Power of Long Term Investment !!!

Well

Discussion has shifted to trading vs, investing, which it is not intended to be.
Let us see what are the factors that might help us in indetifying a stock worthy of taking long term risks as aca_tarder has correctly put it.
Risks are there in any kind of transcation. In the long term risk will be more. Who could have predicted that a Rs. 95 would jump to 13000 and also drastically fall back only to rise and reward. But as aca told there are many ruins behind a successful castle.

I thought by giving one line wonder ( bharti) people may be spurred into discussing identifying factors for long term investing.

But alas ! Admonitions of Amit seems to have worked well.


Pankaj

Here is an interesting article I've come across, a counter view to buy and hold. Makes interesting reading.

http://www.turtletrader.com/buyandhold.html

In my humble opinion, instead of adopting the Warren Buffet's way of investing which is very risky, for near long term(3-5 yrs.) the investors should identify today's blue chips in the sectors which are poised for growth, where management is good and where the business model has a very fair chance of surviving in the long term and then should rate them on parameters aforementioned in addition to financial factors like EPS, ROI, Operating Ratio, etc. 5 Top rated companies from the list should be selected and this way a fairly good portfolio can be created which will have the potential to provide good returns with fair degree of risk. On a sectoral basis only, my picks will be Biocon, ITC, Reliance & Siemens. I am not sure if the rating process will select them or eliminate them.

However, if some of the investors are really ready to assume greater risks, then they can hunt for companies with very good & cohesive management teams in the areas of Nano-Technology, Agriculture & Food Processing, Alternative Energy, Stem-Cell Research. The only problem is at the moment, hardly any company is listed on the bourses in these areas and even if any of them are listed, perhaps information about future plans and the veracity of that information will be hard to gather. If someone can get private placement or preferential issues (Is there anybody on this forum of that status) in good companies in the said sectors then perhaps we can see emergence of the Warren Buffet of India.

Best Regards,
--Ashish

Interesting discussion going on. Thanks to Pankaj, Ashish, softtouch, SGM, Desciple, vince. Great going friends.

The point that I want to drive home is that it is always very rewarding if you have a long term approach provided you have done your homework. What I mean by home work is: identification of list of stocks based on FA. Shortlisting them to accomodate good sectors and have a portfolio for around 10 stocks. Identify your investible capital. Identify ones risk taking ability. Have a realistic return expectations compare to existing instruments. (one should not expect a growth of 100% each year!). And invest and monitor. Am not asking for invest and sleep. One has to be smart investor rather than dumb investor. Monitor quarterly or half yearly. After a year If one is confident about stock keep it else get rid of it.

Friends, there is no end to logic. And many examples can be quoted to counter the long term approach. But wherever examples has given to prove it false are all presentation of data to strengthen ones statement and they are not the actual/ realtime holding of an investor. I know only one thing that the 2nd richest man in this world is Investor and not Trader !!!

Everyone can not be a trader. It requires many things and top of that your passion and skills. One can learn basics of TA, risk/reward, Money management etc but how strong is the interest to continue for lifelong !!! Its a full time profession and no one can deny this fact. If I am good at something else I would earn my living by doing that thing rather than forcing myself to become trader and learn the nitty gritty of TAs and finally give up after year or so.

For investing it requires less effort. Realtime case: I invested 2 years back and have a return of more than 60% overall. Want to mention that I hardly invested more than 15 days (5hrs for 15 days = 75 hours max.) in last 2 years to monitor my portfolio. Had I have been trader I would have invested my all 2*365 days = 730 days (10 hrs for 730 days = 7300 hours). The facts are at your end, compare it. It is like close to 100 times effort will go into trading comapre to investing. But will my trading returns will be 100 times of 60% i.e. 6000 %. I seriously doubt.

Do I need to remind that TIME is the greatest money. Utilise it according to your interest, skills and strength.

Think it over !!!

cheers,
nkpanjiyar

Ni nkp

The point well made. By citing one or two examples in favour or against is not going to sttle the issue. Trading is a fulltime job, a means of livlihood hence rate of return will be similar and not fantastic. Risk factor remains same or rather increases with the increases necessity to monitor.

Investment is totally different and not in opposition to trading. It certainly requires different approach. My position is almost similar to you and despite fall my portfolio has given more than 100% in return. Had I been churning it might have given more but it all depends on the objectives.

The calculations can be given to show either way also but the question is how many do it and what are the factors leading to it,just as traders would like to find a winning trade by TA/FA.That is what we would like to emerge from this discussion
regards
Pankaj

As they say, "Statistics is like bikini. What it reveals is suggestive but what it hides is vital."

Regards,
--Ashish

cheers,
nkpanjiyar

Very nicely said pankaj. How many do it?

I fear Traderji will expell me from forum if I speak more on Investing which is construed by many as against trading. I am in minority in this forum as far as investing is concerned. Also, waiting for blast from my friend Karthik.

As Robert Kyosaki of "Rich Dad Poor Dad" fame said - 'Its a deadly combination if you know both TA and FA and able to apply.' One such friend I know here is Amit who is expert in both.

Good discussion going on. It would be nice to have trader's view too. Guys are you there?

cheers,
nkpanjiyar

Hi nkp

Don't Worry.

The punchline of this site is
"Online Community for Indian Investors and Traders!" It is assumed that both can co-exist peacefully( also within the same person).

If at all expulsion is there we can come back with assumed names and stalk the members till sentiments improve and everybody is in the mood for intermediate or longterm tip giving.

Karthik will be busy re-launching his Doubts and giving relief to others. Have no fears.

Pankaj

Hello,

Gr8 discussion, in the weekend spirit

Where do we go from here…..?

Two things come to my mind1. We can add 9 more scripts to the original and start preparing (dreaming) to take the commercial flight to the moon for the holiday of life time in year 2026.
2.
As a outcome of our discussion in this thread I would like to have developed a tool for Fundamental Analysis.

Can we develop a tool (maybe excel based) to help identify scripts for Long Term Investment?

But before we start building such a tool we need to "identifying factors for long term investing". What would be the entry and exit rules, one would use?

Regards
Sanjay