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     It took years of reading, learning, experimenting and believing to understand there is NO holy grail for investing.  Infact, it is a very simple method which takes lot of hard work to find winning stocks.  The hardest part is executing what we believe in and patiently waiting for compounding to work its magic.  All of us know the power of compounding and have heard of it enough already.  It takes a stable and calm mind to make meaningful decisions in investing.  Therefore, it makes enough sense to learn how to invest our hard earned money.  Time and money go hand in hand.  Longer the time, better the result of compounding, but this works like a magic only if the investment decision is correct.  THAT is exactly what I would like to highlight here.  Stock Selection.

     When I started reading the book “One up the Wall Street” it felt like Mr. Peter Lynch was talking to me.  This book needs to be read several times for it to sink in our mind and influence decision making.  Far too often people discount a simple method assuming “making money can’t be that simple”.  All the great investors like Peter Lynch, Warren Buffet, Ramesh Damani, Rakesh Jhunjhunwala have held their investments for years.  There have been enough macro or micro events and several recessions but still they are the richest investors.  So, staying invested in what we believe is the biggest virtue in long term investing.  Having said that lets look at the simple method of stock selection.

     Stock selection could start from kitchen, backyard, traffic jam or simple common sense.  Does it sound very difficult or impossible?  Let’s dig deep.  Let’s say you wake up and brush your teeth.  What paste was that? Ah colgate? Have you seen the performance of this stock or considered it for an investment? How about that soap you used to feel refreshed? Guess it came from Hindustan Unilever or Dabur?  What’s for breakfast? Tea/Coffee/Horlicks from Hindustan Unilever and Bread from Britannia.  You feel comfortable wearing Bata footwear.  You commute with a bike that comes from Eicher Motors or Bajaj Auto, Car from Maruti.  You bank with HDFC Bank, home loan from HDFC Ltd.  You celebrate with friends on a Dominos Pizza coming from Jubilant foodworks.  Your kids love Maggie noodles or Milo or Kitkat etc coming from Nestle.  Haircare from Marico.  Healthcare from Cipla, biocon etc.  We can go on; probably we should stop here and look for how these companies have done in past 10 years.

Below is the table showing performance of each of the above stocks in the past 10 years.  Please note numbers are taken from websites and may not tie with investor reports.  Idea is to show approximate return on investment in equity on stocks we picked from daily life.

Stock Performance 10 years
Colgate 17%
HUL 23%
Dabur 19%
Britannia 34%
Eicher Motors 43%
Bajaj Auto 15%
Maruti 17%
HDFC Bank 22%
HDFC 17%

The return exceeds any other asset class.  Equity is one of the best asset classes that beat inflation.  With this method in mind one can find many more great performing companies which lead to long term wealth creation.  It lives up to saying “Buy Right, Sit Tight”.  Sitting tight on wealth creating stocks is the final test of patience, that’s how value investors are made. 

To Summarise:

  1. Invest in what you know and understand.
  2. Whoever says whatever, invest only if you believe in that stock and it is backed by study.
  3. Do not make emotional decisions.  It’s all about practicality and results here.
  4. Back your decisions with good study.
  5. Hold on to good stocks, but be flexible to book profits when needed.  Nothing is forever.
  6. Keep it simple.  Do not try being perfect.

Peaceful Investors enjoy the journey not just the destination.  Have you observed DMART while shopping 🙂 what do you think of that stock?Happy Investing.  See you soon….


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Post Author: rashmi

32 Replies to “STOCK SELECTION”

  1. Have been reading your blogs. The concept of keeping it simple/ peaceful is breathed into your blogs as well. I liked this one very much. Keep writing.

    1. Thanks Vaibhavi, for the feedback. It helps. I started enjoying the financial journey when I avoided noise. Simplicity rocks.

  2. I am very happy to read this. This is the type of manual that needs to be given and not the random misinformation that is at the other blogs. Appreciate your sharing this greatest doc. Ava Jamey Dalston

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      Thanks for taking time to check the content. I am not very sure if I am the right person to guide you on this. I have not really done anything unusual to run this blog except to write what I know and think it could be useful for all. As long as we love writing and publish good and useful content it does not feel like too much. However, a person who is good with technology would do wonders.

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