Top 10 Learnings of Rakesh Jhunjhunwala

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There are countless investors in India, but only a handful of them can be considered great investors. If you want to become an investor, then you should learn from someone who has already succeeded.

Rakesh Jhunjunwala is one of the best investors in India.

The Indian business mogul is not only one of the most successful investors in India, but he is also the most respected.

Rakesh Jhunjhunwala has provided us with ten valuable lessons on how to become a successful investor.

MyTopTen - Top 10 Learnings of Rakesh Jhunjhunwala

1. Investing Should Be A Topic You Feel Strongly About

The best way to develop a passion for the stock market is to do your own research, read about investing, and talk to others in the industry.

That’s what he thinks and it seems to be what he’s proven. He believes that you’ll never develop a love for learning if you count on others for stock market tips or suggestions.

His obsession with the stock market began when he was a young boy, when he asked his father about the ins and outs of stock markets and became fascinated with the fluctuating prices.

While growing up, his investment passion allowed him to make successful decisions and stay motivated, despite some failures. Even though he no longer actively invests, he still likes to attend the meetings and Annual General Meetings of companies that he invested in.

He poses honest questions to the management and offers truthful feedback. He does this not because he’s obligated to, but because he cares deeply about his investment.

2. Patience Is A Virtue

You must understand that investing is a long-term endeavor. You must realize that the return on your investment will take at least a decade to be realized.

As the “Big Bull of Dalal Street,” Rakesh Jhunjhunwala has immense patience when it comes to investing in stocks and is known to hold onto them for years.

Since investing in Titan Company Ltd., he has made over 1,000% returns on his initial investment.

In his view, he invests in the business of companies rather than in their stocks, and he avoids selling shares during market corrections.

The Stock Market has gone through too many cycles for him to get concerned by short-term drops.

Long-term, a company’s fundamentals drive its stock price.

The stock price usually reflects the growth potential of the company over the next five to seven years. If you are buying for a year or two, you are simply taking a gamble.

This does not mean that one should buy any stock and hold it for seven years. It should be paired with due diligence and an understanding of the company’s growth potential and future performance.

3. Make The Most Of The Opportunities You See

As a fundamental investing principle, Jhunjhunwala says an investor should be prepared to seize an opportunity that the volatility of the market can produce.

His example is the 2008 global financial crisis, in which he bought stocks at a discount, but as they increased in value.

He profited from the rise in market prices that came from the 2014 elections by cashing out some of his investments. Investors should be aware of their risk tolerance and never be afraid to let their losses go.

This is because according to him, no one can earn a profit if they are always fearful of losing it. Success in the stock market hinges more on your character and personality rather than anything else.

Traders are advised not to become euphoric when the stock market goes up or irritable when it drops.

I advise you to always have some spare cash to seize on opportunities that come up. Investing all of your money in the stock market is risky, because history has shown that there are periods when this doesn’t provide much in the way of return.

4. The More Emotionally You Invest In A Stock, The More Likely It Is To Lose Value

Almost everyone has heard the story of the friend who bought a stock and then watched it go up.

In so doing, he or she thought, “I’ve hit the jackpot with this investing thing. Let me do it again.”

An emotional investment can be one of the biggest mistakes you can make while investing. It’s caused by a lack of knowledge and an even greater lack of understanding why you bought in the first place.

In order to be a successful investor, Rakesh Jhunjhunwala believes that you should learn to suppress your emotions and behave like a machine. If you are a consistent investor, you need to trust the economic cycle and your investment philosophy.

If you stick to your investment philosophy, you will succeed in this business.

You have to embrace some counterintuitive behaviors in order to become a great investor.

In order to avoid acting fearful when others are greedy and greedily when others are fearful, we must act oppositely and buy low and sell high when others are greedy.

5. Invest In Businesses With A Competitive Advantage

Rakesh Jhunjhunwala is known for finding competitive companies with non-replicable products or services.

Investments in such companies gives investors a competitive edge that most other investors do not have.

It seems that his investment philosophy has been well rewarded, having invested in stocks like Nazara Tech, Delta Corps, CRISIL, Jhunjhunwala, his wealth has grown by leaps and bounds.

Rakesh Jhunjhunwala claims that companies can’t increase their profits if they’re not staying up-to-date in their industry.

This theory is similar to the idea of having a stronghold or advantage when entering a business venture. Rakesh Jhunjhunwala is famous for saying that he looks for businesses with a wide moat when investing.

