It is that time of the life of an ordinary but smart person who can OWN a business he likes when his target stock can be purchased at their reasonable levels, a dream which can be made true. These lifetime opportunities may come rarely. The absurdity of high prices stands corrected only upto a certain period.
When a stock is beaten down, from it’s ridiculous highs and when recovery happens in the market, investors, in general, study where they can invest and if that particular stock is eligible for their investment, based on their own set criteria, the stock slowly recovers. The prices may or may not reach the initial levels from which the falling had happened. Now, after a certain period, the lessons learnt during crashes are forgotten or maybe new investors who had not seen the crash, start investing in that stock and raise the prices to ridiculous levels again. The absurd prices happen because the stock is in huge demand and the number of investors targeting the stock is more. This cycle repeats itself without an end.
My criteria for selection: Good promoter/management, wide MOAT, No/Less debt, strong Cash Flow, good ROCE(Return on Capital Employed), Dividend Yield & Geography.
My preparation & action: (i) identify the business you want to own. Use the above criteria. Diversify.
(ii) Remember the Ant. It saves for the rainy day. Having cash at the right time is essential (personal strong cash flow 🙂 ). Use/Invest it in proportions. Never ever run out of cash.
(iii) Never ever take debt on you. You will have to start working for somebody else. Earn, Save & Invest, Spend rightly(not miserly).
(iv) Whatever you do, give your 100%. You will stand apart – in life too.
(v) Develop an attitude of being botherless, even if your stock goes down to zero 🙂 . Alternatively, invest only the amounts which you feel you are comfortable in giving to others for managing.
(vi) Have an independent business/profession/money earning hobby apart from your main source of income – for multi source income – SUCCESS is yours.
For a smart investor, crash is the time to invest and be more active. The control temporarily gets transferred to a smart investor rather than the markets for getting their favourite stocks at reasonable prices. The smart investor also knows that these ups and downs are like crest and trough and waits for his lifetime opportunity to take a deeper plunge and enjoys surfing through these waves pleasantly. If we find a happy person who is into stocks during this period, be sure he is a smart investor. Are you Happy now? Congratulations for being Smart 🙂 !