What are the greatest lessons you’ve learnt from investing in the Indian stock market?

Mark Twain once divided the world into two kinds of people: those who have seen the famous Indian monument, the Taj Mahal, and those who haven't. The same could be said about investors. There are two kinds of investors: those who know about the investment opportunities in India and those who don't. India may look like a small dot to someone in the U.S., but upon closer inspection, you will find the same things you would expect from any promising market.

The return from Markets is higher than other financial instruments:

Apart from real estates, the stock market do provide great returns if invested cautiously. SEBI has always tried to protect the retail investors. So, it takes in profit making companies only for public offering. Taking this into factor, every company that is listed has a chance of good growth over the years.

People mistake volatility for risk :

Since stock prices fluctuate, people get emotional and start worrying when prices get low and start celebrating when they get high. They never think of it as a business that they own. If then own a house as an investment, they never track the price daily. But, just the availability of a quote on a stock everyday makes most investors incapable of handling the fluctuations. This generally results in getting in and getting out at the precisely wrong time.

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Diversify: 

Always diversify. If you see a sector booming, even then you need to diversify. There is always what if ? For eg: the issue to H1B visas hit the Indian IT stocks negatively. If a person was bullish on IT stocks and invested all the shares in IT stocks, he must have taken a hit. Similar case can be with tea stocks. The tea stocks will be in good position few quarters down the line but there is if. What if the monsoon is so bad. There is always some probability of things going bad. Diversification shall not only be with regards to stock but also with respect to industry/sector.

Understand your investment: 

If you are going to do it yourself, do not follow what others say. You would not like to blame on others if it impacts negatively on your portfolio. Many individuals/brokerages like to gloat about profits but they would show less number of losses. Always have a fundamental analysis by yourself. Otherwise, invest in other instruments with less risk and less return.

Be updated:

The fundamental factor which made you invest in company may change. This will lead you the average out. Hence, you need to be updated about the market news. Be posted about your investments at least on weekly basis.

Investing beats trading: If the various researches are to be believed, people make more profits on investments than on intraday trading. Although the prospect of making great profits lure the large crowd into intraday, it is really few people who makes profit on intraday for continuous basis. Have a read on How to invest like warren Buffet?

When analyzing investing successes : 

People think a good outcome means a good decision. However, this cannot be more untrue. Good decisions can have bad outcomes (a high probability event on which you bet not happening) and bad decisions can have good outcomes (low probability even on which you bet that it wont happen actually happens). Thus, one cannot deny the role of luck in the markets, especially in the short run. However, as your number of years increase in the market, the role of luck reduces as probability and actual experience should align.

Be fearful when others are greedy and greedy only when others are fearful : 

This can be related with demonetization. If you look at the charts of most of the stocks, they plunged drastically after demonetization. Most of the professional investors considered it as good signal to buy the shares at attractive prices. And they gained from it just few months down the line. This means when the share price is on bull run, invest cautiously. If a bad news comes which is not fundamental, it is time to buy more shares of that company.

Stock markets are cyclical in nature but since public memory is very short: People think that current trend will continue forever (trees will grow to the sky), which is the cause of disaster in most cases. At the peaks and troughs, this feeling (of trend continuance) is at the maximum level.

How to invest like warren Buffet?

Warren Edward Buffett is an American business magnate, investor, and philanthropist. He is considered by some to be one of the most successful investors in the world, and as of March 2017 is the second Wealthiest person in the united states with a total net of $78.7 billion.

Warren Buffett’s investing principles have earned him the moniker of the “world’s greatest investor.” It is a nickname that Buffett himself chuckles at, but when you are worth $36 billion, it is hard to dispute. However, it’s not the truth.

Warren Buffett did not become a billionaire as an investor, and he does not “invest” in the manner usually depicted in popular media. That may be a bold statement to make, but once you understand his actual techniques of accumulating wealth, then you will be able to begin running your own investments in a similar way.

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Does Buffett “Buy and Hold?”

Buffett is used as an example by the media and financial advisors of why you should buy and hold. But the portrayal isn’t really accurate. When you buy and hold a stock, you buy it and hold it no matter what. It does not matter if there is good news or bad news, a Democrat or Republican president, a recession or an economic boom. You hold the stock through good times and bad.

Buffett, on the other hand, buys for specific reasons, and when those reasons are no longer present, he sells. Known as a value investor – one who buys stocks that have a low price-to-earnings ratio – Buffett looks for good prices, sound management, and a competitive advantage

Buying a stock and holding it forever is not what the Sage of Omaha does. Of the first 20 companies in which Buffett invested, the only one he still holds is Berkshire Hathaway, and that is probably only for its name. Each of the other 19 he no longer owns. Yet, we have

writers, financial advisors, business news heads, and self-proclaimed investment educators who tell you to do just that. But if the world’s richest “investor” does not do that, why should you?

How to Invest Like Warren Buffett

Though you probably won’t have an ownership interest in the companies in which you invest, you can follow Buffett’s approach to generate more profits and reduce losses. The steps are simple to understand, though they may not be easy to implement:

DETERMINE HOW MUCH YOU WANT TO PUT IN THE STOCK MARKET

Unless you come from money, you will probably be starting from scratch and that is ok. Many of us have to start small – myself, included. Begin by determining how much you want to invest. If you are going, the route of investing in mutual funds many will have some initial minimums you need in order to buy in. Numerous ones available have initial investments of as low as $250 or none at all, such as through E*TRADE. If you had rather invest in individual stocks, you need to choose an online broker. Many of these will also have minimums to get started, though some of them do not. If you do not have $1,000 to invest right now, set a goal for yourself to save up the money as you can start investing with $500 or less at a number of online brokers. When you reach your goal, your investment account will mean even more to you because you had to work harder for it.

• Make a List of Criteria to Buy a Stock. For example, you could look for stocks within a certain industry and with a specific price to earnings ratio or 6 month moving average. Just remember that stock price should not be a sole criteria. Often, a good company will dip in price due to the market or sector – which could present a good buying opportunity as long as the criteria you establish are being met (How To Complete Tax-Related Issues Before March 31, 2017)

• Invest in Industries and Companies Familiar to You. Understanding something about the industries or companies you invest in will make it easier to stay current on industry trends and company news. An investing strategy based on hype or following other people’s stock tips is a recipe for long-term failure. If you are interested in a company you do not know, but hear a lot about, research it first.
• Stay in Cash if Necessary. If no companies on your list fit your investment criteria, stay in cash. Cash is a position.
• Do your research and follow the Companies. Rather than buying on a tips , Do the research, Buffet reportedly Read 5 newspaper a day and Once you invest, follow the companies on a monthly basis. Do not look at them on a daily basis.
• Sell at the Right Time. When a company no longer matches your reasons for buying, sell the stock. If you determined it needs to be above its two-year average stock price, and it falls beneath it, then you sell. This is what most Buffett followers miss. He has rules and he diligently follows them. When a company no longer fits his criteria, he sells. Resist the urge to make excuses to stay in the investment. Sell it. Period