Don't give up when you are in the market; Stay here for 15-20 years to earn good returns: Basant Maheshwari

Basant Maheshwari, Co-Founder & Partner, Basant Maheshwari Wealth Advisers LLP, talks about what is the best thing that he has learned from the market and ways to choose the best stocks at the stock market. Edited Excerpts: 

Q: What is your best learning from the market except the way to earn?

A: The biggest thing that I have learned from the market is that never lose your courage. Several occasions were there in which it felt as if I have lost almost everything. But it is similar to the NatWest trophy in which Mohammad Kaif and Yuvraj Singh played a pivotal role and helped us in winning the game. So, I feel that the market every two-year allows you to play like Yuvraj Singh. Personally can say, whenever the market falls - in 2-3 years - then it seems that the world is coming to an end. It is a situation when you will have to question yourself are you doing the right thing or not or should I sell everything and opt for a fixed deposit (FD) and sit comfortably. Especially in a case, when you sleep after Dow ends and wake at 4 am before Nikkei, it gives a sense that this life is difficult. But, you will not get anything for free. 

When you become so passionate about the market then you associate yourself with it - not in a sense that you are losing or earning from it - in a sense that you don't want to leave it. So, there are two things (i) Don't lose the courage and (ii) you will have to love the market. If I were to say than I can say that nothing else is more important than the market to me, I am telling you about the market, not the money. Usually, I say to people that it looks like my heartbeats on the screen. So, it is important to see your heart on the screen. When the market opens on Monday after the closure of two days then it feels, as if, I am meeting my child after a gap of two days, however, boredom approaches, on Friday evening on which the market closes for two days. Strange happiness comes, when the screen reopens on Monday. 

Q: Provide a basic knowledge that can help a person may be a beginner to choose a right share by analysing things that are revolving around him?

A: People can earn in the market, simply by buying sustainable companies that can survive for the next 10-20 years. If the company is alive, the investors will be alive. For instance, when did you see Colgate toothpaste for the first time in the morning, did you go to find that it is listed. The same was the case when you used the soap and shampoo manufactured by Hindustan Unilever you didn't go to find that it is listed. Their prices have gone up 100 times. However, you opened Kellogg's to have it in your breakfast but it is not listed, then strike off it. Similarly, Nescafe that you drink is listed and has gone up 200-300 times. The first SIM card that you took. Bharti Airtel was listed and has gone up 200 times. Someone is buying Maruti but you went with Ambassador, whose shares have turned zero while Maruti turned up to be a hero from zero. Similar was the case with Bajaj, who was engaged in manufacturing scooters, while Hero Honda was manufacturing motorcycles. In the entire era of the 1990s, Hero Honda has outperformed Bajaj just because it was an era of motorcycles while Bajaj was just thinking to manufacture motorcycles. Thus, it is a situation where you buy what you see the concept. 

Similarly, you went to SBI to update your passbook and they asked you to come back after 2 pm and then you visited HDFC Bank, where you were asked for coffee and tea, which made you think to work with it. In a simple term, we say buy what you see. In this case, you will not get instant returns or it will take time after troubling you for two-three years but your capital will remain safe with them. You thought of getting your home painted and used Asian Paint for the purpose, which turned 5,000 times in the last 30-35 years, i.e. Rs 1 lakh turns up to be Rs50 crore. Asian Paint is a product that is used at almost every phase in decorating your home from distempering to wall-putty and plastic painting. Then you call them to hand over the entire project of colouring your house. 

Thus, you should look at the fact that the company stayed with you throughout the journey. Speaking from my personal experience that if you can survive in the market without emptying your d-mat account then you will be rich. This means you will have to keep watching the market almost every day or churn your portfolio. The sad part of the market is that it won't allow anyone to stay there for 15-17 years but if someone will manage to survive here then he will turn rich because during his stay he learns a fact that this is the only process through which he can make money from the market. 

Q: You are saying to buy shares after analysing the factors near you with the hope that the business will run for the next 15-20 years. Can you tell us the chances of getting wrong in this process as habits change with time?

