Introduction
Problem: Many retail investors want to be like legendary investors Warren Buffett and Ramdeo Agrawal, but they don’t find the stock market as predictable as it appears. Frequent market fluctuations and meltdowns have even seasoned investors worrying and losing money through bad decisions.
Platform: In this video, we analyze the experience of Mr. Ramdeo Agrawal, one of India’s popular investors whose portfoio saw sharp declines due to landmark market collapses like the 1992-93 crash, the dotcom bubble of 2000, and the 2008 financial meltdown. And one great lesson that flows from this is all investors must be prepared to withstand market turbulence so as to achieve long-term returns.
Answer: If you are an investor, want to not just survive but grow within the stock market, you must learn those active investment strategies that really work. Here, in the course of this article, we are going to discuss eight easy yet powerful strategies employed by great investors so that you can reap better returns and learn about the management rollercoaster ride of the markets.
1. Accept Market Volatility
Stock Returns Not Moving in a Linear Fashion
Returns are not coming straight. Markets have given lots of shocks wherein there is a very big fall and then the markets recover and start growing over time. As a case in point, Nifty 50 has provided years of returns in the negative and also huge gains. You should value the lesson that the nature of stock prices is quite volatile: they do not move in a straight line, so there should be no deviation from the investment plans when shocks arose at any point in time.
Takeaway: Prepare and expect some zigzags and short-term declines without losing track of the long-term perspective on investment plans.
- Stay Invested to Avail Asymmetric Gains
Why Stay Invested
In fact, research has demonstrated that an investor who leaves the market for the best ten days loses half of what he made. Again, such days are few and completely unpredictable, though it is on those few occasions that the market makes most of its money. Legendary investors are fully invested for those occasional, glorious days of profit. Imagine you plowed $10,000 into the S&P 500 and left it there. But if he missed the right days, he’d be down sharply.
BOTTOMLINE: Don’t time the market; stay put in the equity position and let the market rise for you.
3. Do not chase multibagger stocks
The Myth of Multibaggers
Most multibagger stocks are a thing of expectations. Of course, it is very hard to predict such things. Still, investors like Mr. Jhunjhunwala who invested in Titan did not predict at the beginning that it would become a multibagger stock. Instead, he continuously monitored and adjusted over the years in terms of performance as well as firm fundamental analysis.
Takeaway: Instead of searching for some sort of multibaggers out there, look for assessing and monitoring businesses.
- Monitor Your Investments
Why You Should Periodically Monitor
Investment is no “buy and forget” strategy. For instance, Reliance Industries still reflects zero returns for nearly ten years before the profits were harvested. Continual tracking of your investment will enable you to pass time-bound judgments based on performance or changes in market situations rather than becoming lazy.
Key Takeaway: Review your investment as you update the change in the market conditions and your objectives.
5. Know Mistakes and Learn from Them
Adaptation is Paramount
Although most investors are very good, even Warren Buffett did confess and learn from his mistakes. And during the 2020 market boom, he admitted that some opportunities went unfulfilled due to excess cash. Intelligent investors know errors are part of the way for learning and adapt as need be.
Takeaway: Mistake-acceptance while investing, learn from them, and change your approach accordingly.
- Number of income flows to create and manage
Diversified Sources of Income
The best investors are accompanied with diversified sources of income, which help them take care of their investment business. Radhakishan Damani as well as Warren Buffett have businesses or huge portfolios, which offer with them capital for investments. The diversified sources of income shall help the investor in managing the market risks properly.
Key Takeaway: Generate multiple streams of income as another means to diversify and expand your investment program.
- Manage and Restrict Risk
Diversification and Hedging Techniques
Bavisfile teaches intelligent players how to manage the market with their risk by controlling it. Of course they can hedge investments using futures and options. There is also a far less technical hedge: it is imperative to have a mix of aggressive and defensive stocks in your portfolio, so that you never risk either too high returns or low-value returns.
Take Away: Invest in diversification and hedging to cover your investments.
8. Invest in What You Know
Invest in Known Assets
You will be much better placed to make informed decisions with assets you understand. Some investments-who certainly would not, for example, take a punt in the stock of a small extremely volatile tech start up-are far from a stable known name. Getting to know the nature of your assets will make it easier to take changes in the market in stride.
Key Takeaway: Invest in assets you know and believe you understand how they will behave under different market conditions.
Always expect market volatility and maintain investment, never wasting time searching for those hypothetical multibaggers. Investment and learning from mistakes is the key. Proper diversification in sources of income, risk management, and an investment in something you are so familiar with is a necessity. In this way, all the complexity of the stock market will make sense to you, and you will get good returns from your investment.
This concludes our article. Be sure to like and subscribe to our channel for further insights on strategies applied to successful investing.