Why there is NO Stop Loss in Value Investing?
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VALUE INVESTING & STOP LOSS
As I said in the MASTER MIND Training in Value Investing there is NO STOP LOSS! Why?
The answer is simple: When price goes down the Intrinsic Value goes up! So you will not Sell – Instead you should Buy More in Value Investing!
WARREN BUFFETT DOES THAT!
PETER LYNCH DOES THAT!
Why most Retail Investor cannot do that?
If you fear to buy more your stocks during downtime it means you have:
- Not invested in a good growth company
- Not performed enough study on the company
This is the reason we keep the following essential 5 checklist.
If you invested in a growth company @ good value with low debt & high integrity management then your stock will have high demand in the future thereby yielding mutibagger returns. So you should buy more on downtimes inorder to get higher compounded returns.
Example: You invested in Rs. 100 Manappuram with Intrinsic Value Rs. 1000 which is 1000% ROI expected.
Now the price crashed to Rs. 50 and the same Intrinsic Value Rs. 1000 is intact as only the stock price crashed & not any funamentals in the company changed. So you are positioned for 2000% ROI now if you buy more!
The Secret to Peaceful Sleep & Path to Enormous Wealth is VALUE INVESTING!!
All the Traders, Short-Term Investors, F&O are doing nothing than part-time job. Read here.
Stop Loss is a Trader thing. NO Stop Loss in Value Investing!
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GOLDEN RULES OF VALUE INVESTING
If you learn & adapt these rules – you will NEVER have to be money slave in life!!
10000% is the Real Returns
Stock Market is created for Wealth Creation! The Real Gains are 1000-10000% and More. eg: Infosys, Reliance, Eicher, Cera etc.
You can Gain Crores out of Stock Market through Discipline, Multibaggers, Long Term Investing & Portfolio Management strategies.
So do not use it for Silly Gain methods like Day Trading, Futures & Options, IPO Investing etc. Read more.
Focus for Long Term
Stock Market is a place where the Company requires Multiple Years to Expand & Zoom Wealth through Power of Compounding. The Standard Returns is 300-500% Range for a 5 Year Period which is 1000-2500% for a 10 Year Period.
The compounded price growth happens through company growth, capitalization growth, investor attraction, mutual fund participation, PE resizing etc.
Above 2 Years No Loss!
So 1 Lakh Saving could become 25 Lakhs in 10 Years – Save Money, Invest Money! [So by wasting Rs. 1 Lakh you are loosing Rs. 25 Lakhs]
Understand your Risk Capital
Stock Market is risky in the short-term. So find out your Risk Capital – the amount of money you are okay to see as loss.
If Rs. 1 lakh is your Okay Level then in Smallcap/Midcap Portfolio can crash up to 50% – So Rs. 2 lakh is your Risk Capital.
In this way you will be having peaceful sleep even during bear times.
Chalte Chalte.. you will gain knowledge, experience & increase your Risk Capital levels.
Strategy: Another way to Increase your Risk Capital is to find the under-performing assets like plots, buildings, low paying career & upgrading them for higher money – so whatever money earned is Free now to invest in stocks. There are strategies to 5X your Savings given to Paid Subscribers.
Invest in Growth Stocks
One should take care in Identifying Growth Stocks with Huge Economic Moat. This will ensure you the Future Profits of your portfolio.
Moat is a differentiation to the Competitor. Moat ensures high price, returning customers.
Example: Warren Buffett went with Apple not seeing the Technology but the Loyal Customer base as the Moat who are ready to pay the premium purcahse price.
Take Less Actions
You need to Take ONLY less actions to be a Successful Investor.
Example: Warren Buffett
Valuation is an Art
Valuation is an Art! Master It with Intrinsic Value Calculation, Sector Growth, Economic Moat, Multibagger Checklist, Economic Analysis etc.
Spend 1-2 hours per week on learning rather than taking stock market actions. Stock Market gives more returns than your Career if you Learn it properly. MASTER MIND TRAINING
Portfolio Returns Matters
One stock giving 1000% doesn’t matter if you have other stocks dragging the portfolio down!
Total Portfolio Returns matters!
Synonymous, you have to check your Net Worth Returns also. If your Net Worth consists of Real Estate, Gold, Bonds, Mutual Funds etc. which are mostly Under-performing than Inflation Or of Low-Returns then Just your Stock Portfolio performing doesn’t matter.
Total Net Worth Returns matters!
Rich People have Net Worth Returns > 20%!
Keep Maximum 12 Stocks in Portfolio
This will bring down the Management Cost of your Portfolio & Gives ample time to Track Quarterly Results & Read Annual Reports of the companies.
The Top Investors like Warren Buffett, Ramesh Damani keeps above Portfolio Limits.
If you have more stocks to manage, I would recommend Maintain 2 Portfolios.
Cash Position Matters
Portfolio Theory enforces the Need of Cash Position as It will also Play equal role as Multibaggers!