A: You may go wrong when you are not using that product but are thinking that it is a good product. Like there was a company Manpasand Beverages and I am not aware of the number of people who drink its product, Mango Sip, and how many of them have brought its shares. I think if a company can sell its product than it will have an impact on its sales, which means the product is being sold above its cost. Thus the first rule is that if the product is being liked by almost everyone then there are chances that the product will perform. But, what happens at times, we buy Maruti as a vehicle but opt for the shares of Hindustan Motors and this must not happen. you must not estimate what is cheap, instead, see what is liked by you. The only problem that you may face with this choice is that you may not get returns for 3-4 years because the shares were bought at high prices but these are those shares, where you should make an entry without thinking about exiting from it. If you manage to stay with it then it will provide you with a chance to exit with good returns. 

Q: The most common mistake that an investor makes is that they opt for the stakes that are available cheaply while the shares being suggested by you are four-digit shares. So, let us know the way to get rid of the greediness of buying the cheap shares and fear of going for the expensive ones?

A: You can't buy Alphonso mangoes at the rates of bananas and you will have to pay the price at which Alphonso is available. Thus, the share that is priced in four-digit has something special in it, for instance, if you have some ailment then you can visit a Homeopathic doctors who can treat you at an expense of Rs 800-2000, while if you go to an allopathic doctor then he will ask you to go for number of tests including Cardiology and ECG among others which could take your expenses to Rs 50,000 but we go to the best. Thus, you should have the same eye on your physical and financial health. And as we say in Hindi "मेहेंगा रोये एक बार, सस्ता रोये बार बार", which translates to be 'the cheap buyer takes the bad meat'. If you buy cheap shares, it can easily become 50 from 25 but Asian Paints purchased at Rs1,500 will not turn up to be Rs3,000 but if it attains those levels then it will not return to the level at which you bought them. But the cheap stocks which turned off Rs 50 can fall up to Rs 5. Thus, you should look at them with this angle. 

Q: The other mistake committed by the investors is related to exit. Is there any formula or art that can help you in deciding the time when the stakes should be sold?

A: Basically, people think of selling the products that are in profit but not that is making a loss and wait for the time when the stakes reach the level at which it was bought. For instance, if you bought a home at Rs30 lakh and its price goes up to Rs1 crore then you don't think of selling its verandah or bathroom or the kitchen but they do it when the prices of shares start moving up. This happens just because we don't have any role model in our country who can inspire us with the hope that an ample amount of money can be created from the market. Ask anyone, they will say that there is a gambling market and you were lucky enough that you have made money from it. I don't think that many people give weight to knowledge and hard work in the market. Thus, society has a belief that your luck and speculation are two things that may help you in making money in the market. When it comes to selling then let me know the amount that you may lose in a share just 100% but what you can earn, theoretically, infinite which can be two times, ten times, 100 times, 5000 times or anything else. 

Q: At times, investors commit a mistake while investing as the investments are based on the leads that are generated either from a friend, advisor or at a social media platform. How to be cautious while investing through those tips? 

A: It is a situation in which someone asks you to buy the shares of Whirlpool and you go ahead with it but you research for the same to find out the best product when it comes to buying an AC. Generally, we research while buying things like AC, fridge, washing machine or vehicle, but we don't research in the same manner while putting our money on shares just because we in the back of our mind have a thought that we will get a chance to exit, however, we will have to struggle for at least five years if the product went wrong. Thus, the exit that we have in our mind makes us complaisant. So, I can just say that before buying a share just think what we would have done if someone would have suggested its product just at someone's recommendation or not. The same thing implies in the case of shares.

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Q: Generally, the common investor either don't have ample time to research or knowledge or both along with the money that should be invested. Thus, why should they do a lot of research at least when they have less money. Suggest a solution to it?

A: Yoy will not know about the product in which you are not working. For instance, if I am a doctor and into a habit of writing prescriptions every day and the number of medical representatives are sitting in front of my chamber to suggest different products. Then I know the medicine and the company whose products are available in my pharmacy business. But being a doctor if think about the company that has developed the Bandra–Worli Sea Link and the amount that he would have earned from it then it is problematic for me. The same goes for the case where an engineer thinks that this medicine will perform. Thus, everyone should look across the work with which he is associated. For instance, you are in a media industry and you are well aware of the TRP ratings of the best four-five media houses, the program with maximum viewership and movement of a particular anchor can have an impact in its viewership. Then no one else will be more aware then you in this case but if you plan to look after aviation then there is a problem. So, one should restrict themselves under the circle of competence then you will do good.