Everyone speaks about when to buy a stock, Hardly anyone speaks on when to Sell

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 Everyone speaks about when to buy a stock. Hardly anyone speaks on when to "Sell".

  Thread on when to sell a stock🧵
1) Repeated Corporate Governance issues - Exit a stock if there is news of repeated CG issues popping up every now and then. It takes a mountain to change a bad management. Better opportunities always exists.
2) If the financial performance of the company is declining - keep a watch on this over quarters to see if the performance in profits and sales is consistently going down. Attend AGM, Concalls to understand the reasons for same.
3) If the working capital days is increasing - keep a check on receivables days. A higher receivables days QoQ over a period, shows that working capital cycle is strained.
4) If borrowings increase - Check on if the borrowings have gone up due to capex or as a working capital effect. If for capex, check if company has ability to repay the same in a down cycle. Too much of leverage usually kills a business.
5) Key employees leaving the company in short interval of time - Often KMP like CFO, Compliance offer, VP, Director leave the company when they see something fishy in operations or when mgmt does not give heed to repeated red flag/warning.
6) When 5 yr Cash flow to operations(CFO)/EBITDA is less than 40% - There is no benchmark % for this but in my experience if the mgmt is not able to convert the profits into cash over a 5 yr period, it is better to exit the company.
7) When dividends are paid from borrowings - There are companies who often pay dividends from borrowings just to show they are shareholder friendly. Such companies usually bleed internally in their operations and over a point go bankrupt.
8) If Altman Z Score ratio (not applicable for financial companies) is <1.8 (in actual have it below 1.6). It uses profitability, leverage, liquidity, solvency and activity to predict whether a company has a high probability of becoming insolvent. Combine this with other factors
9) When the stock price reaches a point which no longer reflects the underlying business - This can be tricky as many a time stock price reflects sentiments of a proposed capex or potential opportunities for M&A/demerger been considered. Hence have sufficient Margin of Safety.
10) Hype & Hope story - Too much media attention can often lead to a hype created in guise of hope for a business turnaround which often leads to collapse once the frenzy fizzles out. Stay away or book profits from such moves.
11) When you feel like converting your trading position to investment position - Again having seen many (including myself at some point) convert trading position to investment, it has always lead to sunk investment. A trading stock hardly creates wealth in my experience.
12) Unrelated diversification by company - Example of Satyam is well known. Similarly when Avanti feeds acquired football team Blackburn rovers. Same with VRL logistics promoter announcing foray into airlines. Such unrelated diversification shows poor capital allocation.
13) When the investment gives you sleepless nights - Exit the investment at first go, if such investment keeps you awake all night.! If you have invested on a basis of thesis, stick on to such investment as long as rationale is playing out.
14) The company market share is falling - This might be due to competitor's entry into product lines or quality of product deteriorating. If the mgmt is not able to pull up its socks quickly, it might lose out a significant market share in no time with cascading effects.
15) When the company doesn't utilise the funds it was supposed to as per IPO - This applies usually for new IPO companies in first few yrs of Ops. If funds are utilised otherwise than for purpose it was raised for, Exit.! First signs of funds taken out of company by promoters.
Often investors sell stocks on basis of PE or on back of stock up in quick time. Many investors miss the journey of holding on to stocks for long time due to these factors. A company with high PE can continue to remain high for quite a long period of time without any correction.
At times, many of the above factors have to be combined to take a overall view. Likewise, better opportunities do come up as well for switch of stocks/industry bets. PF allocation as well matters along with diversification. Stick to your style of investing.
Selling stock is as important as buying one. Be invested as long as your rationale for investment and thesis is in place. Develop the urge of not selling stock when price is down but business continues to grow. Sooner or later, you will be REWARDED for your perseverance.!
*Venky's and not Avanti. Was working on some other post side by side on wealth creation!

40 harsh truths I wish someone told me at the start of my Investing Career

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 40 harsh truths I wish someone told me at the start of my Investing Career:

  1. The market doesn't care how much you paid for a stock or what you think is a fair price. 2. Saying "be greedy when others are fearful" is much easier than actually doing when the opportunity arises.
3. Most of what is taught about investing in school is theoretical nonsense. There are very few rich professors. 4. Being emotionally detached from your stocks will save you from a lot of blunders.
5. It is hard to time the markets. Small investors tend to be pessimistic and optimistic precisely at the wrong times. Predicting the short-term direction of the stock market is futile. The long-term returns from stocks are relatively predictable.
6. A 20% loss only requires a 25% gain to get back to even, but a 50% loss requires a 100% gain and a 90% loss requires an astounding 900% gain — just to get back to even.
7. Several famous investors whom we call "legends" have barely beaten an index fund over their careers. In the stock market, huge wealth is not necessarily indicative of big returns.
8. During recessions, elections, and Federal Reserve policy meetings, a lot of people turn economists and become unshakably certain about things they know nothing about. 9. The more comfortable an investment feels, the more likely you are to be crushed.
10. Instead of trading derivatives, intraday, or penny stocks, just light your money on fire. 11. The gap between a great company and a great investment can be miles apart.
12. Don’t worry if you don't understand a big bank's balance sheet. The people running it and their accountants don't know either. 13. There will be seven to 10 recessions over the next 100 years. Don't act surprised when they come.
14. The more someone is on TV, the less likely his or her predictions are to come true. 15. Thirty years ago, there was one hour of market TV per day. Today there are upwards of 18 hours. What changed isn't the volume of news, but the volume of nonsense.
16. Professional investors have better information and faster computers than most people. You will never beat them in short-term trading. Don't even try. 17. How much experience a money manager has doesn't tell you much. You can underperform the market for an entire career.
18. The majority of market news is not only useless but also harmful to your financial health. As Mark Twain says about truth: "A lie can travel halfway around the world while the truth is putting on its shoes."
19. Not a single person in the world can predict what the market will do in the short run. Thus, stop trying to Predict the #NIFTY movement or believe in someone who claims to do the same.
20. Professional investing is one of the hardest careers to succeed at, but it has low barriers to entry and requires no credentials. That creates masses of "experts" who have no idea what they are doing.
21. Most IPOs will burn your money. People with more information than you have, want to sell. Think about that. 22. When someone claims to get rich quick schemes based on charts, moving averages, head-and-shoulders patterns, or resistance levels, walk away.
23. The phrase "double-dip recession" was mentioned 10.8 million times in 2010 and 2011, according to Google. It never came. There were virtually no mentions of "financial collapse" in 2006 and 2007. It did come.
24. The low-cost index fund is one of the most useful financial inventions in history. Boring but beautiful. 25. The most boring companies -- toothpaste, food, bolts -- can make some of the best long-term investments. The most innovative, some of the worst.
26. Investments that offer little upside and big downside outnumber those with the opposite characteristics at least 10-to-1. 27. Marty Whitman says about information: "Rarely do more than three or four variables really count. Everything else is noise."
28. 30 years from now the NIFTY50 will look nothing like it does today. Companies die and new ones emerge. 29. The real interest rate on 20-year Treasuries is negative, and investors are plowing money into them. Fear can be a much stronger force than arithmetic.
30. Make a brain tattoo of the Buffett quote about progress: "First come the innovators, then come the imitators, then come the idiots." 31. The next recession is never like the last one.
32. The best investors in the world have more of an edge in psychology than in finance. 33. What markets do day to day is overwhelmingly driven by random chance. Attributing explanations to short-term moves or discussing them is like trying to explain lottery numbers.
34. If you have any kind of debt and you are thinking about investing in anything, please stop. 35. “In this business, if you’re respectable, you’re right 6 out of 10 times. You’re never going to be right 9 times out of 10.”
36. There is no accountability in the financial guru’s who come on TV. People who have been wrong about everything for years still draw crowds. 37. Just High income will not make you wealthy, saving and spending responsibly will. 38. Time Is Much More Valuable Than Money.
39. The next time is never like the last time. 40. In expert tennis, 80% of the points are won, while in amateur tennis, 80% are lost. The same is true for investing: Beginners should focus on avoiding mistakes, experts on making great moves.
Check out the full article:
1. The market doesn't care how much you paid for a stock or what you think is a "fair"
https://stockifi.wordpress.com

Top 10 Rules of success in #StockMarket

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 Top 10 Rules of success in #StockMarket by @VijayKedia1:

1) Invest only a part of savings (not the actual earnings) into stocks: > As per your age, only invest a certain "%" based on your risk-taking capacity. (if you are <50 years = ~25 to 50%, and if >50 years = ~10 to 25%).
2) Your investment belongs to the market and the profits belong to you: > As long as you are invested, the profits belong to the market. > Don't spend just because your portfolio has increased because tomorrow stock prices can collapse.
3) Book profits periodically: Invest those profits in buying real estate (securing a house first is very important). 4) Don't trade or leverage: Trading is a full-time business. Don't even try doing it part-time and never do it with borrowed money.
5) Create an additional fixed income apart from the market: > Never be dependent on the profits from the stock market because it is volatile. > Have a margin of safety even before entering the market.
6) Invest with the best management and then let them worry about the company:  > Good management in bad business is better than bad management in good business. > If you invest with the best management, you don't have to worry.
> Many times Management is playing golf, and investors are worrying 24 hours about what will happen to the company. > What is the use of being an investor then? Let management worry because management has its prestige and its name at stake.
7) Be informed & read a lot: > The market rewards you as per your perception. If you think investing is a gamble, then it is a gamble. If you think it is a business, then it is a business. > Read a lot and be a maniac when it comes to reading; it will help you connect the dots.
8) Invest for the long term (at least 5 years): >Rome was not built in a day. It takes time for a business to mature. >Whenever I bought a small-cap, many people discouraged me as they didn't like the stock. > 2 years the company went nowhere; then it gave multi-bagger returns.
9) Keep a balanced mind and never regret:  > Don't be happy in an upmarket and don't be sad in a down-market. > Be physically, financially, and mentally sound and avoid regret. He says a stock can go up after you sell it. Don't regret it. A stock market is a place of regret.
> In the stock market, You lose money, you regret. > You make less money, you regret. > You make money, still, you regret. > That is why it is very important to keep a balanced mind.
10) Do good karma as Luck plays a crucial role: > First focus on being a good human being. > The stock market is also a game of chance. > If you are consistently doing good karma, it has to come back to you.