A company’s moat could be anything that gives it an edge over its competitors, such as the company’s size and the benefits of size or brand value, or intellectual property patents.

Companies that have an advantage over their competitors would be worth your consideration.

6. Invest In A Stock Before It Becomes Popular

According to Rakesh Jhunjhunwala, he is not the type of person who would like to be part of a crowd. It’s just his nature.

There must be something in his genes that makes him stand out and do things differently. He doesn’t know why, but that’s just how he is.

He has mostly been right, but he has been wrong occasionally, too, but his big wins have always come from buying unpopular stocks.

It is always better to believe a company’s story when nobody is talking about it.

If you believe that the company has great potential, regardless of what its current performance is, you should find out how its performance over the last two to three years has been and what its future outlook is.

Do not worry too much about what others think of the stock if you find that they are good.

A fundamentally sound company is important to check, since some stocks appear cheap, but never become expensive owing to a fundamental problem.

So, unless you find out if there’s something fundamentally wrong with the company or its management, I wouldn’t worry too much about what others think about this firm.

Thus, when street vendors begin promoting a company, it may be better to avoid investing in it.

7. You Can’t Change The Past, But You Can Learn From It

The lesson in all of this, says Rakesh Jhunjhunwala, is that every mistake you make in life will teach you something.

For example, he saw that Jet Airways and SpiceJet were trading at Rs 100 a share. They ended up being terrible investments.

He asserts that, from his errors, he’s learned that some businesses are just too competitive to be profitable, and if those running the business are not committed enough, the result is always disaster.

Rakesh Jhunjhunwala insists that he has made many mistakes during his career, but has never regretted any of them. Rather, he has used them to improve his personal financial plan, in order to put more money back in his bank account.

As an investor, I believe that everyone who invests should be thankful for their losses, because it helps them succeed in the future.

Regardless of your regrets about making a mistake, you can still turn it into a learning opportunity by using it to become a better investor and a better person.

8. Search For Small-Cap Businesses With Proven Abilities And Solid Demand For Their Products

It may be in your best interest as an investor to look for small-cap companies with the aforementioned qualifications.

These businesses have the potential to bring your investment back to you tenfold.

According to Rakesh Jhunjhunwala, the lifespan of a product should be studied in India. If it seems as though there is a future demand and if consumption is on the rise, then investing in those companies will be prudent.

Let’s say, for example, he had seen that there was a demand for the product and he invested in Delta Corp, based on a new gaming policy by the government that could boost the industry.

9. There Is Nothing Right Or Wrong

Jhunjhunwala’s track record shows that the best stock pickers are not also the most successful investors.

When he bought stocks like Bhushan Steel and Punj Lloyd in the late 1990s, he remained optimistic about the IT sector and invested heavily in NIIT and Mastek.

As the dot-com bubble burst in 2001-02, all these stocks were hit hard.

In spite of being wrong so often, Rakesh has been able to identify stocks with 10-50 times upside potential.

Compounding his returns has been made possible by increasing his position in these stocks.

He made his fortune in Titan Industries, for example, by increasing his position from Rs 14 to Rs 2,000 per share.

His bets on Aurobindo Pharma and Lupin Ltd have also paid off handsomely.

If you are the smartest person in the world, you will still not be able to beat the market. Jhunjhunwala says the market is above you. Markets are rational.

The market may act irrationally for a long time, but it will always act rationally in the end.

Respect the stock market, even when you think you have it figured out. Assume that it can do anything.

10. Following The Stock Picks Of Big Investors Is Not A Good Idea

According to Rakesh Jhunjhunwala, it’s best to go with fundamentals rather than just rumors. Financial information, corporate governance, and management, are what you should be examining before you invest in a stock.

It’s not right for you to follow someone else’s lead if it’s not suitable for you.

One interesting phenomenon about the financial media is the type of things they’ll focus on to find investment ideas.

The most common cases for announcing a company a high-profile investor is purchasing are either before the exit or when the shareholding period is nearing its end.

Essentially, once the report is released, those who have been borrowing from these investors have already profited, and are now bailing themselves out.

It is even more important to note when one mutual fund shares its top ten holdings with its customers. This information is great for background information but should not be considered buying a certain stock because it is popular with one fund.

Reading about an investment idea is not the same as acting on it.

You can’t base your opinions on something new from the media until you have researched and evaluated it first.

Until then, keep trusting your gut, as there is no such thing as a free lunch in investing.


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