I lost most money on two positions which I stubbornly held on despite all evidence to the contrary and losses only kept getting bigger. As if to rub it in my face, one of these declared a bonus issue after I exited at rock bottom and the stock has risen 33% from my selling price. I console myself thinking it was the right process but a bad break.
3. You need a side vocation as if you are only concentrating on stocks you will feel compelled to act when doing nothing is the best option.
4. Have clear entry prices in mind for buying. Dont keep waiting for still lower prices and miss out on opportunities. I am guilty of this on several occasions
5. Dont over diversify. If you are buying more than 10-12 stocks, you are probably better off buying a mutual fund.
More later. Would love to know your comments and reactions
10 thoughts on “My battle with the Sensex”
Only thing that has worked for me is : Buy index periodically . Second – don;t buy what everyone else is – If everyone else is loving say – Gold, then don’t buy Gold. If every one is exiting from stocks ( and you have cash ! – go for stocks )
Reblogged this on The Blog of Nothing.
good good. I can do one thing to make money- do exactly opposite of what you are doing… was this ILFS where they declared bonus issue.
Yes, ILFS Investment Managers it is.
One friend of mine told me one thing when I started dealing in shares and which has stayed with me is “You cannot buy at the lowest price and you cannot sell at the highest price.”
Smart friend you have
Well, as long as company fundamental are strong stay with it unless you need money. Sooner or later, it will start looking upwards. So, may take would be doing analysis of sector / Company and stay focussed on that.
3-3:30 is the worst time to trade, this is the selling time and thus stock prices usually go down during this period.
SO logically it is the best time to buy
I would go for the index and stay invested for the long term. In long term equity investment would give a +ve return. Needless to say, systematic investment has always paid.