Long Term Investment is like staying in the Seven Star Luxury Hotel. Masses can’t afford it.

 3^rd September 2020

Long Term Investment is like staying in the Seven Star Luxury Hotel. Masses can’t afford it.

Dear Fellow Travelers,

Namaste! Since the last three blogs, we are dealing with success in life and investments. One such issue often talked in the media and in general is doing investments for the long term. In my 29 years of experience, with retail clients – I have observed that it has become a Fashion to talk about Long Term Investments. But when they do, they face genuine difficulties due to various reasons.

Buffett and Munger always says – AVOID mistakes and you will have gains and only gains. If you are really passionate about Long Term Investing – then let us know the mistakes which can occur in the process. If you are aware of it, you can avoid them.

Invest with 100% spare money: -

Buffett has never taken a loan to invest in shares. He is a majority holder in a couple of banks. He can generate billions by just making a call to banks of his choice.

Have you seen Mukesh Bhai did force selling of shares in various companies in last 4 months? Have you seen what happened to the top of the line companies – who took loans and invested in the business in the last 10 years? See Anil Bhai.

If you have to worry about installments or interests’ payments then Long Term is not for you. If you even have to worry about your day to day expenses than also Long Term is not for you. You must have your own MONEY available for a long time – even after your death.

If you don’t have a vision for the company beyond your death – don’t go for the long term. Today Buffett is investing for the year 2050/2060. Do you think he will be there in 2050? He is already 90. This is his commitment to the long term – do you have such commitment?

Performance of the price V/s Performance of the Company: -

Masses don’t differentiate between the above two. If the prices don’t move for a year or so and if the general market moves up – they will start doubting their luck / their consultant’s skill sets or the person who recommended them. Their brain simply can’t process the difference. They get panicked.

Height happens when the stock remains underperformer for a long year for 3-5-10 years – they will go MAD. They will start CURSING the person who asked them to buy. A company like Reliance was an underperformer from 2009 to 2018. Even in March 2020, it was available at Rs.900. So, anything can happen in the long term.

By any chance they had appointed a consultant and if he had asked them to buy the above company – they will fight with him/they will not pay their consultancy fees and they will do all tantrums.

Masses believe that if the prices are moving up – it means it is GOOD. If the prices are going down or not moving with the market – it is BAD.

When IT stocks moved up in 1999-2000, Buffett’s portfolio underperformed compared to the market and Wall Street guys were full with talks that Buffett has lost his touch.

During 2004-2007, Rakesh did not invest in property stocks and Dalal Street guys were talking that Rakesh has lost his stock-picking abilities.

If you want to do long term investments – focus only and only on the performance of the company. This looks easy to listen, but very difficult to practice in reality.

Remember Rule of 80:20: -

In life and investments this rule is supreme. Do the best research on all your investment stocks, take all pains of meeting company people, visiting their supplier, customers, bankers, and plants – you will always find that out of these hand picked companies 20% of the companies have moved up multi times and rest have not moved up even in the long term.

Rakesh had invested in 33 companies and only 4 companies moved up and made him what he is today.

Buffett had 215 companies but only 13 companies made him what he is today.

Masses portfolio also has these 20% companies but still, they do not become RAKESH, why?

Rakesh and Buffett's kind of investors focuses on the company performance year over year. When they find that performance is super but the prices have not moved up or p/e has not moved up they just go MAD and buy that stocks in TONS. Masses will go MAD and sell those stocks at the same time!! The reason is the same but the response is different.

When they keep on adding performing stocks over a period of time in their portfolio – they end up having more of GOOD STOCKS in their 20% category and their overall performance skyrockets over that period.

Smart guys know these 80:20 principles and they focus on 20% stocks while the Masses focus on 80% of the stocks. Their focus decides their destiny.

Concept or Fashion Stocks of the time: -

In lockdown period, Chemical and Pharma stocks outperformed the market. Now, looking at the price movements – the masses may get inclined to invest in those stocks for the long term. When the prices move up daily – they feel they are the smart investor and they have done the right things by investing in those stocks.

Smart investors use these FASHION for trading and not for long term investing. They know that some of the other TREND will keep coming in the market at various times. They take advantage of the same and get out fast.

Masses picks up these stocks when the stock is already at high price and most of the times they buy and selling starts in the market. I have seen Masses always complain that when they buy, shares prices go down and when they sell, shares prices move up.  

Lot of psychological pressures comes to the masses when their stocks do not move and fashion stocks move. Their heartbeats lose rhythm and they end up making mistakes of selling their long-term stocks and buying these fashion stocks.

Long term investments are not done in FASHION or TRENDING stocks. They are always done with the long-term demand for the company’s product in mind. If the demand is there and if the management is good – the company will show performance without fail over a period of time.

Have v/s Have Not Stage: -

Masses belongs to the HAVE NOT class. They don’t have many things in their life. The major focus of their disposable income is to spend on house/education/marriage of kids and retirement planning. They operate out of HAVE NOT attitude and they have a lot of insecurities with respect to their future.

To deal with these insecurities – they have a SAVE MONEY attitude. They are averse to unnecessary expenses. They get panicked when losses happen. So, they go for secured but low return schemes. They consider payment of fees to consultants as unnecessary expenses. They have a deep love and longing for everything FREE or CHEAP.

With the above qualities Masses can’t get success in long term investments.

Long term investments are for the people who “HAVE” everything and now money is lying idle. If these monies become ZERO – their lifestyle is not going to be affected at all. They have nothing to panic. Recently Buffett booked USD 5 Bln loss in airline stocks. He was 100% normal after that. During the Silver bull run of 2011, Rakesh had booked heavy losses in Silver bought at 65000 per kg. He just got out without panic.

As long as you have unfulfilled dreams – Long Term Investment is not for you.

How do we guide our NORMAL clients for the LONG TERM?

We know the psychology of masses. We do the simple things – we ask them to trade as per their capacities/capital and skillsets in various instruments. The profit they generate in those trading – we ask them to invest for long term and sleep. This way they don’t panic if at all the prices go to ZERO. When they don’t Panic – they learn the fine secret of investing and gradually move up to the next levels.

What Now?

This is the TRUTH of Long-Term Investments. Very few consultants have the GUTS to share the right perspective on Long term the way we have done. Read and think about all the issues by keeping yourself in mind. You will get HONEST answers from within and you will be able to decide the right course of action for yourself and your family.

In my long journey, I have realised the TRUTH that – Long Term Investments / Astrology / Ayurveda and Seven Star Luxury Hotels are not for Masses. It is only for the people who are really AMBITIOUS or who “HAVE”.

So, don't worry if are in the HAVE NOT group, just fire your AMBITIONS. 

Have a GREAT INVESTMENT EXPERIENCES AHEAD.

 

Follow me on Twitter @hiteshmparikh /  WhatsApp - +91-9869425399.

 

Live With Passion…Invest With Passion.

 

Hitesh Parikh.