Just read this excerpt from the book 'Reminiscences of a Stock Operator' that I am currently reading.
(Once I complete reading this book, I will post a review of the same in this blog, I promise)
"Suckers differ among themselves according to the degree of experience.
The tyro knows nothing, and everybody, including himself knows this. But the next, the second grade, thinks that he knows a great deal and makes others feel that way too. He is the experienced sucker, who has studied not the market itself, but a few remarks about the market made by a still higher grade of suckers. The second grade sucker knows how to keep from losing his money in some of the ways that gets a raw beginner. It is this semi-sucker rather than the 100 percent article that is the real all-the-year-round support of the commission houses. He lasts about three and a half years on the average, as compared with a single season of three to thirty weeks, which is the usual wall street life of a first offender. It is naturally the semisucker who is always quoting the famous trading aphorisms and the various rules of the game...."
And so on and on and on....
While I was reading it, I am like, this guy is talking about me. This book was written in early 1900s. I wasn't even born then. How the heck does this guy know so much about me? I am one of those half baked knowledge guys who thinks he knows all about Stock Market because he has dabbled in stocks a bit.
"Buy and hold", I tell them earnestly. I have read in various investment books that it is the best strategy to make long-term wealth. I pride myself that I am an avid 'Buy and Hold-er' since I bought Reliance in the 'Muhurat Trading of 2010' when it was trading at 1195, a price the stock has avoided touching since then, as if the price were a leper or somethin'. Since I don't want to dispose off at a loss, the stock has become my example of the importance of 'Buy and Hold' strategy. God knows that if it were to just cross 1195 I would be exiting of that like a Pavlovian Rat in a electrified cage. (Inflation be damned, I just want my principal back). But the real truth is that I have disposed off more stocks than a used diaper. For every stock of Reliance that I keep, I have sold off Kemrock (at a loss), Financial Technologies (at a loss), Bank of Baroda, Oriental Bank of Commerce, Canara Bank, ICICI Bank (all at minor profits).....
List goes on.
"If you buy a good stock, keep it", said someone. I took this advise to heart and purchased HUL in 2004 and kept it. Till 2012, the price of the share was wandering around my purchase price like some loafer in the Central Park. I still have it (Though I must admit that the Share Price moved substantially upward in the last two years)
"Keep a target return and sell off when you reach that return. That will take care of the two main enemies of a retail investor, vis. Greed and Fear", that is another mantra that CNBC taught me. I took to it like a fish to water. And that too at the very early stages of a Bull Market !!. I kept a profit target of 30% and a loss target of 10%. I bought Oriental Bank of commerce at 60 and sold it off at 78, it went on to touch 800, I brought Financial Technologies, the stock went up to 90 and came down to 50, I followed my 10% loss rule and sold it at a loss, the stock went on to touch 2025...
Then there are advises that I have ignored. "Buy Praj Industries at 60. It has good long-term potential", said a finance magazine. Since CNBC told me to 'Ignore the noise', I ignored it. Praj went on to touch 1200, gave 1:1 Bonus and 1:5 Split and now it is trading at around 100.
"Let the winners run" said another expert on TV. I bought IDFC at 50, it touched 300 and it is back to 80 or so now. "Keep Trailing Stop Loss", said another expert and many of my stocks hit the stop loss before returning to their next bull market upward run.
(Now I know one thing. I got the advises and the market trends mixed. 'Let the winners run' is a good advice in Bull Market. 'Keep 30% profit and 10% loss target' is a good advice in bear market)
"Understand and use the power of leverage", said another expert. I went and bought options. I purchased 'In the money' options, 'Out of the money' options, 'Far out of the money options', 'Calls', 'Puts', 'Straddles', 'Strangles'....
I lost money in all of them.
I am one of those guys who expound on Stock Market like a passionate motivational speaker. I know all the theoretical concepts out there. I can keep them on thrall like I am Freud (Sigmund). I know about Stocks, Bonds (including James and Zero Coupon), Retirement Planning, Tax Planning....
You know, the works. And I don't hesitate to share my knowledge.
I always used to wonder if there was something wrong with me. I wondered why, with all this knowledge, was I losing in Stock Market. Why the Stocks I keep tend to go down and stocks I sell tend to go up.
Now I know.
When it comes to Finance and Investments, I am a second grade sucker. Thats why...