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 The Equity Desk Forum :Market Strategies :Fundamental
Message Icon Topic: Magic of compounding -109 times in 10 years! Post Reply Post New Topic
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Vivek Sukhani
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Quote Vivek Sukhani Replybullet Posted: 28/May/2007 at 9:50am
Excellent summation......truly wonderful....
 
before the market discovers it...... very very appropriate phrase!!!!!!
 
Thanks lalit
 
regards,
 
Vivek
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deveshkayal
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Quote deveshkayal Replybullet Posted: 28/May/2007 at 9:55am
The moral is to get in very early before the market discovers it and pay the right price for growth stock
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Absolutely.As far as theme is concerned,Internet could be a huge play in the next ten years.I remember in Biyaniji's book,Shivanand Mankekar has said that he will keep invested in Pantaloon for the next ten years.
"You don't need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beat the guy with a 130 IQ. Rationality is essential"- Warren Buffett
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Vivek Sukhani
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Quote Vivek Sukhani Replybullet Posted: 28/May/2007 at 10:13am
However be flexible......if after 3 years you see it go up 30 times and you see another stock thats likely to double in 2 years time......swutch off to that so that you end up making 60 times in 4 years and not 10 years....hathi baocho bakri kharido style which is perhaps the most flexible style and advocated by manish dave.....do tie up your investment to corporate cash flows....and if you can increase the earnings yield dramatically by switches, dont ever fear.....thats when the compounding comes into play.....
 
illustration:
 
1.Stock A=5 times in 2 years.
2.Switch to Stock B=triple in 2 years
3.Switch to stock C= double in 2 years
4.Switch to Stock D=double in 4 years
 
You end up making 60 times in 10 years, by becoming more and more conservative....
 
Assumptions:
1.A Full blown out bull market at the beginning of the career for 2 years
2.A Selective bull Market for next 2 year where your performance becomes average(4 years gone)
3.A minor bear market after 4 years upto 5 years and therefater a smart bear market pull back....(6years Gone)
4.A bear market for 2 years after 6 years lasting for 2 years(8 years gone), and then a a leg up rally again for 2 years(10 years Gone)....
 
However, some more smart and enterprising investors can earn still higher returns by making very aggressive switches like selling outright and reinvesting in the bear market.....for normal investors, this can be applicable...
 
regards,
 
Vivek
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go4lalit
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Quote go4lalit Replybullet Posted: 28/May/2007 at 10:58am
If we take a 10 yr view, we have to be really patient. For many people it is very difficult to take a view longer than 3-5 yrs.
 
Vivek, taking your point of veiw. Take a look at this:
1. Stock A : 50 times in 5 yrs
2. Stock B : 50 tmes in the next 5 yrs
 
After 10 yrs you will have 2500 times.  Amazing...  Now the point is, Will someone risk his entire 50 bagger money in another stock B? My guess will be a big no. After that he will look at protection rather than risk. That is when the number of stock in his portfolio will go up and factors like consistent growth will be crucial.
 
Does anyone know whick stock has given maximum return in the last 10 yrs? Its Unitech. and you know which yrs of that 10 yr stretch has contributed for that return.
 
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Quote go4lalit Replybullet Posted: 28/May/2007 at 11:12am
Just curious to know if anybody knows this.
 
Which stock in India has given maximum return for a period of last 20-25 yrs? Is it able to manage more than 30% CAGR?
 
Also in the overseas market maximum return from a particular stock in the last 20-25 yr period?
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Vivek Sukhani
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Quote Vivek Sukhani Replybullet Posted: 28/May/2007 at 11:18am

Lalit, what if someone would have had a Silverline at the height of 2000 rally.....its all about defence, moderation and aggression.....and reverse cycle.....TV18 was an equally compelling story in 2000, but its yet to touch those highs, now one who invested in it justa year back has made more than 3-timer....and hence, I always will say one should not make an exit and switches for the sake of it.....I entered into OBC at 35, made a top exit at 308, then enetred into SRF at 33 made an exit at 280... entered infosys at 1150, made an exit at 2037.... entered BASF at 186 and am standing at 270.....the switching has been reasonably decent for me....my dad made less than by sticking his guns with Shree Cement 9although with his purchase its more than 130 times) in the same time.....at the end of day, both of us are happy.....as Bubble says, play the game in accordance with your comfort level......I have for one always liked getting into mid-caps, so I realised Infy's not for me.....and if i want safety of capital i will go with a MNC, where also I have packed some amount.... frankly speaking, i like switching although in tits and pieces but am not a very dull investor either..... and except for dividends, I have no competence....

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go4lalit
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Quote go4lalit Replybullet Posted: 28/May/2007 at 11:37am
Vivek, just curious to know..
 
After making a 10 bagger, are you able to put entire 10 magger money in another stock? Now assuming next stock also gives you 10 bagger and you have total 100 times money. Can you again switch and put this 100 bagger money in 1 stock again?
 
For me, I find it mentally very difficult to put entire money in another stock.
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basant
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Quote basant Replybullet Posted: 29/May/2007 at 3:17pm
All that talk about getting in  early and then exiting when the stock has been discovered is akin to shadow boxing; the real thing is remarkably different. It is great to get back into the realms of time and unwind the clock but actually speaking few can do it with actual money.
 
It is very easy to make 10 baggers from positions that you can afford to lose but making a 10 bagger from a position that you cannot afford to lose is the trick that we all learn in this market.
'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in
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