Saturday, November 19, 2011
Do You Invest In Shares The Way You Buy A Car?
Greetings from Hitesh! Thank you for your overwhelming response to my last email… Is Warren Buffett a Hypocrite? I am really touched. It is your faith in me that brings out the best in me.
Let us see what a normal person asks before he buys a car….
1. What is the average?
2. What is the resell value?
3. Which car offers the best discount?
4. Which car has got the car of the year award?
5. Which car your neighbors and your friends are buying?
If you study all the questions, you will find that the focus is on the secondary factors rather than the primary factor. The primary factor of buying a car should be……you like the look and feel (comfort) of the car. If it satisfies any of the above criteria along with the primary criteria then very good…..but if not…..you should go ahead and choose the car based on your primary criteria.
But in reality, the primary criteria are being kept aside and normal person goes with the secondary criteria and buys the car. He does not have the guts to follow his own calls.
The same person when he goes to share market, he asks for following questions……
1. How much return he will get?
2. How fast his investments will generate return?
3. Who gives the guarantees of maximum return?
4. Which mutual funds/brokerage houses/ HNI are buying them?
5. Who gives the free advice?
The primary criteria should be investing in a good company which can not only conserve your capital but also generate reasonable risk adjusted return over a longer period of time.
As in the case of car……her also sticking to the primary criteria requires lot of independent thinking.
Without independent thinking there can never be the creativity and when there is no creativity…..there is no life (because life itself is a creativity)…..you just get bored with whatever have!! I have seen people shopping the best discounted items only to keep it in some corner of their house and throw it away later on. Many times they are not used for once also!!
These thinking habits also affect their behavior at the time of marriage. Result…..they have everything in their married life…except LOVE, the basic factor for which marriage should take place and continue!!
The Power of
The most successful investors have the ability to think independently. They independently consider each and every investment options……their investment decisions are not taken……just because the shares are cheap / just because market is going up or going down/ just because the shares prices will move up faster / just because somebody is buying.
Example:-
Once again I would like to share with you the example of Warren Buffett. When our IT analysts were busy writing SELL for IT companies…..he was busy in buying shares of IBM!! This is the same guy who was buying shares in 2008 and selling put in 2008 (we have covered the same in our last article). He thinks independently…..he stays away from the noise of media and their free advise and analysis.
What happens when you think independently?
Your decision is based on the merits of the investment option. This is what management guru Peter Druker had said about Management....“Doing Right Things from the beginning only.” When you do the right things from the day one……you are creating more chances for you in getting good results. That’s what is happening with Warren Buffett.
Word of Caution:-
Mr. Market is the ultimate authority to evaluate your independent thinking and reward you……and whether you like or not…... Mr. Market takes his own time…..it may be a next day / a next month / a year or more!! You can not dictate your terms with him. So, do right things from the day one.
Hope you enjoyed reading this email…This article is being sent as a part of investor educations initiatives taken by Destiny Management Services. We believe Education is the best place to invest. Do you agree?
Live With Passion…Invest With Passion.
Hitesh Parikh.
