Rakesh Jhunjhunwala, who passed away last year, was one of the most successful investors in the country. Jhunjhunwala, known as the Big Bull, was an optimist who believed that ‘the best (of the market) is yet to come’. The billionaire investor, also called ‘Warren Buffett of India’, set an exemplary example of how to create wealth from stock markets. He began his investment journey with Rs 5,000 and left $5.8 billion (about Rs 47,000 crore) in wealth, according to Forbes data. Over the years, investors have followed Rakesh Jhunjhunwala’s advice, investing nuggets to emulate his success in stock market investment.
Jhunjhunwala was admired for his courage to trade against the overwhelming market sentiment. This resulted in phenomenal gains for him on several occasions. While Jhunjhunwala is no longer with us, the investment principles he has left behind can still guide beginner investors. If you are also one of those who are looking to start their stock market investment journey this year, here are Rakesh Jhunjhunwala’s 5 investment strategies that can help you start and hopefully lead you to reap handsome returns in the future.
Rakesh Jhunjhunwala’s 5 timeless investing principles
Buy right, sit tight, don’t panic
Rakesh Jhunjhunwala strongly believed in ‘buy right and sit tight’ principle. He always advised investors to do their own research, buy the right stock and then hold it till an opportune time. ‘Build a fighting spirit, take the bad with the good… Have faith in the company’s business. Don’t let panic drive your investment decisions,’ Jhunjhunwala often said. So, as a newbie to stock market investment, when you are convinced about the business model of a company and its sustainability, there is no need to panic from short-term sentiments. Go with your conviction, and stick to your investment.
Go against the tide
Rakesh Jhunjhunwala’s quote, ‘Always go against the tide. Buy when others are selling and sell when others are buying,’ is used by various investment advisors to date. One of Jhunjhunwala’s investing strategies was buying stocks at discounted prices when the market was down, and selling when the market was on the rise. He himself traded against overwhelming market sentiment, especially in bearish times, and then used windfall profits to buy or add in fundamental long-term picks in which his conviction was high. This way, he was able to multiply his wealth with a unique combination of short-term trading and long-term investing. If you have the ability to take a risk when markets are down, this investment principle can help you out.
Never let emotions guide your stock ideas, investment
When Rakesh Jhunjhunwala turned 50, he was asked by a reporter whether he sometimes got emotional about any of his stock ideas. In response, Jhunjhunwala had said that if he had any emotions, then they were for his loved ones, but surely he was not so emotional about any of his stocks. ‘I would not say there is no emotion when you have invested for such a long period of time, but they are not such emotions that will not part ways,’ he had said. So as a beginner investor, the lesson you can take away from this is to invest in the stock market (usually for the long term), but if you want to get rich, then never get emotional about your stock ideas and exit on time, when needed.
Never invest at unreasonable valuations
Rakesh Jhunjhunwala strongly suggested investors to look at the valuations of the stock before making any investment decision. ‘Never invest at unreasonable valuations. Never run for companies that are in the limelight’, Jhunjhunwala used to say. His advice holds even more weight now as in the recent past, we have seen several stocks like Paytm, Nykaa, PB Fintech, and Zomato, which had extremely high valuations at the time of stock market debut, destroy investors’ wealth. As you start your share market investment journey, whenever you see a stock trading at unreasonable valuations, avoid going for that. Or, you may end up losing your hard-earned money.
Have realistic return expectations
The Dalal street maverick advised people to trade with their own money as it ensures that people will take calculated risks and avoid their capital from unwarranted erosion. He often asked investors to have realistic return expectations. “If you’re able to earn an 18% return on your portfolio, you are no less than a king and if the return is 21%, you are an emperor,” he used to say. In a 2018 interview, Rakesh Jhunjhunwala told SIP investors to not expect a rate of more than 12-18% from equity markets. “If you are in a SIP, I’m confident you will get it. Don’t try to be over smart,” he had said.