scorecardresearchA snapshot of fund manager Samir Rachh's investing lessons

A snapshot of fund manager Samir Rachh's investing lessons

Updated: 18 Aug 2022, 09:26 AM IST

Investing is not a game. It is the outcome of a well-planned strategy to ensure that you park money in the right options for the right reasons.

In the world of investments, patience pays well. 

In the world of investments, patience pays well. 

Stalwarts in the investment world are not limited to Warren Buffett and Peter Lynch alone. The lesser-known indigenous ones have their experiences to share that they gained through pure expertise and a prolonged stay in the market. Samir Rachh, Founder, Nippon India Mutual Fund shares valuable investing lessons from which you can always take a cue while investing your money in the market.

Buying shares equates to owning a part of the business

Only when you realize while buying shares that you are becoming a partner in that business, will you focus on shares of quality companies and good businesses. You obviously would not want to invest in businesses operating at losses or with a bleak future. This explains why you must be passionate regarding stock selection before deciding to put your money in them. Remember that stocks or funds do not make you wealthy. It is your attitude towards them that decides how long would it take for you to attain your financial goals.

Remember that honesty should be the underlying quality of all transactions, which is why you must identify businesses led by strong and ethical management. Do not partner with less capable people or who are not passionate about furthering their businesses. Seek out responsible business houses that have adequate cash in reserves, earned profits and distributed dividends among their shareholders. This translates to avoiding businesses with limited growth prospects and poor return on capital employed while being constantly dependent on government aid. Pay attention to both the quality of the business and its promoters.

Investment is all about buying and hold

Honesty is very rare, so it may be strenuous for you to find it. So is equally difficult to spot good stocks that will perform consistently. Once you have found them and studied them well, decide on your investing strategy. In the world of investments, patience pays well. This explains why you must not be in a hurry to sell stocks early at meagre profits just because they have done well during a particular cycle. Fundamentally strong stocks are here to stay, which is why you must take care to hold them for a prolonged period. Most investors earn their millions from stocks they held for years instead of shorting them every season.

Knowing that investing is a game of imperfection and probability, which is why you must be aware of the common mistakes that most investors make. The worst mistake you can make is reacting to short-term corrections in the market and selling off your stocks immediately. Many people have lost their winning stocks to sudden market corrections and consequent panic selling. While it may seem like an opportunity loss to you in the short run, you will make most of the money by holding on to stocks of fundamentally good companies. Remember, that good businesses are here to stay.

Do not be rigid about the target price

Target-based investing always helps but you must not be rigid about it. Some stocks hold more potential than you may anticipate. Some stocks may perform beyond expectations. To know if you must wait or sell as soon as you reach the target price, read the company’s documents to know its mission, its recent business tie-ups and its growth potential. This will help you decide the possible growth trajectory of this stock and whether it is worth holding for a prolonged period. It may be difficult at times to comprehend the possible upside when you hold stocks for far too long. A sudden jump should not surprise you as stocks’ behaviour is proportional to their performance. Therefore, it is important that you do not limit yourself with the target price mechanism as the potential gains could be much more than you had originally set.

Cut down on the mistakes early

It is possible that you will make mistakes regarding stock selection. Know that it is okay to make mistakes, but a point of concern is if you stick to your mistakes. The best mistake is to cut off your mistake as soon as you realize it. Do not waste your time and money rueing over your mistakes or attempt a revenge strategy by sticking to them. Investments necessitate time and money, and it is important that you use them for the best possible results.

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First Published: 18 Aug 2022, 09:26 AM IST