Investing - My Learnings...

I had always been interested in investing in the stock market but neither had the means nor the guts to invest. Then I started working and the first thing I did after I received my first pay cheque was to open a trading/demat account. The stock markets have been kind to me and I have been able to create some wealth with higher than expected returns, especially considering the rate of return at banks. I am sure there are a lot of you like me who want to invest in the stock markets but are not sure how to keep your investment safe. I have tried to summarize my learnings from 11 years of investing. Some of this might work for you and some might not. Take what works for and leave the rest behind. Even better, share your experiences if you have been investing as well. So, let’s get started. Shall we?

My first learning was to distinguish between ‘Trading’ and ‘Investing’. Trading involves buying and selling shares frequently (holding the shares for a very few days, usually just about a week) while Investing is for long term with a time frame of at least a year. Trading involves bigger risk while investing requires a lot of hard work. I had to decide what I wanted to be - a trader or an investor? I chose the latter and focused my entire energy on investing.

Once I was clear on wanting to invest rather than trade, the next thing I decided on was the approach I was going to take. Investing in the stock markets is not a joke. So, I chose to do my research and analysis individually, before deciding on a stock to invest in. I made it very clear to myself that I was not going to ‘Follow the herd’. This was my second learning. I didn’t want to invest in a particular stock just because everybody else was investing in it. It helped me immensely as I steered clear of stocks that I was not comfortable with.

The third thing I learnt was to follow a very disciplined approach to investments. I spend hours doing research on companies that I want to invest in - looking for news, reviewing the financials of a  company and deciding on what price to buy it. Also, this taught me to be patient, especially when, at times, the stocks I had invested in weren’t doing well. I was confident of my research and bid my time before making a decision.

And this is my next learning - I never try to ‘time the market’ which in other words means that I never tried to chase the top or bottom price of a stock. I set my personal targets for returns and sell when I achieve those targets. This also helps me set the ‘right expectations’ on returns while ensuring that I don’t get greedy. The biggest challenge with this is to not feel the guilt when tock shoots through the roof after one has sold it. It has happened to me and I have (surprisingly) been quite content.

Another thing I learnt was not to put ‘all my eggs in one basket’ and hence, I diversified my portfolio. The diversification is possible only with more research but it helps me minimize my losses and risks. If one industry isn’t doing very well, it may be compensated by another that is doing extremely well. This approach also helps me invest in many stocks rather than just a few.

Probably the most important lesson is that I invest only my ‘spare or surplus’ money. My objective is wealth creation and I want to do it with the extra money I have rather than put all the money I have in the markets. I want my investment journey to be a learning one for me, but  if I invest all that I have and fail at some point,, I would be loathe to try again.

Finally, I try to monitor my portfolio regularly, at least once a day. There are definitely days when I’m unable to  lookat it but then that happens quite rarely. This keeps me on my toes and reminds me that I should keep an eye for any kind of news that might affect my portfolio.

It’s been over 11 years now since I made my first investment in 2004 and it’s been an eventful journey thus far. There have been a lot of ups and downs, trials and tribulations, wins and losses. But my zest to invest has just grown exponentially in this time. I learn every day and I hope to do so for the rest of my life. Have you invested? What have you learnt? Do leave a comment to share!

Who is the GOAT??

A friend of mine and I were having a discussion around who is the GOAT wicketkeeper-batsman in test cricket. We, however, considered only two batsmen for this. Kumara Sangakkara from Sri Lanka and Adam Gilchrist from Australia. We couldn’t agree on who was better of the two. I was leaning towards Gilly while my friend thought it was Sanga who was better of the two. I decided to take it a step forward and look at the various aspects that can determine who is better. Let us start off with their overall statistics -

Details	Mat	Inns	NO	Runs	HS	Ave	BF	SR	100	50	4s	6s	Ct	St
Gilchrist	96	137	20	5570	204*	47.60	6796	81.95	17	26	677	100	379	37
Sangakkara	132	229	17	12305	319	58.04	22695	54.21	38	52	1479	51	182	20

If one were to consider just the overall statistics, there is no question of who the superior player is. However, what also needs to be considered is that Sangakkara has played more than 60% of his matches as a specialist batsman for Sri Lanka rather than as a Wicketkeeper-batsman. Taking that into consideration, we should look at their records as specialist wicketkeepers -

Details	Mat	Inns	NO	Runs	HS	Ave	BF	SR	100	50	4s	6s	Ct	St
Gilchrist	96	137	20	5570	204*	47.60	6796	81.95	17	26	677	100	379	37
Sangakkara	48	81	4	3117	230	40.48	5988	52.05	7	11	419	9	124	20

Now, this tells us a completely different tale, doesn’t it? Gilly has played all his matches as a wicketkeeper while Sanga has played only 1/3^rd of his matches as a wicket-keeper. Gilchrist has a better average (7 runs per innings) and far better strike rate (82 vs 52). Even as a wicketkeeper, Gilchrist has more dismissals per match (4.33 per match) over Sangakkara (3 per match). Even if you look at the absolute number of runs scored by each, and extrapolate Sanga’s to match the number of matches played by Gilli, Sanga would probably have scored more than what Gilli has. But that can be drilled down to the position in which they play. Sanga has primarily batted at number 3 while Gilli at number 7 and this has ensured that Sanga has batted in almost both innings of a test match while Gilli has managed only 1.4 innings per match.

Another aspect that Gilchrist was outstanding at was his ability to build his innings around the tail-enders. 73% of Gilchrist’s innings (100/137) has been at the number 7 position which meant he had to play a lot more with the tail-enders while Sanga played 90% of his innings at number 3 with the top or middle order.

Another disadvantage that Gilli had against Sanga was that he made a late debut (at the age of 28 against 23 for Sanga) and that took off a few good years from his career. Who knows how much better his stats would have looked had he made an early debut! Sanga, without doubt, is a far better batsman, but, if I were a selector of a World XI and wanted a wicket-keeper batsman, I would go with Adam Gilchrist. For me, he is definitely a far better wicketkeeper-batsman! What do you think?