15 Investing Lessons From Rakesh Jhunjhunwala

(Investing Lessons From Rakesh Jhunjhunwala, famous quotes of Rakesh Jhunjhunwala, famous trades of Rakesh Jhunjhunwala)

If you want to be successful in the stock market then it is always advisable to learn from people who have been successful in the stock market. 

Rakesh Jhunjhunwala, a name that needs no introduction, was an exemplary investor and popularly known as India’s big bull. Not only was he one of India’s most successful investors, but other investors and business titans regarded him as the most respected and wanted to work with him.

On Sunday, August 14, 2022, India lost Rakesh Jhunjhunwala, known as the “Big Bull.” Jhunjhunwala consistently had correct stock predictions and was able to foresee market swings. He is regarded as one of India’s most significant investors and will always be remembered for his humour, humour, and stock market expertise.

Let’s look at 15 important lessons Rakesh Jhunjhunwala has taught us about how to be successful investors.

Here are 15 investing lessons that can be learned from his success:

1. No intra-day trading 

He advised people to stay away from intra-day trading in the stock market. As stock market usually has wide swings in the short term which are hard to sail through for novice traders. Due to the extremely volatile nature of markets in the short term, most day traders lose money. Only a small percentage of traders make money. Since the probability of winning is against us so novice traders should stay away from day trading.

2. No option trading

There are buyers and sellers of option contracts. Buyers trade in the hope of making quick big profits and sellers are in the hope of small but regular profits. But it is extremely difficult to consistently make money and a living from options trading. Only very seasoned and experienced traders can make money from this. 

So just like intra-day trading odds are stacked against you. Traders who are beginning their journey in the stock market should stay away from the options trading. 

3. Risk is an inherent part of the market: 

No matter what investment you decide to make certain risks are always there. Even in the case of bank FD which is considered the safest option for investment, there is a risk of bank failure. To be truly successful in the market you will have to completely accept the fact that risk is an inseparable characteristic of markets. When you come to the stock market you must know that you are in the business of managing risk. If you can do that efficiently over a long period of time, you will definitely make money. 

Retail traders lose money because their approach is not process driven. They don’t have a rules-based trading system. Cutting your losing trades or how to trim down your losing trades is an important part of the trading system. 

4. Don’t average down losing trade: 

He strongly advised traders to never ever average down losing trades. If a trade is going against you, the best decision is to accept your losses and cut the position. But most often traders are seen to do the just opposite. They will average down the losing trade. They keep buying the stock as the stock keeps coming down. They justify this buying activity by saying that their average price is low now. They fail to realise that if a stock is going down, it’s going down for a reason. They hope to catch the bottom but nobody can predict when the stock will bottom out.

The best loss is a small loss. So you should take the first small loss on your first entry position and get out of the losing position. You can not be right on every trade that you take. As long as your risk reward is favourable, you are going to do fine. There are going to be losses in the journey but you should not let these losses ruin you. You can come back from a loss but not from ruin. 

5. Have reasonable return expectations from the market: 

Before coming to the stock market you must ask yourself what are your return expectations from the stock market. If you ask this question most people will have expectations of generating more than 40% return and some even more than that. You have to understand that these expectations are completely unjustified. 

The returns of legendary investors like George Soros, Stanley Druckenmiller, Warren Buffet and a few others are only in the high 20%. It is rare to find returns in the low 30%. Many ‘top investors’ barely managed a 20% ` compounded return.

Rakesh himself said, “If I get 18% I am king, if I get 21% I am an emperor.”

6. Sometimes you will lose

Markets are supreme. You can not fight it. If you choose to fight it, defeat is guaranteed. No one can be 100% right all the time. There are going to be positions where you will lose. 

A trade going against you is the market’s way of telling you that you are wrong. But after reading some books, watching videos and coming up with a strategy, traders believe that they have mastered the market and have become experts in the matter. Most traders have this feeling when they are having a winning streak. 

This feeling of supremacy makes you fight the market trend and instigates you to make unwise trading decisions. Remember that the dead people can’t be winners in a war only those who live to fight another day can be.

If the market is telling you that you have been wrong on a particular trade, just accept it and move on. Think of the small loss as a learning fee. For some stubborn traders, this lesson has been very costly and has led to their financial ruin. 

7. Dont invest based on tips

Never invest or trade based on others’ tips. No trader or investor has ever made big money consistently by investing or trading on the basis of tips. Ideas for trade can be borrowed but how will you borrow the courage to hold the trade or cut the position if starts going against you? Most of the time these tips are part of some pump-and-dump scheme. 

Before making the commitment to any stock do your own research about the business and management of the company. 

8. Invest in what you know: 

Jhunjhunwala believed in investing in businesses that he understood well. He emphasized the importance of having a deep knowledge of the company and the industry before investing. Before committing to any investment you must spend sufficient time understanding the business dynamics and meeting the management. 

By investing a considerable amount of time in reading various businesses he was often able to find businesses that were overlooked by others. You can say that by following this method he often found ‘diamonds in the dust.’

9. Long-term thinking: 

He believed in investing for the long term and holding onto good stocks for years, even if there are short-term fluctuations in the market. He often invested in stocks for 5-10 years. He was more focused on the fundamentals of the company and long-term growth prospects rather than focusing on short-term fluctuations in the market. 

