When I started investing in the stock market, I learnt about fundamental analysis, read great books like The Intelligent Investor, etc.
Basically, I did everything which a new investor should ideally do. I thought now I can’t make a loss. But I was wrong.
I knew how to start a fundamental analysis but my biggest problem was that there are 6000+ companies in India.
My question was…
How to shortlist the right companies for the fundamental analysis?
Then I found a shortcut. I started exploring the top investors in India. I thought when these top investors are investing their money, it should be the best stock. Hence, why not just buy those stocks and save all my time.
The strategy sounded perfect!
I did some research and got some big names in Indian stock market including Rakesh Jhunjunwala, Dolly Khanna, Porinju Veliyath.
I started reading their interviews and research on stocks where they have invested.
What I didn’t realize was I was already late in buying those stocks. These people are big influencers. As soon as they buy the stock, the stock price increases as a lot of people start buying those stocks.
As soon as they exit, the price goes down and small investors who buy the stock at a higher price, thinking that stock will further rise, makes a loss.
For example, I heard about LT Food as one of the favourites of Porinju and Dolly. I started tracking it. It was at the level of 60 when I started tracking. It soon reached 100. That’s when I purchased it. But what happened?
It is currently trading at 47. It might be an attractive valuation but my current investment is at 50% loss in Daawat.
Lesson Learnt: These stocks might be great but what is important is the entry and exit point. Also, do not blindly follow these big market players.
I always wonder why they suggest the stocks in interviews, etc. Later I realized that once they buy the stock, they would want retail investors to buy them and that trigger the price of the stock. If they think the stock has become overvalued, they can exit and with that, the stock sinks. They made the profit and we made the loss.
Well played.
Similarly, I started following G**** K********di stock analysis on Quora and started buying based on his analysis and currently at loss. He never told me to buy them but his analysis was really good which prompted me to buy them. But still, the stocks are at loss.
Bottom Line: I am not saying these stocks are good or bad. All I am saying is not to blindly follow the stock advice even if it comes from the best of the investor.
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