Born in Silence

Do you get alone-time?

Can you live with noise?

Does noise cover fact?

Can you see the forest for the trees?

Why do I ask?

Do you want your ideas to turn into multibaggers?

Bask in silence. 

There’s something about silence. 

You don’t need to think. 

Thoughts just come. 

Eventually, a blockbuster idea appears. 

Distracted, you might not even recognize it. 

It will come, and go, worthless as it is forgotten. 

Alert, you recognize it. 

You put it on paper. 

Ramifications. 

Aha. 

You see it. 

Implementation. 

Benefit. 

It was born in silence. 

The biggest money can be made when you think like no one has thought before.

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… And Why Growth Stocks…?

Well, why not?

We’ve got History on our side.

Buffett shifted a tad from value to growth in the latter part of his career.

Forget about all that.

We get into growth because we wish to get into growth.

We’re not buying at growth prices, mind you.

Our value background comes in handy. We use value techniques to pick up growth.

We continue to accumulate upon opportunity, quantum by quantum.

Our portfolio gets rounded.

Over the long run, its gets a bit of a boost.

Ideally, we’d like our growth stories to continue, forever.

Consider this. What if even one of our holdings makes it to a 1000-bagger?

What do you think this would do to our portfolio?

Exactly.

Lots that starts out as value becomes growth later.

We pick value with growth in mind.

Sometimes, we’re not offered value in something we want to pick, for a long, long time.

We’re not offered value in the traditional sense of the way we expect value to be.

At these times we evaluate.

Is this something to “wantable” that we have to have it, like Buffett and Coca Cola?

No?

Continue as normal.

Yes?

Create new criteria for value, within growth.

Enter only when these criteria prevail, quantum by quantum.

Sit on your growth holding. Don’t just exit in a growth fashion, upon any odd market high.

Exits are reserved for when you comprehensively don’t want the stock anymore.

Why’s it not stinging you when there is a correction?

Meaning, that growth stocks fall considerably during corrections.

Well, firstly, you are not using money that you might need in the foreseeable future.

Then, the correction is an entry opportunity, so instead of being glum, you are busy going about entering.

Thirdly, because you are entering quantum by quantum, you have tremendous entry potential still left, with more being added to this month upon month, from your savings.

So, you’re not worried when your growth stocks fall.

When they rise, your portfolio burgeons, so…

…for all the above reasons…

…that’s why growth, too, apart from your value pursuits.

How to Enter into a Growth Stock

You can play this one in different ways.

The successful way for you will depend upon your risk profile.

What we will be discussing here is a kind of a value way for growth stock entry.

Fine. What sets growth stocks apart from value stocks?

Valuation.

Growth stocks have high multiples.

What does that leave us margin of safety people?

Will we completely have to stay away from growth stocks?

No.

There’s a way.

Loosen your margin of safety criteria slightly. Bring it up to, for example, PE < 15, amongst other things. (We’ll compensate for this loosening, you’ll see).

Now wait.

Let the stock correct.

PE goes under 15.

Don’t enter yet.

Now we compensate.

We let more margin of safety develop in the price.

We want price going down to a technically viable level for entry.

This can be a Fibonacci level, a support, a base, a pivot, or what have you.

Three things have happened.

You have identified a stock through your due diligence.

You have waited for it to reach desired valuation after raising your valuation criteria a tad to compensate for the growth aspect.

You have compensated for your compensation by waiting further for a technical level to be hit before entering.

Now, you enter.

Your entry price becomes your base. (Subsequent entries will always refer to the base-price average).

You have entered with your minimum entry quantum.

You will take many entries, each with your minimum entry quantum.

You will keep taking entry till all the above criteria keep being met.

When even one criterion is not met, you will stop entering and will sit tight.

You will keep watching the stock and its management.

If entry criteria are not met for a long time, but stock is still not over-valued as such, you can enter once for every shareholder-friendly act of good governance, upon an interim dip in price.

You will only stop entering when over-valuation rules and becomes obvious.

You will think of exiting when you are no longer convinced about the stock.

Exit will be done upon a market high only.

Hopefully, you won’t need to exit for a long, long time, so that your investment turns into a multi-multi-bagger!

🙂

A Small Entry Quantum per Day Keeps the Doctor Away

Your ears are probably swelling from all this talk about a small entry quantum (SEQ) per day.

However, you are also noticing the practical element of the SEQ, especially during the current correction.

Whatever’s happening in the world is happening. We need to long-term invest on the basis of what’s being offered to us. When we see margin of safety, we act.

However, we could go on seeing margin of safety for years upon end. Therefore, our entry quantum per day is small, so small that we can last out purchasing for quite a while, and still have ample liquidity left over for all other necessary aspects of life.

There’s another benefit of the SEQ though.

Let’s say that one of your holding turns rogue.

It can happen. So many scams are emerging. There’s a new scam every day.

So let’s just assume, for assumption’s sake, that the management of one of the stocks you are holding is involved in a fraud, and this fraud has come to light.

Where does that leave you?

You stop accumulation of this stock immediately.

Don’t expunge it yet. You’ll lose out. What if the scam is a hoax? Find out. It might blow over. Management might change. Your conviction in the stock might be rekindled. Wait for a market high. If you’re still not convinced about the stock anymore, expunge it on a market high.

What did the small entry quantum do for you here?

You had accumulated the stock over some kind of period, SEQ by SEQ, right?

When the fraud exploded, your holding wasn’t that sizeable. SEQ, remember.

A fraud management won’t wait multiple years to let their fraudulent natures act. Sooner or later, a fraud will get caught. Sooner the better. When this one is caught, your holding is not enormous. It’s size depends upon the number of years of holding and conviction.

The greater the conviction, the longer the holding and the lesser are the chances of the management consisting of fraudsters.

Your small entry quantum has ensured that over many, many years, stocks that end up getting accumulated majorly are the ones where conviction strengthens year upon year upon seeing multiple practices of good governance and shareholder-friendliness.

Scammers stop getting accumulated long ago. They are expunged on market highs.

After a decade or two, your portfolio is brimming with honest multibaggers.

The Pinch of Minuscule Loss

Did I drop the 200 bucks this morning?

Hmmmm…

…naehhh.

I don’t drop cash.

It was probably nicked from my rucksack.

You know what, this incident is pinching me.

I’m trying to brush it off.

Was I careless?

Yes.

Why?

God knows.

Over-confidence?

Maybe.

Do you see?

Even minuscule loss has it’s thought-process-baggage.

Minuscule loss pinches too.

Where does that leave us?

We’re market-people.

We’re faced with minuscule losses everyday.

Hopefully miniscule.

Meaning, hopefully everyone has by now graduated to putting stops.

Don’t underestimate the business of stops.

The human mind gets used to stops very slowly indeed.

Society teaches us to win at all costs. It doesn’t teach us to take a small loss and get out.

Trading works differently, however.

You can’t will a losing trade to win.

Society teaches us to book a winner and post it on social media immediately.

Again, trading is so different.

A small winner needs to be left alone, so that it can grow into a multibagger.

When we enter into the world of trading, we have to first swear to ourselves that we will start to program our minds from day one.

Otherwise, we’re dead-meat.

We need to teach our minds to let winners win some more.

And, we need to programme our minds to cut many, many small losers while they are still small, simultaneously and slowly getting immune to the pinch of minuscule losses by taking these in stride, one, after another after another…

…, till, the rest, as they say, is recorded as successful trading by History.