Based on my personal experience I feel as if that there are 3 types of people exists in equity investment world.....Let me tell you that, investors or traders both are speculators only, it is just the level/time of speculation differs in both the cases....in case of former "TIME" is in his hand which is not in the case of later. So, if you are
#1. Very High Risk & High Returns - Those who always look for small cap or mid cap which can be potential multibagger in long run. He/She is ready to lose his/her money in order to hit the jackport. Goal is to either create huge amount of wealth or live a normal life, they are extrimist in nature, and yes, HBJ Capital falls in this group. These are the one who entered into the market during last 4-5 years and by the time bull run was on their way to peak, these guys were learnings the rules of the game. These people don't expect or speculate returns which are un-realistic but yes, they do expect the best returns and ready to take risk for the same. They will do exhaustive research in the small cap and build their own conviction. Since research reports on small caps will be not available from financial houses like Citi, IIL, Indiabulls, ICICI or Religare etc, so their jobs are touch to get details on these small caps......but again "No gain with no pain". Young energatic and smart mind falls in this class, for them risk is everywhere, our life itself is in risk, either do or die, mostly people in the age group of 20-35 falls in this class.
#2. Medium Risk & Medium Returns - Those who were in the market for 10-15 years and have made huge amount of money, they don't see 2003-04 time coming again or such value in the market, since they have seen lower prices so everything for them look highly priced. They have gained a lot from last bull run and want to just secure their earnings. They will normally go for stable and well knows stocks like RIL, Infy, Bharti, Pantaloon, Titan or Voltas etc. They are medium risk takers and fear in case if they lose what they earned from the market, don't they had confidence in their stock selection which create wealth of them? Might be because, market has its own brain and just check your best invetsment might be the one which you must have not planned/thought or which was not your #1 stock but turned out to be best one. They are long players of stocks market, most of them you can see were from 80's or 90's. So, called old folks planning for their retirement life.
#3. Low Risk & Low Returns - These guys look for dividents only, for them to be in the stocks market is waste of time. They can be in Govt. Sec or go for FDs. Most of the working class fall in this group. They sometime get attracted towards market and go for ULIP insurance or Mutual Funds and lose money, come back to olden days FDs. These guys are the one we call "Retail Investors".
Our message to 2nd and 3rd set of people...
These people never talks about "Small Caps".....just look at the type of companies these people discuss...DLF, RIL, L&T, PRIL, Titan or Voltas, they go for IPO of Reliance Power and thinks that Anil can change their life, Oh!!!. Even tom, dick and harry would blindly say that RIL is good or Pantaloon with Big bazar doing good business....does anyone need brain for that, it is visible na.....
Brain is needed to say the same thing when pantaloon was Rs 200Cr company with 1st BIG Bazar in Kolkota, now it is Rs 6000 Company, and whole world knows about it.....investing in such business which whole world knows or investing in a company where many of these folks invests will give average return....One of the smart investor use to say one great stm, "at any point of time every body can't become rich" so when all of us invest in RIL, L&T, Voltas or Pantaloon, the probablity of all becoming rich is low.
Until, our portfolio includes shares which is different from others we will not get great returns....so just think what is there in your portfolio and if 50% of your stocks are there in other's portfolio then better have a re-look.
You would say, Warran buffett has invested in known and robust company, but don't forget that Buffett waited for 20-30 years for them to grow, will we wait...I doubt...so investment in stocks is for those who can wake up with eyes wide open not for those who will invest and sleep with peace.
Coming back to small caps, I would say you can read www.hbjcapital.com, here we use to mention those gems occasionally. But I would suggest you to learn how to pick small caps...Currently I am writing a book on this topic, will share when it is completed.
- HBJ Capital Team.
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