In 2005 i passed from my engineering course and joined a software MNC.As there was too much hype about stock markets i too got lured into it and had my Demat account.
Confused why i am writing this story,please read on.The next part was to do some investing and for that i wanted to earn big and fast.My first trade was buying Reliance pre split at 830/- a share.Many said it was overvalued and i wont gain from split.I had other thoughts,i have always had a fascination for reliance and i thought i was perfectly right.In fact i was and today that 830/- has zoomed to 5000/-.
The next thing i heard was value investing.And i hate the day i heard about this whole value investing funda.I started to read blogs of value investors and plz dont take otherwise they are so sick people that right from 8000 level of sensex they are saying that the market is overvalued and market will crash and only value investors will have the final say.Today market stands tall at 17500 and value investors are as usual worried.
And after devoting so much time to value investing i feel i have missed the bus from 8000 to 17500 in a big way.Guys who had simply invested in sensex (famous) stocks have made much much more than what i have made.
May be all this value investing will come handy when the market actually crashes and go in a bear phase.Seems that is not going to happen anytime sooner.
I m sorry for myself and for most value investors i guess.Most have lost.....agree or disagree i hold my view.........
I can understand your frustation. I will not try to ‘sell’ you the concept of value investing or justify it. I think that is something one has to decide for himself.
Let me first try to clarify (per my understanding) what value investing is not. It is not a system of predicting the market. I am not sure if anyone could have forseen this rise in the stock market from 3000 to 18000 (the market was at 3000 in May 2003). One can guess that the market will do well in broad terms, but it is very difficult to predict whether the market will be at 20000 or 25000 next year.
In addition, one can only estimate (probabilistically) how over valued or undervalued is the market . See my post on the same topic here. So if someone is sure that the market will tank soon or take off, take it with a pinch of salt (value investor or otherwise)
One important point to remember is that value investing does not work all the times. Over a 8-10 year period you can do well ( I am saying can and not will), but there will be phases when you will underperform the market, especially during bull markets. This is not a new phenomenon. Value investor got killed during the 1999-2000 dotcom bubble in the US. Warren buffett who is recognized as ‘the’ investor was assumed to have lost it and the press was writing him off. So if you want to follow value investing , be prepared to look like a fool sometimes. Also if you recommend an out of favor, value stock, your friends may smile (if they are polite and don’t want to laugh at your face).
Finally value investing is buying something for less than what it is worth. What can be more rational than buying something for less than it is worth…we buy all other stuff that way …except maybe stocks. The approach is simple but it is not easy. On the contrary it is emotionally very taxing. I have gone through the same phase myself. I started off in 1999-2000. I did not have experience then and saw my portfolio bleed as the market tanked. The stocks which I though were cheap, became cheaper …can you believe that concor sold at 5 times PE in 2003, blue star at 5 times and so on.
I was not able to understand the reason why the undervalued stocks I was holding were not appreciating then and why no analyst was even analysing or recommending them. It took 2-3 years for the stocks to be recognized and the value to be realised.
I have not regretted being a value investor over the last 10 years. I chased IT stocks in 2000 and lost money on that. I have found value investing to be a rational approach and from personal experience, a profitable one too.
I agree the last 3-4 years have been tough for value investors, where you may have lagged the market. Will it end soon and then everyone will convert to value investing and value investors will have the last laugh? I don’t know and frankly not concerned about it. I just prefer to follow a logical and rational approach, which is what value investing is about.
I would also recommend you to read this article by micheal mauboussin on process v/s outcome . See the matrix closely and I hope you realize that even when you follow a good process, the outcome will not always be favourable (but over time favourable)
One last suggestion – try to invest some portion of your portfolio in an index fund or a good mutual fund while you experiment with various investing styles and pick one eventually. Maybe that will reduce the regret.
please feel free to leave your response to amit's points in the comments