This post is obviously not for someone who has decided to struggle for half or all their life. If you are determined to sit in a cubicle or stand out in the field, to have no time for your loved ones or to party and play, then you should safely skip this post. If you dare to take a different path of becoming rich in 10 years, please read on.
Making money is easy once you have decided that that is what you want. First, your desire has to be so powerful that everyone around you starts to see it. Second, be thorough and inculcate the habit of reading. Third, be in the right company, this has helped me immensely over the years. Finally, be quick and make decisions. In this post, I will give you a formula that has made me 8 times return in the last 10 years.
INGREDIENTS & PROCEDURE
[I] Rs. 10,00,000 – You need at least Rs. 10,00,000 to start with. Earn this, borrow, or steal but you need this much. Also this is high risk capital, so if you borrow and lose it you should not blame me or this formula, instead you should know how you will deal with such a situation. Realize that you’ll never get rich from work, so save $10,000 to speculate and risk it. Go for the gold!
[II] Timing – I may be the only person left who still advises that timing the market is as important as spending time in the market. Think about it – the market has rallied 45% in the last 3 months, and yet those who purchased 6 months back are in 10% loss. The success in stocks is mostly determined not by how long you stay invested in stocks, but by how patiently you waited with your money before committing it to what you buy. It is hard to see the markets move up everyday and sit out. Practice yoga! A lot of my investments at this time are still in fixed income funds. Choose any good, safe Government securities fund and keep zeroing in on stocks that you would like to buy. My favorite fund in this category where a lot of money has been parked is the Nippon India Nivesh Lakshya Fund, a fund I openly endorse. For the more inquisitive, here’s a presentation file for this.
[III] Buy equal amounts of five speculative stocks that meet the requirements of Section IV below. If the job is done right, results like the following might be anticipated after one year.
Invest Up or Down % Value at end of year
2,00,000 -15 1,70,000
2,00,000 -40 1,20,000
2,00,000 +10 2,20,000
2,00,000 +65 3,30,000
2,00,000 +300 6,00,000
One year increase of 44%, will get this portfolio up from 10 Lakhs to 3.83 crore in 10 years. Do not doubt this one bit, it is totally possible and has happened millions of times for as many people in the past. In fact, anytime you begin to doubt this – just stop reading, doing so will save you a lot of money.
Before I go on, I will again emphasize this – no matter how good your research, if you do not have a lazor like focus on point II (timing), nothing else will work.
[IV] Small is Beautiful: Keep eyes and ears open. Look for great ideas that meet these requirements:
(a) A small, young company, even a start-up, revenue under 500,00,00,000 (500 Cr)
(b) A pure play – the product you like should be all, or almost all, it makes.
(c) With a solid position in an important niche market (My favorites for the future are pharmaceuticals, defence and security, technology and agriculture)
(d) With high barriers to entry. A strong patented position will be best.
(e) An exciting story or product.
(f) In a field that is likely to grow for many years.
(g) Not priced at too high a multiple to anticipated earnings.
(h) With enough cash to bring the product to market.
[V] Experience it: Try the product yourself or call the company. I am shocked at how many investors in India are buying stocks without even a basic understanding of the goods/ services offered by the company. You will be amazed at how passionate small companies are about talking to even the smallest of investors, you just have to find the right person to talk to. I am always available in case you wish to discuss an idea or a stock. I will try my best to ensure that the companies too are receptive. If the product is too technical or complex, try talking to an independent expert. I don’t personally understand pharma, but I love this space so I found people who understand pharma.
[VI] Avoid: Airlines, hotels, retailers, fashion companies, utilities, metals, telecoms, media and companies with market cap over 5000 Crores. My first ever stock purchase was – Indian Hotels, I made good money on it before realizing that airlines should be looked at only for travel, and hotels only for pleasure.
[VII] Leverage – This formula will only work if you do not need the raw material with which you are working. The amount in point I above should be such that you never need it back, and you pay interest on it. Never use margin and never sell short!
[IX] Cheat the ones who don’t love you: Take your stock’s pulse regularly. Learn its mood swing and vital signs. Never fall in love with a falling stock. Don’t become emotionally involved with a poor pick. Don’t let your ego prevent you from dumping a loser. If it drops 15%, automatically sell it so you can live to invest another day. My list in point III above will not always be the same. I am not buying 5 stocks today and leaving them for 10 years. I will sell the looser, buy a new one and fill up its bucket with my profits so it becomes 2,00,000 again. Don’t fight your ego and surely do not fight the ego of those on Twitter, Facebook and all sorts of outlets. It is not their 10,00,000, it is yours, make or lose!
Equally remember this: If you wouldn’t buy it at its new price, it may be time to sell it. What goes way up can also quickly crash way down
[X] Be Rich:
But be patient.
Stick to these principles.
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