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.
Golden words..."Peter lynch says that the best stock to buy could be the one you already own"....So True...
I always think HDFC bank is so boring & I should switch to some new stock in banking...but see the best banking stock is which I am already have:)
The best stock to buy could be the one you already own.
Excellent one Basantji.
Basantji -
Words of wisdom. Pearls of wisdom.
Investing looks simple but is not easy.
To hold on to current stocks for 10-20yrs is not a joke.
That is why people try to switch every 1-2 yrs.
The wait in capital markets is very very long to give you stellar returns.
How many people have that patience and conviction is what matters.
Basant ji tusi GR8 ho!!
Amazing..I think you are 100% correct
Dear Basant ji keep posting such words of wisdom for the benefit of people like me.
I've learned a lot for this site, just that I need more discipline in practicing them
I rellly rellly like it :-)
Basant ji, it's very true what you said, probably I'm also in the same category....would try to exercise some discipline.
Basant, Your best point is investor must be open and constantly evaluate existing stocks vis-a-vis new ones. Out of 5000 scrips we had 1 wipro, 1 Infosys etc. Bluechips of yesteryears like bombay dyeing, orkay,baroda rayon, century fared poorly in comparison. Due to same reason one doesn't know if the stock he is holding is THE stock of century like Wipro:-). A friend of mine doesn't follow WB/Value/Buy & Hold style of investing but still made 40 times returns in last 5 years which is 109% CAGR against Wipro's 53% :-).
Posted on:4/18/2011 10:43:18 PMcatchsudipto
Good One Basant Ji.