Articles

Guru Purnima: Investment teachers to learn from

Publish Date: 27th July, 2018

“The father and mother give me this body; but the Guru gives me rebirth in the soul” – Swami Vivekanand

Everyone, at some point in time, has felt the need for a Guru. Since none of us are endowed with perfect enlightenment, a Guru is one that helps bridge this gap within us and pours onto us the rich knowledge and expertise, he has acquired over the years.

We need a Guru to mentor and train us. Be it at math, karate or investing- everyone who’s a master in their field has had a guru, including leading investors. Let’s take a look at some prominent gurus and what their protégés learned from them.

Benjamin Graham
Warren Buffet was mentored by the legendary Benjamin Graham, author of “The Intelligent Investor”. Buffet claims this book changed his life. The three main principles from it established the foundation of Buffet’s investing approach.

- Treat stock holding like you’re a part owner

This simple line changed the mindset of many in the stock market. If a company investor considers himself a part owner rather than just a shareholder, the investment would be treated very differently. Especially during downtime, when the company’s shares are low due to uncertainty. The investor would not only educate himself about the company’s future prospects but also stick to his holdings or even increase it if future prospects seem promising.

- Follow a margin of safety

Warren Buffet emphasizes following a margin of safety, which is a principle of investing, wherein an investor only purchases securities when its market price is significantly below its intrinsic value.

- ‘Mr. Market is your servant, not your master’

Benjamin, in his teaching, has personified the stock market into an easily excitable, moody character that offers to buy or sell stocks every day at an irrational price. The lesson here is to refrain from yielding into market hysteria, but rather to stay grounded by our own researched value estimates.

RK Damani
Rakesh Jhunjhunwala, renowned trader, investor, and protégé of RK Damani, has emphasized the importance of discipline in one’s trading strategies, along with the art of taking calculated risks.

- Extreme Patience

Patience is a virtue- in our daily lives and in the world of trading. ‘Patience’, Rakesh Jhunjhunwala mentions, eventually pays off as it allows you to sit back a bit and wait for the right trading set up. It may sometimes make or break your strategies in the world of trading. Human nature and eagerness are inclined towards making a "quick buck". However, should there be one thing that ensures a high probability of winning, it is having the patience to grasp all the necessary information before you trade.

Rakesh Jhunjhunwala
Vijay Kedia, an Indian investor based out of Mumbai, has been in the trading industry ever since he was 19! He was mentored by Rakesh Jhunjhunwala, often referred to as the Warren Buffet of India. Vijay Kedia has shared gems of advice he received from ‘Rocky’.

- Have cash in hand

Liquidity is the ability to meet obligations when they come due without incurring unacceptable losses.

- Anticipate trend

Anticipating market trend is an art all traders must, if not already mastered, at least be acquainted with. Trends are your friends! It is entirely on the trader to use certain market trends to his advantage and strategize his plan to get the best out of them.

- Don’t get emotionally involved with your investment

The lesson here is to have practicality over emotion. Sticking to a company just because you have an emotional attachment to it, or perhaps because it was your first investment that made you money is perhaps not the right way to go. Always stick to a business, which has the potential to rise and make your money grow.

Peter Lynch
“People who succeed in the stock market also accept periodic losses, setbacks, and unexpected occurrences. Calamitous drops do not scare them out of the game.” ― Peter Lynch

Ramdeo Aggarwal, the founder of Motilal Oswal Group, took to the lessons of Peter Lynch on successful trading. Here are some of Lynch’s favorite quotes that inspired him.

- Understanding the importance of diversification in your portfolio

Lynch’s approach to diversification was different. Just to reduce the volatility of his portfolio, he didn’t invest in ‘safe companies’. He believed that, while slow growers provided stability in a portfolio, fast growers were a source of alpha.

- “Never invest in an idea you cannot illustrate with a crayon”

Perhaps the biggest piece of advice investors can take from Lynch is investing in “what you know”. As an investor, Lynch had a penchant for investing in businesses he was intimately familiar with- this included the ins-and-outs of the business and the trends it portrayed.

Final Thoughts
The ability to learn from a Guru about his principles, imbibing all of his rich expertise and putting them to practical application for oneself is a huge asset for any investor looking to carve a niche within the trading industry.

Every Guru may have different approaches to similar situations, do not follow just about anyone blindly, but learn perpetually and through intensive research on what mantra works the best for you.

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