'Warren Buffett is a Genius'. It may sound cliche' to those who know about him, but for those who are ignorant, let me tell you that he is a man who has made a wealth of over $40bn by investing in financial markets and most of it through stock market.
This really must have raised a few eyebrows considering the fact that equities are considered to be the riskiest asset class and the only stories we get to hear from the majority of the market participants is of angst, anger, despair, frustation and sometimes even suicide.
It is said that, 'Common sense is the most common thing which is uncommon in most common people' and this is clearly evident in the people' and this clearly evident in stock market. People leave their senses at home or lock their brains in a cupboard when they sit in front of the trading screen. What they do is ' imitation', imitating their neighbours and imitating their relatives. They become a part of what is called the 'Herd Mentality' and this becomes the biggest cause of their nemesis.
There are 3 golden rules which if remembered and followed religiously can guarantee you unmatched success:
1. Dont consider stock market to be an ATM machine.
2. Follow the process of 'Bargain Hunting'.
When we go to a vegetable market, we search at number of shops as to the quality of vegetables, the price at which they are being offered and whether the quality justifies the price we are paying. Thats when we are buying vegetables of just few rupees.
But do we follow the same methodology, when we are spending thousands or lakhs. Most of the time we dont.
3. Know the company in which one is putting his money very well in terms of its present business model, its management and its future growth prospects. The future growth prospects should be defined in terms of the time horizon one is looking at to invest.
So do not follow the market blindly. Learn what is happening, analyse it amd make your strategy. Remember that there are no Generic Strategies for making money in the stock market. The famous proverb ' You are the creator of your destiny' holds very aptly for investing.
Happy Investing.
