Top 5 lessons you can Learn from Rakesh Jhunjhunwala
Top 5 lessons you can Learn from Rakesh Jhunjhunwala
What makes Rakesh Jhunjhunwala special
The quality that makes Rakesh Jhunjhunwala the ace investor is the uncanny ability to not just understand the company and the business but also to understand the sentiment inside the stock price. The Sentiment is a reflection of the kind of buyers and sellers who are there in that stock. It is a reflection of whether that price is perceived to be the right price or the wrong price.
So basically Rakesh Jhunjhuwala was a really good judge of people also and the way they reacted under different situations helped him in assessing the market in a better manner and subsequently assisted him in choosing the right stocks.
His stock market journey is full of valuable lessons which can act as a guiding light for budding investors. Here are some of the philosophies from his top bets which we can also follow as stock market investors and traders.
1). If the girl is pretty the suitor will come
Rakesh Jhunjhunwala always believed in choosing the right company and he said that if the company is strong enough then its stock price will eventually rise. He always advises that as an investor you should not run behind companies that are popular and buy only those stocks because they are a hot commodity in the market currently. Instead, he believed that investors should go for fundamentally strong stocks which are not popular, and if the stock is good enough it will eventually garner good profits.
He was a strong believer in the fact that instead of picking popular stocks at higher price value you should pick those stocks with reasonable valuations and efficient management and if the stock is good enough it will give you good profits.
2). It’s not what you buy but the price at which you buy
Rakesh Jhunjhunwala was of the view that a big reason that most people do not earn abnormal profits from the market is that they pay a higher price for the company than what the true value of the company is.
He said that most people follow the herd mentality and buy those stocks which are either popular or are the so-called blue-chip stocks but do not give that much returns to the investor than what is expected out of them.
He gave the example of United Breweries that when he bought 55% stock of United Breweries stock at 6 crores in 1999, people were skeptical about the company because of Vijay Mallya’s image but he still invested in that stock because United Breweries captured around 50% of the liquor market in 2000.
Rakesh Jhunjhunwala made 15 times his investment in around 3 months which tells volumes about his conviction in his choice of stock that once he believed in a particular stock then irrespective of the noise around it he went for it and it proved to be a money-making machine for him.
3). Market is the king
Rakesh Jhunjhunwala always said that the market is always right and you cannot fight the market. His popularly saying was that “You don’t time the market, the stock market is always right.” According to him, the stock market is always right and if you are making losses then you must be doing something right.
He insisted that whenever it comes to the market, you need to stay humble and accept your mistakes. Those who try to fight the market and undertake a stubborn approach to the market fail the majority of the time in the market.
For example, RJ says that half of his investments in unlisted companies have failed but he accepted the fact and did not get stuck with these companies instead he sold his stakes in those companies and moved on.
4). Patience is the key
In the stock market you must have heard a lot about patience and how it is an important virtue that every investor in the market must possess but still it is one of the most neglected skills. Apart from having an eye for picking the right stocks, Rakesh Jhunjhunwala showed great patience with his holdings which increased his net worth to thousands of crores.
For example,Rakesh Jhunjhunwala’s Titan holdings proved to be his biggest bet to date. He bought the shares of Titan at Rs3 per share and at one time the share price went to Rs80 per share and again went down to Rs30 per share. An average investor would have either sold off his shares at Rs80 or would have squared off his position when the price was 30.
But Jhunjhunwala stuck with his holding and was convinced that it would go up further. Currently, Titan share prices are trading at Rs2400 per share and RJ’s holding in Titan is around Rs11,000 crores.
5). Don’t be afraid to go against the tide
Rakesh Jhunjhunwala was a kind of investor who wasn’t afraid of going against the crowd and believed in treading the path which he deemed right. In the course of his investment journey, he did not blindly believe in tips and followed the herd mentality. Instead, he believed in having independent thinking and buying those stocks which he believed in.
For example, during the 1989 budget under VP Singh’s government, everyone in the stock market was afraid that it will not be a business-friendly budget, but Jhunjhunwala assessed that VP Singh is from a business family and took a bet that by investing heavily in the market when others were pulling their money out of the market.
Subsequently, it proved to be a masterstroke by him as the budget turned out to be business focussed and Rakesh Jhunjhunwala’s net worth rose to around 50 crores in just 3 months. This is a prime example that Jhunjhuwala was not afraid to tread unchartered waters which made him what he is today.
Rakesh Jhunjhuwala’s tips and strategies will act as a guiding light for the current and future investors in the stock market and his investing journey is an inspiration for many budding investors. Although he is no longer among us, his legacy will live on in the stock market.