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The simplest money advise is the most difficult to follow!

Hello, guys its been a very long time since I have written here. I intend to write at least once a week. You can expect the articles every Sunday from now onwards. 

Let’s get back to the topic. So people find it difficult to digest and follow simple money advice. How many of you have bought a stock and not tracked it for the first 15 days? Most of you would see your MF and stock portfolio almost daily, correct?

What would have happened if you would have invested in private equity? You wouldn’t have got the investment valuations daily, at best you would get it monthly or quarterly!

Watching stock prices daily creates a scenario where you would want to act on a piece of the given information which is the price, instead of being an investor you tend to become a trader.

Most Mutual funds have an exit load factor of say 1% if you sell it within one year from investing in it. This is a good factor which encourages people to think long term. Short term stock investing also attracts capital gain tax on profits earned. But still, most people will buy stocks and sell when they rise 5% or so or even less sometimes.

My point is people don’t keep their holdings for long. What if Rakesh Jhunjhunwala bought shares of Titan for Rs 2 in 2002 and sold for Rs 4 in 2003? Had he been among the richest people in India? No, he wouldn’t have.

A question would arise in your mind how come RJ didn’t sell it in 2003 and still holds Titan? He had formed his thesis for this stock and had a strong conviction about this Tata company. He was able to see the companies vision along with the Indian growth story. His thinking was a Long term. Short term thinking rarely rewards in stock markets.

This reminds me of a conversation between Warren Buffett and Bill Gates. Bill Gates asked Warren Buffett ” Warren your investment thesis is so simple. You’re one of the top 10 richest guys in the world, and it’s so simple. Why doesn’t everyone just copy you?” to which Warren replied, Because nobody wants to get rich slow.” 

In the stock market, people want quick money.

Simple money advise is very difficult to follow. Simple people are not very well accepected in society. People love fancy things and show off.

Trust me simple investment ideas will lead to the best posible returns.

Follow simple rules – 

  • Thoroughly study before investing.
  • Have faith in your thesis. Its important to review your investments, but surely don’t reivew them daily.
  • Stay invested for long term. Avoid short term thinking.

Over to you… Share your thoughts and insights! 

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