If Share investing is so simple ?

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Rishi Kashyap
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If Share investing is so simple ?


Below transcript between me and my close friend, lets call him, SR, addresses 1 very good question -
If Share investing is so simple, why is everyone not rich ?

SR : I can do better than the share market experts coming on TV if I know how to values stocks.
ME : YES and you can also improve your stock market probability of earning by finding undervalued stocks with enough margin of safety !
SR : It cannot be THIS SIMPLE !
ME : YES it is !
SR : Then why is everyone not rich ?

I briefly touched this subject in Stock Trading vs Stock Investing, however in this chapter of our share market tutorial I will try to explain, in detail, why many do not make enough money in share market ?

  1. People are in hurry
    Nobody wants to get rich slowlyMr Warren Buffett
    If given 2 options to invest
    1. Invest in Great shares and hold it for 10 years to get 10X returns OR
    2. Invest in X Shares for 6 months and get 3X returns.
    Trust me, most people will take 2nd option !

    People want to get rich quickly, nobody, I repeat, nobody wants to get rich slowly.

  2. People want to SPEND
    Doing well with money has a little to do with how smart you are and a lot to do with how you behave. Morgan Housel
    I have tried to explain this in You are rich.

    Everyone wants to get rich soon, so that they can spend and enjoy this money in this lifetime.
    Celebrities celebrate their extravaganza.
    People believe that the purpose of money is comfort or luxury.
    Society made you believe that rich keep spending !
    Everybody wants you to spend, capitalism works that way.
    People spend to feel happy.
    More they spend, less they save, more they move away from getting rich !

    Many still do not understand that if money is not for spending then what is its use ? We have explained this in Good habits from successful investors.

  3. Short term vision
    Someone’s sitting in the shade today because someone planted a tree a long time agoMr Warren Buffett
    Because everyone want to start spending sooner, we all have short term vision.
    When I started Stock Investment, I had a short term goal of buying a car with the Share market profit. I achieved that in 2013 and took my 1st car selling my performing stocks.
    Of the many mistakes I have done in stock market, this was the costliest ! If I would have held to those stocks I would have been Financially Independent by today. Today I have a much longer term goals (Plz read Kashyap Why are you investing).
    I still do not blame myself , I really did not understand CAGR returns then.
  4. People don't understand Power of compounding
    Compound interest is the 8th wonder of the world. He who understands it, earns it; he who doesn't, pays it
    People know the Compound Interest Formula.
    People know rule of 72.
    People do not understand the power of compounding.
    Getting rich is simple if you understand the power of compounding !
    The mantra is to start early and stay invested with great stocks for long !
    Try our CAGR Calculator

  5. Stock Investing is not gambling / lottery ticket !
    Many invest in stock market because they believe that if only 1 stock trade clicks they will be super rich ! This rarely happens !
    If stock investing is so simple Whenever I talk about share market I have found people mixing stock trading with stock investing.
    Stock trading is about quick money which in the long run rarely happens.
    No wonder only 1% of stock traders actually beat Fixed or Term deposit in 3 years time frame.
    I do not recommend stock trading, I also avoid stop loss as I believe Stock traders follow Stock Investors.

    If you google for Stock market Course or Share market tutorial, chances are 8 out of top 10 Google pages will show websites which teach Stock trading.
    When Share market beginners start with Stock Trading, they sooner or later, loose money !

  6. People leave Share market after loosing
    You get recessions, you have stock market declines. If you don't understand that's going to happen, then you're not ready, you won't do well in the markets.Peter Lynch
    Let us assume you invested 100 INR in 2 companies Company A & Company B.
    Company A price went UP 10% and values at 110
    Company B price went DOWN 10% and values at 90.
    Even though the amount is the same 10 INR, the pain of loosing 10 INR is more than the happiness of making 10 INR.
    This is human nature.
    People fail to understand that volatility or share price rise and fall is part of the investment.
    They do not understand what are shares in a company and they do not understand themselves.

  7. People do not know themselves or risk of Investing
    The first principle is that you must not fool yourself, and you are the easiest person to fool.Richard Feynman
    Most enter the Share market because everyone is talking about it !
    People do not know how much money they need to retire !
    People do not know why are they investing !
    People do not know how to value stocks !
    People do not know how to find undervalued stocks !
    People do not know how will they behave when share price rises and falls.
    In B-Schools, students are taught this under "Behavioral finance", if only people knew how they would behave themselves and control that !

    Risk in share market is not the price going down, risk is your company not performing.

    Finding under valued stocks and knowing how to value stocks is the basic in share market investment. Many believe that value investing is dead, however, it never was and it never will be.

    While Growth investing is real, buying shares at any price, is for sure, a formula of failure. People buy shares at any price because they loose patience !

  8. People loose patience
    No matter how great the talent or efforts, some things just take time. You can’t produce a baby in one month by getting nine women pregnant.Mr Warren Buffett
    Some stocks take time, trust me ! I have held to some stocks for more than 3 years till they started to perform.
    Most people loose patience when share price starts to rise, they buy high !
    When same share price starts to go down, to come to its correct valuation, they SELL because of fear !

    There are many shares which my friends told me about.
    The reason I performed better in these shares, compared to my friends, is because I wait patiently for months and years for correct margin of safety and easily said NO to those shares which were not in my Circle of competency.
    My friends bought it, because of FOMO !

  9. People do not want to learn
    The most important investment you can make is in yourself.Mr Warren Buffett
    People do not invest in themselves, they don't read books.
    Many don't want to learn.
    Everyone believes in quick money though !
    Most friends come to me to know best stocks to buy today, not how to value stocks or best investment books to read !

  10. People love complications over simplicity
    There seems to be some perverse human characteristic that likes to make easy things difficult. Warren Buffett
    It actually explains itself, we all enjoy boasting our intellect.
    Simple things are never considered intellectual !

    Tell some one just buy great share and hold for 10 years, it is boring !
    Tell them buy x-share at 100.2 and
    target price of 124.78 with stop loss at 98.3 !
    It looks so cool !
    It looks intelligent and informed !
    All covered up !

    People rarely trust simplicity, while learning is important, using too many Financial Ratios will rarely work.
    Basic financial ratios with patience is all it is required to be successful here !
    While most of my friends learned about Technical analysis, because it is difficult, I stuck with simple Fundamental Analysis (Plz read Fundamental analysis vs Technical Analysis).

    Even when using Stock filters with many financial ratios and found one good share, when time comes, people never bet big !

  11. People never bet big
    To make money in stocks, you must have the vision to see them, the courage to buy them and the patience to hold them.Thomas Phelps
    Most good investment comes in a bear market (Plz read bull market vs bear market).
    When there is fear in market everyone is selling ! People loose courage to go against the herd then !
    Most successful investor wait for years for good Investment opportunity, and once they have found it they BET BIG !

    The reason they are able to BET BIG is because they save and keep CASH reserve.

  12. People cannot handle CASH in hand bank
    I have explained this in detail at Best stocks to buy today, a little refresher course never hurt anyone though !

    So here is the basic idea.
    Investment opportunities do not come everyday.
    If you make your cash invested in illiquid investment like property, you will keep missing great opportunities. (Plz read Real estate vs Stocks)

  13. People are not serious about stock investment
    Most friends and relatives I found are invested for pastime !
    They invest small amounts and keep playing with numbers, till they loose interest or money or both !
    They rarely know why they are investing ?

    I too was doing this for few years through Value Investing, only to realize later that, real money in Stock Investment is not in Value Investing but growth Investing.

Let us move to our next section of wealth creation GROWTH INVESTING !


Rishi Kashyap | | EDIT



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