 "Smart stock pickers' way of creating wealth")
The smart stock picker doesn't look to beat the Sensex; he (and she, of course) seeks to significantly outperform the broad market, year after year.
By the same analogy, the smart stock picker does not focus on wealth management; she focuses on wealth creation.
This game of capital extrapolation is defined by differentiated rules.
Contrary to what most people believe, some of the most successful wealth creators do one thing most visibly after they have bought a promising stock. They do nothing (practically).
Contrary to what most traders would profess, some of the most successful wealth creators do not focus on timing the market -buying at the bottom or selling at the top. They buy across the tail-spinning period; their holding period is forever.
Contrary to what most analysts recommend, some of the most mature investors do not track the business or commodity cycles on which their companies are based (that's the job of the managers of the businesses they have bought into). They are more likely to track managements instead, their business discipline and governance consistency. If that story continues to be good, they assume the rationale for their holding continues to be validated.
Contrary to what most research reports recommend on how good days have returned and how this would be a good time to build equity portfolios, seasoned investors usually mourn the progressive demise of value. They hibernate.
Contrary to always-engaged investing styles in frenzied markets, some of the most successful wealth creators shun intra-day trading and go home as early as 3 pm (Nemish Shah does). They prefer to decode broad trends, instead.
Contrary to the 10 per cent post-tax plus risk premium return that fund managers target, some of the richest money makers simply seek to multiply their capital a number of times over, focus on the possibility of their target company generating a post-tax profit equivalent to the market capitalisation when they bought into the stock and generating a handsome livelihood only from dividends (market capitalisation appreciation being a bonus).
Contrary to the prevailing mood that professional investors must keep swinging at every ball, the really successful recognise that in an active 30-year investing career, there will be only five or six - only - sweet investing opportunities. These being market troughs when the discounting of once-mid-cap companies has transformed these into small-caps on the assumption that prospective performances would be weaker.
Contrary to what most investors believe, spotting these great opportunities in challenging markets is not really difficult. The tested opportunity seekers believe few things could be as difficult as deep value-investing. As almost all the investing is conducted in bear markets, where the cheap inevitably gets cheaper, the value seeker must plug on regardless, even as the portfolio continues to shrink, secure in the conviction that this is indeed the best of markets to buy into and that the immediate 'loss' arising out of timing differences will one day be only a fraction of the then intra-day price movement.
There is a term for this unusual style. It is called lazy investing.
By the same analogy, the smart stock picker does not focus on wealth management; she focuses on wealth creation.
This game of capital extrapolation is defined by differentiated rules.
Contrary to what most people believe, some of the most successful wealth creators do one thing most visibly after they have bought a promising stock. They do nothing (practically).
Contrary to what most traders would profess, some of the most successful wealth creators do not focus on timing the market -buying at the bottom or selling at the top. They buy across the tail-spinning period; their holding period is forever.
Contrary to what most analysts recommend, some of the most mature investors do not track the business or commodity cycles on which their companies are based (that's the job of the managers of the businesses they have bought into). They are more likely to track managements instead, their business discipline and governance consistency. If that story continues to be good, they assume the rationale for their holding continues to be validated.
Contrary to what most research reports recommend on how good days have returned and how this would be a good time to build equity portfolios, seasoned investors usually mourn the progressive demise of value. They hibernate.
Contrary to always-engaged investing styles in frenzied markets, some of the most successful wealth creators shun intra-day trading and go home as early as 3 pm (Nemish Shah does). They prefer to decode broad trends, instead.
Contrary to the 10 per cent post-tax plus risk premium return that fund managers target, some of the richest money makers simply seek to multiply their capital a number of times over, focus on the possibility of their target company generating a post-tax profit equivalent to the market capitalisation when they bought into the stock and generating a handsome livelihood only from dividends (market capitalisation appreciation being a bonus).
Contrary to the prevailing mood that professional investors must keep swinging at every ball, the really successful recognise that in an active 30-year investing career, there will be only five or six - only - sweet investing opportunities. These being market troughs when the discounting of once-mid-cap companies has transformed these into small-caps on the assumption that prospective performances would be weaker.
Contrary to what most investors believe, spotting these great opportunities in challenging markets is not really difficult. The tested opportunity seekers believe few things could be as difficult as deep value-investing. As almost all the investing is conducted in bear markets, where the cheap inevitably gets cheaper, the value seeker must plug on regardless, even as the portfolio continues to shrink, secure in the conviction that this is indeed the best of markets to buy into and that the immediate 'loss' arising out of timing differences will one day be only a fraction of the then intra-day price movement.
There is a term for this unusual style. It is called lazy investing.
The author is a stock market writer, tracking corporate earnings and investor psychology to gauge where markets are not headed