I am a firm believer in the benign nature of the market. Anyone who is in the market, will make exactly the same amount of money which he aspires for, in the same amount of time that he thinks he has. Sounds idiotic? No!
Most people in this market are punters. They bet little sums of money, on stocks they have never heard of one day prior to buying, don’t know what the firm does or doesn’t produce and are happy to win or lose small, forever. These are mindless, gullible, telegram-following tip based retailers. They buy fancy, at high prices, of mostly shady companies which languish forever in their demat accounts. I know one friend of my father who holds something which goes like Ganesh Housing, because it was trading close to par( Rs. Ten FV and similar market price). God bless him.
Then there are guys who are here to make quick one lakh, five lakh, fund a car or a vacation or maybe an iPhone. Basically they are happy to generate surplus to fund their Insta worthy dreams which can’t be fulfilled without maxing out their already three credit card bills. These people are looking for छोटी छोटी खुशियां। Market gives them enough opportunity to make decent money, and mostly they are content putting in money once in a while when the market is rising. The same people put their money in anything which is going up. Be it real estate, stocks, cryptocurrency or even Dream XI. They are generally late to the party and almost stay till the end, to see it coming crashing down while they hold it, buying the occasional dip. When their stocks go down, they hold it forever, never booking a loss.
Then there are full timers. Brokers, allied guys, fund managers and basically everyone managing Other People’s Money. They live and die by trying to generate alpha, beta and a lot of commision in between. There are different names to their sophistry but more or less they get rich by providing index like returns to their clients and explaining their underperformance in a jargon clients don’t understand and are top afraid to ask clarification thereof. I love their business models and happily own some of their listed peers.
Hidden beneath all this noise is a very rare breed of Investors- an Individual Investor who make it big. Ofcourse the leading light of this class in India is Rakesh Jhunjhunwala and Damanis and Sons but there are multiple such guys who have made it sufficiently if to lead a very prosperous life without ever being bothered to beat the index or lapping up on the newest fad in the market or trying to explain fund performance in monthly newsletters or any such thing. There are multiple advantages such guys have and let’s look at some of them:
1. I can hold a share as long as I can: When I first bought BSE at 735 in October 2018, I didn’t know it will not go above this level until May 2021. However, I didn’t have to explain this to anyone and as long as I, the owner of my fund was satisfied that it was worth owning, I could hold it forever. I happily averaged it on the way down, all the way to 280 and now that it’s back to 750, it’s already up 50% for me. No fund manager will advice you to do this on CNBC nor can he do it in his own fund.
2. I don’t know if I beat the index, nor do I care: This is the biggest advantage for an individual building his own corpus, at his own pace. He doesn’t need to beat the index every day of every week of every month to gain twitter likes or CNBC applause. As long as he doesn’t lose much, avoid burning his capital too much in a bear market and can hold it out during the bad phase, he is likely to generate significant wealth over ten-fifteen-twenty years in the market. I mean all this CAGR bullshit doesn’t apply for us because it really doesn’t matter if I grew at 10% or 12%, as long as I can fund my growing lifestyle and feel significantly richer than five years ago, I am doing well for myself. People are happy if they could build a house by selling their Maruti or Hero shares and don’t care if they underperformed the index for twenty years.
3. I can own stocks which I want: Ask any fund manager if they own Castrol today and you’ll get a resounding no. Nobody owns Castrol. It’s a dud stock which doesn’t move. Similarly,nobody owned Tata Steel last year when it was trading at 0.5 book and 5% yield. An individual Investor can do his own research, buy any stock which he feels has a future and hold it forever.
4.No noise makes you sleep peacefully at night : You are least bothered about thirty stocks going up two percent a day or chemical stocks being flavor of the season or anything else which keeps twitter busy. As long as the companies which you own shares of are generating profits every year, are liberally doling out dividends and you capital is more or less protected ( the only definition of which is the risk of a company facing a real threat to its solvency or business model), you can simply play cricket during the market hours and still make money. You can own your time, workout more, read better and spend time with your family and live a prosperous life.
My purpose to be in this market is to be wealthy. How I define wealth is the ability to control my own time. I want to be able to do what I want, when I want, with whom I want and for as long as I want. I don’t want to be with people I don’t like, and waste thirty years slogging for an imaginary retirement land of honey and milk for it may turn out to be a myth. I want to earn money in order to lead a life which allows me to fulfil my family’s needs and desires and also to achieve my true potential as a human being. I am sure nobody became an artist working 9-6, 5 days a week. Retirement at 60 is a myth society has peddled in order to lead us into falsely believing that we are mediocre citizens and dreaming big is for others. It’s a sin good people can’t afford to commit. Working long hours and being busy with people you don’t like is not an ideal state to live a happy life but the surest way to die young or to grow old in obesity.
If you can stay in the market long enough, close to ten-fifteen years, protect your capital during bad times, avoid being greedy or act smarter than you are, you’ll be a rich man owning lots of good sustainable businesses doling good dividends. The choice is easy, but not simple. It can’t be!
Life is all about Compounding! 