Dear Friends, Now a days everybody wants everything ‘instant’…. like Instant Coffee, Instant Food (Fast Food) etc….So Obviously when one comes to Stock Market also, he desires to make Instant Money…. But Stock Market doesn’t go as per our desires…. Stock Market has its own rules which we should follow if one wants to survive and grow….Let me tell you that Even Warren Buffet can not make money consistently in short term (3 – 6 months) in stock markets… Because in the short term Stock prices fluctuates on the basis of almost all events happening anywhere in the world because we are living in a Globalized time…. How can one predict all the short term events at the same time?… Suppose you are living in India and Even if you predicted correctly near term economic indicators of India for example … How will you predict the indicators (Economic and Political) of other countries in the short term?… And economic indicators of other major countries also impact Stock prices in India also.
In Long term Value Investing or Fundamental Investing, instead of trying to predict short term market prices or events, we focus on Fundamental strength of company, its future prospects, its competitive advantage, its brand value, its management quality, its market share etc …. These indicators do not change in short term…. So if a company keep on doing well on fundamental basis, its stock prices is going to go up sooner or later… As Warren Buffet put it in his famous one-liners – ‘If Business does well, stock price follows eventually’.
So the very first most important thing which is needed to make money in stock markets is a Long Term Mindset….And when I say that become a long term investor, it does not mean that stock prices will rise ONLY in long term… Stock prices can rise in short term also but your mindset should be prepared for long term….You should treat yourself not as a shareholder of company but a business owner of company…. A Business owner focuses on Fundamental parameters like Profits, Balance sheet, Customers, suppliers etc… A Business owner does not see stock prices of its business on daily basis.
In my view, this word ‘Short Term Investing’ is totally wrong… There can not be ‘Investing’ in ‘Short Term’… Only ‘Gambling’ can happen in ‘Short Term’….. So it should be called ‘Short Term Gambling’..!!
Happy Investing !!