Secrets to stock investing Lesson 2

Lesson 2

Recently, I read that if you had invested Rs 1 lakh in Infosys at the time of IPO, it would be worth about Rs 64 lakh (Rs 64,00,000) now. But how many people made that kind of money? None, I guess, except the employees and a lucky few who bought the shares but forgot about it. 

Answer honestly: wouldn’t you have sold the shares when it doubled or tripled or became a ten-bagger? How many of us would have had the patience to hold on?

The problem is, we watch stock prices, not businesses. If people had kept track of the business, they would have seen the company had the potential to grow at 30%-40% per annum. Then they would have never sold their shares.

I know many people who got out at 10,000 Sensex levels, thinking the markets will correct and they will re-enter at lower levels. They are now ruing their decision. The problem: they were so obsessed tracking the Sensex that they didn't see strong economic and business growth. 

Moral: Watch business growth, not rise in stock prices.