One of the typical attributes of a young, impatient and a restless investor is to desperately look at new investing ideas when the existing ones look as promising as the rest. So the moment you meet someone the first question that comes to you is �Aur Naya Kya liya� (What did you buy new?). Isn�t that strange? Why do people want new things in life � always? So many families could have lived happily had people not looked for the new? Likewise so many investors could have stayed and become wealthy had they not tried identifying the new. Spare a thought for the guy who having bought Wipro in 1980 looked to exchange his stock for something new in 1981. A Rs 10,000 investment in the company would have grown to over Rs 350 crores had he just stayed with the old.
So does it mean that investors should do nothing and just sit back after an idea has been identified? Certainly not, all ideas need introspection and a constant monitoring vis-avis the new ones that come in every day. The only cost of investing is opportunity cost. So if Company A is doing well and someone whispers to you about the prospects of Company B then try comparing Company B with Company A before committing your money. If A is still better then B then buy A until you hi the 15% open offer limit!
Peter lynch says that the best stock to buy could be the one you already own.
Suppose you were running a restaurant, or a casino or a hotel, would you have looked at putting more money buying a new business each time your existing business threw back cash or would you have tried to consolidate your position in the business that provided maximum return for capital? Money has no emotion, given a free run it would flow to the spot that provides it maximum return but the emotions of the person in whose pocket the money resides allows it to do foolish things in the garb of looking at something new.
Many people look to buying something new to avoid the pitfalls of putting all eggs in one basket but one should remember that as long as the basket is strong and capable of holding the weight there is no harm in putting several eggs in one basket and if the basket is weak then even one egg can break the same. The idea is look for strong baskets not necessarily new ones.
There could be months where a smart astute and serious investor would not get new investing ideas in that case it would be prudent to analyse the existing stocks in the portfolio rather then hold cash and wait for new ideas. If a stock that he holds does not qualify as a buy then he has no business holding it in the first place.
@Basantji: When I first saw the title , I thought it might be a typo and you actually meant the opposite. But I stand corrected after reading the whole write-up.
Excellent.
[QUOTE=basant]
There could be months where a smart astute and serious investor would not get new investing ideas in that case it would be prudent to analyse the existing stocks in the portfolio rather then hold cash and wait for new ideas. If a stock that he holds does not qualify as a buy then he has no business holding it in the first place.
[QUOTE=abhishekbasu]
There are lots of reasons why people buy and hold stocks. Peter Lynch sometimes bought stocks just to be keyed in on its business. The thought behind it is that you tend to watch the companies that you are invested in more closely than others. Same for Rakesh Jhunjhunwala in India.
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Today there are several other ways to stay clued in to the business ; buying a stock is not a necessity. Annual reports are freely available on a company's website (and in many other places) and so are transcripts and audio recordings of conference calls. There are several business newspapers and news channels. Watching from the sidelines is more easily possible these days than earlier. Of course, one needs to have patience.
"If you don't feel comfortable owning something for 10 years, then don't own it for 10 minutes." - Warren Buffett
Nice words of wisdom. Great work.
[QUOTE=wiseowl]
[QUOTE=abhishekbasu]
There are lots of reasons why people buy and hold stocks. Peter Lynch sometimes bought stocks just to be keyed in on its business. The thought behind it is that you tend to watch the companies that you are invested in more closely than others. Same for Rakesh Jhunjhunwala in India.
[/QUOTE]
Today there are several other ways to stay clued in to the business ; buying a stock is not a necessity. Annual reports are freely available on a company's website (and in many other places) and so are transcripts and audio recordings of conference calls. There are several business newspapers and news channels. Watching from the sidelines is more easily possible these days than earlier. Of course, one needs to have patience.
"If you don't feel comfortable owning something for 10 years, then don't own it for 10 minutes." - Warren Buffett
[/QUOTE]
I think you missed the point that I was trying to make.
1. Don't you think Rakesh Jhunjhunwala/Peter Lynch has/had access to annual reports or newspapers or audio conferences or whatever else you mentioned? Sometimes, people buy into a stock so that they are more attentive to the developments in the company. That has nothing to do with accessibility of information.
2. Buffet is talking about "owning", not buying or selling. I absolutely agree with that. If I am not happy with a stock I own, I would rather sell. On the other hand, if I am not willing to BUY today, does not necessarily mean I will sell today.
[QUOTE=abhishekbasu]
The last sentence seems to me contradictory to the overall message of the post. "If a stock that he holds does not qualify as a buy then he has no business holding it in the first place" -- implies that one should SELL any stock one holds that is currently not on his buy list.
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the point is not that. what's implied is that if the stock is not good enough to be bought (viz-a-viz the one u plan to buy), you should not be holding on to that stock. if you feel the scope is not too much then what's the point in holding it. go with the stock with better scope of appreciation. thats what i think is the implied meaning.
[QUOTE=j2eeprofessiona]
what's implied is that if the stock is not good enough to be bought (viz-a-viz the one u plan to buy), you should not be holding on to that stock. if you feel the scope is not too much then what's the point in holding it. go with the stock with better scope of appreciation. thats what i think is the implied meaning.
[/QUOTE]
[ So many families could have lived happily had people not looked for the new ? ] ..... we missed this gem ;) ...
The charm of buying "new" is there, not only in stock market but in day to day life as well... most of us like to buy new phone, new gadget, new house , new car .. although they don't necessarily provide the best option (on a price-value basis).
Posted on:4/19/2011 12:45:14 AMajayganmohan
Good one. Each time I learn something new from your comments. Do keep writing more often.