By staying invested for the long term he benefitted from the compounding effect on his investments. Jhunjhunwala’s long-term approach highlights the importance of patience and discipline in investing and the potential benefits of holding onto quality stocks for the long term.

10. Passion pays: 

“Passionate investors always make money in stock markets. You will never fail in any work if you do it with passion,” Rakesh Jhunjhunwala said. 

Jhunjhunwala believes that patience is a key trait of successful investors. He is known for holding onto his investments for years and not getting swayed by short-term market volatility. He often said that successful investing requires patience, discipline, and a long-term perspective. 

11. Focus on fundamentals:

 He emphasizes the importance of focusing on the fundamentals of a company, such as its earnings growth, cash flows, and management quality, rather than short-term stock price movements. By exercising patience, Jhunjhunwala was able to avoid the temptation to make short-term trades based on market fluctuations or news events.

Instead, he focused on the fundamentals of the businesses he invested in and held onto them for the long term, allowing the power of compounding to work in his favour. He also believes that patience allows investors to avoid making emotional decisions and stick to their investment strategies even in difficult market conditions.

12. Go against the public

“Always go against the tide. Buy when others are selling and sell when others are buying,” his famous quote reflects his hardened belief in his stock-picking process. He had proven his mettle time and again by having a contrarian view of the stock analysts and being correct almost all the time. He was not swayed by the popular opinions in the market instead he trusted his own research and held tightly onto his investments. 

13. Keep learning:

He believed that continuous learning and updating knowledge are crucial for investing success. He is known for reading extensively and attending seminars and conferences to stay updated on market trends. He believed that the markets are dynamic and keep on changing continuously so you will also have to keep pace with the market. In order to be able to do that you will have to learn continuously. Never believe that you have known everything about the market that there is to know. 

14. Be courageous: 

Jhunjhunwala was known for his bold investment style. He used to say whatever you can do or dream you can, begin it. Boldness has genius, power and magic in it. He looked for opportunities where others saw only risks and invested when others were fearful. Buying stocks should be like buying any other items, look for good quality stock during correction.

15. Buy at a fair price: 

He looked for opportunities to buy stocks at a discount to their intrinsic value, which he estimates based on the company’s financials and future growth prospects. He bought a truckload of shares during the correction when quality companies were available at very attractive and cheap prices. 

Some famous quotes by Rakesh Jhunjhunwala:

  • “Nobody can predict the weather, death, market and women. The market is like a woman, always commanding, mysterious, uncertain and volatile. You can never really dominate a woman and likewise, you cannot dominate the market.”
  • “Always go against the tide. Buy when others are selling and sell when others are buying.”
  • “You do not succeed without obsession.”
  • “Respect the market. Have an open mind. Know what to stake. Know when to take a loss. Be responsible.”
  • “Stock markets are always right. Never time the market.”

Here are some famous trades from Rakesh Jhunjhunwala’s investing history:

  1. Tata Tea: Rakesh Jhunjhunwala made his first significant profit of $500,000 in 1986 after purchasing 5,000 shares of Tata Tea at a price of 43. Three months later, the stock was selling at a price of 143. By selling the Tata Tea shares, he gained more than three times his investment. There was no turning back after that.
  2. Titan Company: Jhunjhunwala is known for his early investment in Titan Company, a leading Indian jewellery and watch company. He invested in the company in the early 2000s when it was struggling, and held onto the stock for several years. Today, Titan is one of the most successful consumer brands in India, and Jhunjhunwala’s investment has grown by over 100 times.
  3. Lupin Limited: In 2006, Jhunjhunwala bought a 12.9% stake in Lupin Limited, an Indian pharmaceutical company. At the time, Lupin was a relatively unknown company, but Jhunjhunwala saw potential in its growth prospects. Over the years, he increased his stake in the company, and today, Lupin is one of the largest and most profitable pharmaceutical companies in India.
  4. CRISIL: Jhunjhunwala bought a stake in CRISIL, a leading Indian credit rating agency, in 2002. He believed that the company had a strong competitive advantage due to its reputation and expertise and that it would benefit from the growth of the Indian economy. He held onto the stock for over a decade, and his investment grew by over 25 times.
  5. DHFL: In 2016, Jhunjhunwala bought a stake in Dewan Housing Finance Corporation Limited (DHFL), an Indian housing finance company. He believed that the company had a strong business model and growth potential and that it would benefit from India’s growing middle class. However, DHFL ran into financial troubles in 2019, and Jhunjhunwala’s investment suffered significant losses.

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How did Rakesh Jhunjhunwala start investing?

He started investing with Rs. 5000 in 1985.

What is the net worth of Rakesh Jhunjhunwala?

By 2023, his investment had grown to ₹44,000 crores.

What was the biggest bet of Rakesh Jhunjhunwala?

Jhunjhunwala’s biggest bet was Titan Co Ltd. He holds over 4.49 crore shares of Titan Company. 

Which movies has Rakesh Jhunjhunwala produced?

He has produced several movies like English-Vinglish, Shamitabh, and Ki and Ka.

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