10 learnings for Retail Investors from Ukraine - Russia issue
Stock Markets over the decades has proven to be far more lucrative than most of the other asset classes, If Retail investor treats it as an ASSET.
The issue begins when the TRADERS lose, INVESTOR gets scared. While it should be other way around, When the TRADER is losing, INVESTOR should be INVESTING.
1. INVEST in fundamental
When choosing a stock to buy, whether short term or long term, Do not invest in stocks if you are not aware of the business.
Just because your friend recommended a stock, Do not buy ! Buy, Cause you like the business of the company.
“The stocks based on rumours and fake news are likely to fall higher than market fall.”
2. CALCULATE the book value of the Stock
If the company is ever liquidated, All assets are sold and the share holders to get the share proportionately, Market Cap will not work. What will work is the book value of the share of the company.
It means that if all assets are sold, How much each share holder is likely to get? This is the real value of the stock.
“Invest in the stock which has relatively higher Book Value”
(NOTE :Other factors too are to be considered)
3. Stock Market ANTICIPATES
Any issue when surfaced whether war or crisis or political instability, Stock market anticipates and discounts the news before the event.
If Russia declares missile attack on Ukraine, Market may fall higher than the actual attack day. It may surprise you on the day of attack by going up.
Political elections can cause big volatility, where as nothing has changed in the company, Demand stays same, Supply stays same, Raw material stays same, the economic policy will also not change tomorrow. Still it impacts the stock market.
“Patience is the KEY and INVESTING in fundamental makes all the difference”
4. Stock Market SURVIVES
As long as the business is alive, The stock market will survive. Exception is that if the 75% of world population is wiped away by WAR or PANDEMIC.
Stock market in itself is no business, It helps you in buying and selling a business. Its a mediator
Till the time human will keep wearing clothes, Garment industry will stay on stock market, Till the time we all have our morning tea to evening super, Food industry is going to stay alive. Yes, the money may move from one company to another.
Stock Market has survived Depressions, Wars, Crisis, Pandemic and a lot more.
5. Tension is OPPORTUNITY
Retail Investors are ones who have money to invest and are wanting to invest in business which will do well. Not, in the businesses which can not survive cycles or seasons.
These Tensions are temporary, They will pass !
As some great Investor of all time said, If the stress is temporary INVEST your money, And if world is going to end, What would you with the MONEY you have. So INVEST and take a gamble. You have a high probability of making it big.
6. You have a BUYER
The biggest and unique feature of stock market is, You always have a buyer !
If you are selling at a loss and someone is buying at the price, Instead of thinking like a loser, Think like the buyer of that stock is thinking . Why is he buying at the price you are selling.
He surely is positive for the stock, GOOD NEWS you have affirmation to your HOPE.
“You should only be worried when there is no BUYER in stock market”
7. Stock Market is INDIFFERENT
Stock Market is emotionless and investors are emotional. It plays with the investors emotions.
Its not easy to see your stock prices going down by 10-20-30% and not take action. Even buying more stock is not easy. Your emotions will hold you from doing so.
Stock Market is indifferent to your emotions and also to the events happening across. The real value lies in the business model you are investing.
Nestle share price on Indian stock market went up during Pandemic as people started stocking food and people were having more Maggi than ever before. Sounds logical !
There are global dependencies we have on businesses, Gold prices, Oil Prices etc do impact the stock prices temporarily. In long run the prices will be adjusted for products in demand. Ensuring the profits moving northwards and in turn stock prices.
“Learn to remove emotions and sit in front of the terminal for investing.”
8. Stock Market is a TWO EDGED SWORD
Some ones pain is some ones gain in stock market. You have to decided which side you wish to be.
It can make you, It can break you ! But isn’t the same with any business.
If you want ZERO loss game, Join a Job, Get paid, work for 8 to 10 hours, get 3% hike every year. And if really lucky, You will get ESOPs !
When you are buying a stock, Some one is thinking this is the peak and it will go down from here, Similarly, When you are selling the stock, you think its peak but some one sees upside from here as well.
“Stock market is OPPORTUNITY and RISK”
9. Stocks are on SALE
Situations like Russia panics the investor and most of them want to go liquid. They sell the stocks which they bought earlier at much lesser price.
Seeing them some retail investors also start selling their stocks and make losses.
When do you buy your winter clothes, If rational person, You will buy during SALES and DISCOUNTS and not beginning of the winters.
If you were wanting to buy a fundamental company for long but due to high pricing you could not, Here is a DISCOUNT SALE, BUY !
10. How long is LONG TERM
Warren Buffet is 91, He is still INVESTING for LONG TERM !
Now, You please determine your long term. I always maintain, Plan a future event and invest for the event.
Start investing for your kids education, Fix a date to withdraw the investment and spend on the education.
Start investing for buying a house, Fix a date for buying the house and withdraw the investment and buy a house.
“Decide your LONG TERM and INVEST.”
The situations like RUSSIA - UKRAINE are not new to Stock markets, Assassination of Two Prime Ministers did not impact stock market in LONG TERM.
COLLATION Govt fall before the tenure did not impact the stock market in LONG TERM.
Large protests against the govt. did not impact stock markets in LONG TERM.
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