Cash Position allows to Utilize a Bear Market Opportunity completely which will Improve the Overall P/f returns.
Stock:Cash Percentage is recommended as:
(depending on the market valuation)
Do not Follow Day Traders or Short-Term Investors
Traders are in different mode of operations & most of them gain very less returns compared to a Long-Term Investor.
Do not copy the Traders abrupt terms like stop-loss, target etc. You will not reach anywhere. Traders are Looted!
Remember, you entered Stock Market seeing Big Riches like Warren Buffet & Ramesh Damani. Why would you follow the amateur traders?
Buy, Hold & Sell
Buying should be carefully done based on the Multibagger Checklist & Comparing at least 2 Years of performance.
Hold should be minimum for 5 Years.
Sell should be based on Intrinsic Value of past 5 Years.
Buy in Installments
Value Investor BUY in Installments!
It allows to scoop stock at average price.
For example: Buy for 70% as first installment & remaining as equal monthly installments for 3-6 months.
Repeat the Buy
Value Investor like Warren Buffet Repeats the Buy for few months, quarters & even years too. They will do this even when the stock price went up or down. This is because the Intrinsic Value gets upgraded based on results.
So stock is not just 1 time buy; but repeated buy;
In this way your P/f limit will also be maintained.
Buy on DIPS!
Value Investor BUY on DIPS! You should be Allocating like 1 Lakh for 500% Multibagger and 2 Lakh for 1000% Multibagger – in this way when the stock price halves you can happily double the investments.
For example, a stock is priced at Rs. 100 with Target Value Returns of 500%. On 50% crash the stock price is a BARGAIN BUY for 1000% Returns!
Remember, if you selected stocks which are Growing, Low Debt, Good Promoter with the Multibagger Checklist, then it will serve as your Insurance!
Conduct Yearly Audit
Conduct Yearly Audit of your Portfolio to Identify the Income, Expense and ROI of your Investments. Remember ROI is King!
You an also Add/Remove the Stocks from your Portfolio based on the Performance.
Ensure Minimum 20% Returns
You should be Alert if your Portfolio is Returning less than 20% Annually for more than 2 years – If your returns are less then you should have parked money in real-estate or fixed-deposits. Exclusions are Bear Markets!
The Standard Returns we expect from Direct Stock Market Investing is 300-500% for 5 Years which comes around 30-50% annually.
Bear Market is Opportunity
Value Investor sees Bear Market as an Opportunity! The Rich Investors uses Bear Market to double/triple their Wealth every bear cycles.
Ensure you keep 30% Money as Emergency Fund so you can Capitalize on Bear Market opportunities.
Keep 1% Advisor Expense
You should NOT spend more than 1% for Advisors.
If you have Rs. 5 Lakh Portfolio then maximum you should spend Rs. 5000 per year for stock advisory.
Note: Do not fall prey to the High Paid Advisors. In India all advisors pick from the smallcap & midcap sectors as we do – it is only random that few can have occasional high performance – otherwise the same 500% 5 Year which is 2500% 10 year is the maximum performance of all advisors.
To become Rich 20% Growth Required
For the past 10 years we were creating 1000% performing multibaggers. But only less than 5% people became rich & gained financial freedom.
Why? The reason is they were using only a small amount of capital for stock market while their remaining capital were idle or low-performing ones like bloated real-estate (flats), low performing FDs etc.
So in order to be Rich in 5 years you need 20% Net Worth growth annually. The details are contained in the Rich ebook you get with Subscription.
Believe in India Growth Story
Stock Market is a a Machine which is Fueled by the Underlying Country’s Economy. So Invest confidently in Growth Stocks & During down times Invest More!
India is Undoubtedly Growth Path for next 10 years due to Rapid Urbanization, Digitization, Manufacturing Shift from China.
Contra Markets Strategy
Not all scrips in stock market follow the same trend.
For example, when Economy is in Boom the price of Gold will be reduced As people switch more to stocks for higher returns. Similarly, when Economy is in Bust the price of Gold will be increasing As people choose gold for safety.
Keep a Contra Markets Strategy to gain from both Bull Market & Bear Market.
Remember, Futurecaps Contra Strategy on Corona Times created 100-500% return multibaggers.
Do not Underestimate Power of Mind
Mind is your Vehicle to Path of Riches! Train it well. Protect it from Noises. You are the Average of 5 People you Meet!
Luxury is your Right! Once you realize Profits through Stock Market you should Train your Mind to Buy Branded Luxury Goods as that Keeps the Spirits Up! Rich People buy Luxury through Investment Profits!
Example: Buy a Harley Davidson with 20% money & 80% profits!
Mediocre people reduce expenses, buy cheap things, live below them means thereby killing Spirit of Life! Do not train the mind like that.
Instead Train your Mind to become Rich! Expect good things to happen.. POWER OF NOW!