How to DETERMINE the RIGHT price of SHARE before Investing?
October 17, 16
How to DETERMINE the RIGHT price of SHARE before Investing?
Greetings from Hitesh! MONDAY is
back. I wish you all a great week ahead. All our last weeks post were
appreciated and liked by readers. Most guys liked the educative information on
HYPER INFLATION and RBI policy change. If you have missed – I suggest you can
read them on our blog.
Many times when NORMAL investor
goes to MARKET – he is faced with the DILEMMA of deciding the right price. Deep
down he wants to be sure that what he pays for shares is the right price. He
also wishes that after his purchase the prices should move UP and UP only. If
it goes down – it means he has made MISTAKE!! So, today, we will deal with how
to determine the right price.
But before that, LET ME SHARE A BEAUTIFUL story of
LAO TZU, a CHINESE MYSTIC. In his OLD age, when he saw his death is near, he decided to go to
HIMALAYA. But the KING wanted him to WRITE SOMETHING about his experiences before
he goes. He was STOPPED at the CHECK POST of the STATE and asked to WRITE SOMETHING
before he can go.
He wrote his famous book – TAO
TE CHING in just 3 days at the check post of the state. TAO means TRUTH. On
the first page of the BOOK – he wrote – TAO can’t be WRITTEN / TAO can’t be EXPLAINED
/ TAO is PATH less PATH and then he went on to write about the TAO!! Most
guys got interested with the LATER part of the book and TAO became a RELIGION
there!!
What does FINANCIAL LITERATURE says?
There are “N” numbers of METHODS
for determining the prices of SECURITIES. There are TECHNICAL CHARTS / P/E
ratios / Various SECURITIES price models / ENTERPRISE Value concepts so on and
so forth.
At the end FINANCIAL LITERATURE
says – “YOU CAN’T CATCH the BOTTOM price at the time of BUYING and YOU CAN’T
CATCH the TOP price at the time of SELLING”.
Can you see the PARALLEL between TAO and SHARE
PRICE? What TAO says
on the first page, financial literature says on the last page. It means there
is NO RIGHT PRICE!!
What is PRICE?
Price like TRUTH is an EXPERIENCE.
You feel it. When you get a good bargain (compared to the believed or actual
value you get) – you feel happy and when you are forced to pay against your
will, you feel unhappy.
Irrespective of the VALUE you get – you judge the
VALUE by the FEELINGS at the time of PAYMENT of the price.
Most HIGH END BRANDS or 5 STAR
hotels know this secret and they invest lot of money to give the unique
experience to their customers!! You pay for the experience you get and not for
the thing you buy!!
How WARREN BUFFETT decides the price?
He was aware about this TRUTH long
back. He was BLESSED to know at very early age that there could never be the
RIGHT price of anything. It varies with the time / situations in the market /
change in the underlying value and many other psychological factors operating
from time to time.
He finds out the VALUE (that too
based on PAST TRACK RECORDS) he gets from the given businesses and then he
tries to pay the lowest possible price for the same. That’s why he had said –
“I like PESSIMISM, not because I am pessimistic. But because PESSIMISM gives me
an opportunity to buy shares I like at the lowest possible prices”.
In other words – he also says “there is NO RIGHT PRICE”. You try to KEEP margin of safety
as far as possible. That’s the only thing you have in your hand.
What is our WAY of DEALING with the PRICE?
We also know this secret from
early age in our life. So, we have divided the price in two segments - price of share when I want to trade and
price of share when I want to invest for long term. We have developed detailed
trading and investment system based on our experiences of last 25 years and we
teach the same to all our clients when they join us. We also monitor them
periodically and help them to MASTER the same over a period of time.
HIDDEN SECRET of PROGRESS in some people’s life:-
There can be many theories or
reasons for progress in people’s life. According to me I see only one reason –
their PASSION to go for better and better experiences in their life. They want
to experience MERCEDES over MARUTI / ROLEX over TITAN / 5 STAR HOTEL over Roadside
food / and things like that.
When your FOCUS turns towards the
BEST experiences, you automatically forget about the PRICE. At the time of
DEATH, if you look at your life, you will see nothing but experiences and experiences
only. No PRICE and No THINGS!! So, work towards better experiences or the best
experiences.
Better experiences needs MONEY and
you can earn money with less and less pain, if you know the fine art of
investments. If you like our approach, do approach us to learn the FINE ART OF
INVESTMENTS from us.
Follow me on Twitter @hiteshmparikh /
WhatsApp - +91-9869425399 / www.hiteshmparikh.com
Live With
Passion…Invest With Passion.
Hitesh Parikh.
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