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Rakesh Jhunjhunwala: The Big Bull’s philosophy to success

Rakesh Jhunjhunwala, the ‘Warren Buffet’ of India; also known as ‘The Big Bull’ achieved a peak of 10 thousand crore with only 5 thousand rupees. He is the most successful non- promoter investor of India.

Rakesh Jhunjhunwala developed an interest in markets by listening to his father discuss it with his friends. His father told him that markets fluctuate because of news and advised Rakesh to read newspapers. His father allowed him to enter the stock markets but forbade him from asking money to anyone. But Rakesh Jhunjhunwala was fearless and prudent from the start. His brother’s client lent him the money and Rakesh promised to return it with higher returns compared to the bank fixed deposits.

Going all out on Conviction:

Rakesh Jhunjhunwala sticks to the philosophy of “buying right and sitting tight”. This is a great advice especially for young investors. ‘Buying right’ means buying quality companies at the right price and at the right time. ‘Sitting tight’ means staying invested in these stocks for a longer period of time in order to realize the full growth potential. Jhunjhunwala invests in the business and not the stock. At one point, only two stocks from his portfolios were giving positive returns rest all of them were in deep red, but he didn’t care. As long as the fundamentals of the business are intact, he doesn’t sell even a single share.

When Jhunjhunwala invested in CRISIL a lot of stock market Gurus were scratching their head as to why he invested in a credit rating agency leaving aside so many well-established banking names. The reason became clear later. As Indian economy grew the need for a reputed credit rating agency increased. CRISIL quickly established itself as the largest player in the market. All this reflected in the stock price. Jhunjhunwala invested in CRISIL back in 2002 when it was trading at about 200 rupees. Since then the stock has gone up by more than 10 times!

Trading vs. Investing:

Jhunjhunwala has made most of his wealth by short-term buying and selling of stocks. And yet, he wouldn’t recommend that to anyone else. Why?

According to him, trading requires the basic defeat of the human ego, which very few people have. Trading is a high-risk, high-reward activity filled with short term gratification. The only reason he started trading was the lack of initial capital to invest. His advice is to keep trading and investing apart. One shouldn’t drive the decision for the other. In the end, trading should be used to generate short term gains and investing should be used to convert those short term gains into long term wealth.

Be Realist:

Jhunjhunwala believes that it’s not good to be a bull or a bear all the time. One has to be a chameleon. Change as the colours change. The mantra to success is to be a realist.

When the food at home is so good, why go elsewhere?

One thing that hasn’t or will never change about Rakesh Jhunjhunwala, is his optimism and belief in the India Growth Story. His philosophy is “bullish on India and bullish on Indian entrepreneurs”

When asked whether he will go outside India and trade in some global equities, he always gives one reply, “When the food at home is so good, why go elsewhere?”

Meaning you will find plenty of opportunities in the Indian stock markets that you don’t need to go elsewhere.

Analysis Paralysis:

Sometimes investment is quite simple and straightforward. But people complicate things by over analyzing and look at way too many factors. Rakesh Jhunjhunwala calls it “Analysis paralysis”. Rather than trying to predict the future profits, focus on the factors that will create profits. There are always certain circumstances which lead to profits.

Words for the young investors:

According to him, the most important ingredient for the making of a successful investor is love for markets. An investor should be passionate about markets. There is no shortcut to success. The stock market might seem like a platform to make easy money but this is furthest away from the truth. If you enter the markets with half knowledge, you better be ready for a bitter surprise. You should have basic knowledge about the financial statements. Focus more on wisdom and less on intelligence. According to him, investment is a game of future. How well one can assess future will determine how well one can invest.

Rakesh Jhunjhunwala did not reach his current position in a day or two. It took years of research, diligence and patience to become one of the most successful investors in India. His philosophy for successful investment was backed by patience and persistence. He invested in the stocks he had faith in, and stuck with them during the ups and downs without panic selling or buying.

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