Stock Market investments - My experience

I would not say I am an expert in stock market investment. I have been investing only for the past 7 years. But those 7 years were good enough me to believe that equities as an asset class is the best when it comes to long term wealth creation. Only pre-requisite that is required from the individuals are patience and setting realistic expectations.

I am not saying it has always been a smooth ride for me in the past 7 years. I have burnt my fingers in the market. But all that was part of the learning process. I just follow famous saying in the stock market circles. "Its time to sell when greed prevails and its time to buy when panic sets in". My friends say this is easier said than done. Well what you need is just patience and being realistic!!!!

Objective of this blog is let everyone know how I do the investment. Well sharing that will not do harm to my portfolio, but I would be happy if more people get into this investment mode, since its just around 3-4% of india's individual savings gets into stock market. Most of the beginner's problems are on how and where to start. Unfortunately most are ill-advised. Insurance agents throw at you the costliest ULIP (Unit Linked Insurance Plan) policies, Mutual fund agents throw at you all NFOs (New Fund Offer) and stock brokers throw at you all the non-sense stocks. Remember there are over 5000 stocks are being traded in the exchanges.

Here is what one has to do. Invest only in large caps. You can choose the stocks that makes the Nifty index. Some examples are SBI, PNB, HDFC, HDFC Bank, ICICI Bank, Reliance, GAIL, ONGC, NTPC, Powergrid, Infosys, TCS, M&M, Tata Motors, Hero Motors, Maruti, BHEL, Siemens, Cipla, Sun Pharma, Ranbaxy, HUL, ITC, Tata Steel, Hindalco, ACC, Ambuja cements, Grasim and so on. Make a basket of around 15-20 stocks (ideally 2 from each sectors) and fix an entry price in each of these. Always buy in small lots. My lot is around Rs 5000. Once you buy a particular stock fix the next target price. I am being more aggressive I buy at every 5% decline. When do I sell? I sell always after holding the stock for atleast a year to avoid the short term capital gains tax. At the end of one year if the stock is appreciated by 15%, I just sell those. Once the stock price falls 5% from my sell price I buy again. Trust me stock market always gives the opportunity to enter and exit!!!

Now obvious question to many would be that they have to spend a lot of time on this. All you need is just 20-30 min in a day and microsoft excel!!!! All what I do is update the closing price of the stocks in my portfolio and the excel just gives what to buy and what to sell the next day!!!! Dont get me wrong, most often what I would have is just 1-4 stocks which falls in buy category and around the same in the sell category. Once I have the list for the next day target buys and sell, I just log in to my online trading portal and put the next days orders in offline mode!!!! Stock market investment is as simple as this.

I had said earlier that there are over 5000 stocks out there. So just cover a little into that, start a SIP (Systematic Investment Plan) in couple of proven midcap and smallcap funds, so that it adds to a little risk diversification.

Financial discipline is key to financial success. There is risk in every form of investment whether it is equities or real estate or fixed deposits or gold. I would not include insurance products over here since they are not investment products. I will write about risks, pros and cons associated with other types of investment in my next blog. Till then happy investing!!!!