Born in a marwari family of Stock Brokers, Dr Vijay Kishanlal Kedia is a great investor.Earlier started with not so successful stint in trading, he later started investing in stocks.He shifted from Kolkata to Mumbai in 1989. His earlier notable investments are in Punjab Tractors, Aegis Logistics, Atul Auto and Cera Sanitary ware.All these investments turned out to be multibagger investments. In 2016, Dr Kedia was ranked at #13 in “Business world list of successful investors in India”. Dr Kedia invests strictly on the principle of “SMILE”. It means Small in size, Medium in experience,Large in aspiration,Extra-Large in market potential. Here we present Vijay Kedia’s 10 rules for investing in Stock Market.
Vijay Kedia’s 10 Rules for Investing in Stock Market:
- Create a fixed income outside the market for your livelihood: Stock market is a very volatile place to earn money and unless have long time horizon you will never be able to make safe money. If you have to sell your positions to feed your family you will be forced to sell at a very negative period of time and that would end your carrier and push you years back in your wealth.
- Be informative and read a lot like a maniac to know about what is going on in the world : If you don’t like to read a lot, stock market is not for you. Famous fund manager Peter Lynch in his days, while managing Fidelity Magellan started his office day at 6:15AM while reading in the bus and ended it at 7:15PM. You will never find a successful manager who is not an avid reader.
- Invest a part of your savings on things other than stocks.: Kedia recommends buying a house is the most important thing for you because things might turn bad and you need a safe place to live in turbulent times of your life.
- Don’t trade and don’t leverage.: Trading when combined with leverage can create a havoc in your life. There will be days when suddenly the market will go down and if you are leveraged enough it will pull you down and end your career. I would add a great quote by Warren Buffett I’ve seen more people fail because of liquor and leverage – leverage being borrowed money”& “When you combine ignorance and leverage, you get some pretty interesting results.” Keynes also said “Markets can remain irrational longer than you can remain solvent”
- Invest at least for 5 to 10 years: If your investment horizon is for less than 3 years you are speculating. It’s better to keep your money in safe investments rather than speculating.
- Invest only with the best management and you sip the wine: Never compromise the integrity of the management. It’s better to invest in a mediocre business with good management than to invest in fantastic business with bad management.
- Your investment belongs to market and your profit belongs to you.(Don’t count your profit till you sell your stock): You should avoid looking at market movements everyday. Use stock market as an opportunity to buy or sell shares and not as to the real value of your worth.
- Book your profit also periodically in the market: Market timing is something which I don’t believe and it’s better to book your profits when market gets heated time to time unless it is a very fantastic business which you want to hold for a very long period of time.
- Keep a balanced mind don’t be optimistic in uptrend and pessimistic in downtrend. Don’t be happy in good and sad in bad markets
- Luck also plays a crucial role so do good karma.
These were the crux of the lessons given by Mr Vijay Kedia who is a great Indian Stock Market investor. He traded from nearly 1978 to 1988 and was always hand to mouth eventually he realized that it is much better to invest than to trade. He gave a talk in IIM Bangalore whose link is here
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