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What smart investors are doing

What smart investors are doing
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First Published: Mon, Apr 09 2007. 01 47 AM IST
Updated: Mon, Apr 09 2007. 01 47 AM IST
Ignore the noise around
Vishal Sarda, 28
Chartered accountant
Call it luck, call it prescience, but Vishal Sarda saw the coming storm and sold 70% of the stocks in his portfolio before Budget 2007. Now, he has quietly been accumulating stocks of infrastructure and real-estate companies. The prices of some of the stocks he has bought—Nirlon Limited, Walchandnagar Industries, and Patel Engineering—have also dipped, but he isn’t worried. According to him, this is the time to accumulate stocks. “Your own judgement, and not what everyone around you is saying, should guide you to putting money in stocks,” says Sarda, who started dabbling in the stock market when he was in college.
Back then, he would invest his pocket money in stocks. And once he started working, he decided to invest 30-40% of his salary in stocks. “At that time, whatever money I made was because of luck,” he recalls. But as he started reading in the papers about the companies whose stocks he had bought, he realized how news affects stock prices. And he picked up a healthy disregard for experts. “Many people get stock tips from the business channels, but I have realised one thing—listen to all the expert advice but don’t react immediately. When the Sensex is going up, you will find people talking about a long-term bull phase. The moment it starts going down, you will find a bunch of people with bearish opinion,” he says.
Sarda has, in the process, arrived at some thumb rules of investing: when everyone is bullish on a particular stock or a sector, it’s time to exit; and an investor’s time horizon for staying invested should depend on how long he or she can afford to part with the money
Move away from equities now
V.K. Grover, 65
Retired fertilizer executive
At his age, going by what investment advisors recommend, V.K. Grover shouldn’t be investing in stocks. He does. Grover has 20 stocks in his constantly-churning portfolio (it is down by 5-6% in value now). And the value of his real-estate holdings is down 40%. Neither of these developments bothers Grover. He buys when stocks fall sharply, and sells when they rise. He doesn’t overexpose himself to a single stock or one sector. This simple strategy has helped him gain more than he loses.
Grover used to be a passive investor in his time at a government-owned fertilizer company, but he has turned into an active investor since retirement. He believes it will be difficult to earn a return of 25-30% a year on the stock market, like investors did in the past few years. “The chances of making big returns are low and one will need to take higher risks as the market has become volatile,” he says. Grover says he isn’t going to make fresh investment in stocks. “I would rather take advantage of the high interest rates being offered by banks, which promise at least 8-9% return,” he says. In keeping with this strategy, Grover has already shifted 10-15% of his money from stock markets to fixe
It pays to
Ketan Pravin Dalal, 43
Officer with a chemical company
Ketan Pravin Dalal has a simple way of tackling volatility in the markets: He doesn’t look at the performance of stocks in his portfolio. Thus, although he knows the value of his portfolio is down 20% since the market started falling in February, he doesn’t know how individual stocks in it have performed. The perennially long-term investor believes that any loss is notional until one sells. And even though he has lost a bit on construction stocks, he is staying put in the market.
Dalal can afford to ignore short-term blips in the stock market. He bought 100 Housing Development Finance Corporation Limited shares for Rs2,000 more than a decade ago. Just like he did stocks of Grasim and ITC 15 years ago. He still holds all three scrips. Although he is a long-term investor, he keeps aside 20-25% for speculative short-term buys.
In 2002, after he made losses on stocks of Tata Finance and HFCL, Dalal realised the importance of investing in mutual funds. “It was like a nightmare, because I had an obligation of paying the EMI on my housing loan,” recalls Ketan. But even with funds, he redeems them as soon as he earns a return of 25-30%. “At the end of the day, stock investing is like a lottery. Rather than risking savings directly in stocks, it makes sense to put aside money in mutual funds also,” he says.
Not worried at all
Vishal Thakkar, 24
Executive with a multinational company
Vishal Thakkar is all of three months old as an investor in the stock market. But he didn’t find the latest correction scary. Thakkar has been investing 40-45% of his salary in stocks since January. Thakkar’s portfolio of 10 blue chips would have looked even worse than it does but for his decision to invest in the initial public offer of software firm Mindtree Consulting. The stock has gained 86% since its listing on 7 March. So, when the markets fell, Thakkar actually decided to up his exposure. His investing strategy revolves around blue chips, and he avoids mid-cap (medium market capitalization) and small-cap stocks. And he relies heavily on stock tips from business channels and investing websites.
“I keep a target return in mind. For example, if the stock goes up by 12-15% within a month of my buying it, I quickly book profits,” says Thakkar.
Invest, don’t trade
Bakkiya Rathi, 26
For someone who has been an active investor in the stock market for three years and has stocks in her portfolio that have lost considerable ground over the past few months, such as Bombay Dyeing, Parsvnath Developers, and Hindustan Zinc, Bakkiya Rathi isn’t losing any sleep. Rathi acquired these stocks six months back, has seen them drop 50%, and witnessed a consequent drop in the value of her portfolio from Rs3 lakh to Rs2 lakh. She regrets that her broker didn’t have the sense to warn her about the coming fall, but she isn’t panicking. “I am not doing anything with my portfolio now,” she says. “I would rather wait for the markets to fall more so that I can buy them cheap.”
Rathi entered the markets by chance. Her father held some shares in physical form that needed to be dematerialized (or dematted in stock market lingo—Indian stock market rules mandate that stocks be held only in electronic form). The process of converting these shares somehow piqued Rathi’s interest in the market.
Her first few weeks were turbulent. She was trading in blue chips such as Tata Steel and Reliance Industries, holding them for a week and then selling. It didn’t take her long to realise she wasn’t cut out for trading. “I couldn’t handle the fluctuation,” she says. “So, I started putting a target price at which I would exit the stock.”
She also expanded her portfolio to futures, buying some index futures and stock futures of Bharti Airtel and Satyam Computer Services. Then, the market fell last May, as did the prices of the futures she had bought. “With futures, one doesn’t need to pay up the full price of the stock, but I still think one should only buy futures if you have three times more money, so that you are capable of bearing the losses,” says Rathi. Three years on, and several lessons learnt, Rathi thinks she has arrived at the perfect investing strategy. “You shouldn’t trade in stocks but invest in them. And choose A group stocks of the Bombay Stock Exchange,” she adds.
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First Published: Mon, Apr 09 2007. 01 47 AM IST
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