Parag Parikh, whose sad
demise in 2015 stunned the Dalal Street and his admirers, will be forever remembered
for his unique teachings about value investing.
He authored two books ‘Stocks to Riches’, and
‘Value Investing and Behavioral Finance’. Both books made a milestone in
imparting knowledge of value investing to Indian investing community.
Below are some main points/excerpts from one of his very few
interviews he gave to on of the business channels.
1. If
you have one set of losers and one set of winner stocks, and you need money
then rather than selling the winners you may choose to sell half half of both.
In this way you are managing your finances as well as avoiding behavioral
anomalies.
2. One
should not have more than 20 stocks in portfolios because it reduces return and
it is difficult/impossible to track these many 20-50 stocks.
3. Loss
aversion will be very low if your allocation is across asset class.
4. Equity
stocks are best form of assets and best hedge against inflation.
5. Regarding
gold- People now think that it is right form of investment only because the
prices are rising. Behind this type of thinking your casino mindset is working
6. The
innovations of financial markets like derivatives are always against the end
user.
7. Write
down rational behind each investment.
8. If
you bought 1000 share of xyz at 50, and if the stock price comes to 30 and you
do not think more can be bought at this level then you should sell your all
holding of xyz.
9. Over
time profits become boring and losses become terrifying.
10. If
the profits/gains are gradual, it gives more happiness.
11. Keep
less attention to your investment. Don’t go on looking your investments every
day, why the stock went up or down.
12. Receiving
stock alerts is only a way of destroying your mental peace.
13. Life
is too simple but we make it complicated by technology and gadgets.
14. Check
your inv once in a month. Just to check.
15. Mainly
brokers make more money than traders.
16. Don’t
sell your stock because it has doubled or you are making huge money. Sell it if
you think it is overvalued and sell it if the answer to your question that will
you buy it at this price is no.
17. Infrastructure
companies mainly keep asking money from investors rather than throwing money at
investors.
18. Deciding
not to decide is also a decision.
19. Each
one of us have to know our appetite for loss.
20. Company
visits, analyst meets etc.is part of endowment effect. So do not determine
investment decision based on that type of experience.
21. If
the stock price goes down after you purchase it does mean that you are wrong.
Also check out our another
article what Parag Parikh Says on Growth Stocks in his book ‘Value Investing
and Behavioural Finance’ on below link