How this retail investor made a fortune in the market

Feb 16, 2021
Retired banker, who prefers only being known as Ganesh, began investing in his twenties. He started off with a monthly salary of a few hundred rupees and astonishingly attained financial independence in little over two decades. In his quest to lay to rest the misconception that you need a lot of money to invest in the market, he graciously agreed to share his story. His wisdom is invaluable.

Here are his 6 investing lessons for equity investors. 

#1. Work with what you have. Don’t be obsessed with what is against you.

I did not come from a rich family. I was not loaded. I had no monetary inheritance waiting to be claimed. My monthly salary at my very first job was Rs 350. No one in my family invested in equity. So when a friend spoke to me in detail about equity investing, I was interested but guarded. Since my savings were meagre, I treaded cautiously and dabbled only with very small amounts.

A couple of factors were in my favour.

This was around the mid-70s, when multinationals had to dilute their shareholdings to 75%, as mandated by FERA. So there were numerous public issues. Be it Tata Finlay, Colgate, Britannia, Hindustan Unilever, and later Asian Paints and Infosys, I applied for all in whatever quantity I could afford to.

This was at a time when stocks were considered as a pure speculative play and investing in equity was far from common amongst the middle class. Due to lack of demand as compared to today, this helped when it came to allotments.

The Odd Lot market aided my journey. Every company had minimum trading lots (25 shares, 50 shares etc), and the “extra shares” were the odd lots which were not easy to trade. The price of these shares were less than those in market lots; the difference varying from Rs 2 to Rs 10. Buying shares from the Odd Lot market and making it a market lot to sell was a profitable business.

Since there were no magazines or literature or social media or webinars or the internet to help one research a stock, I stuck to MNCs which were reputed and had attractive listing prices. 

#2. Your investing strategy may evolve. And that is okay.

My first application was for 50 shares of Tata Finlay (subsequently Tata Tea and now Tata Consumers). At Rs 10 per share, I was allotted 50 shares. It got listed at Rs 19. This was my first investment in 1976 and maybe I was fortunate with beginner’s luck. I was thrilled to see my investment of Rs 500 become Rs 950 in just 2 months.

Due to a paucity of surplus cash, my investing strategy in the 70s and 80s was mainly switch deals. I would sell shares after 3 to 5 years and invest the proceeds in lesser priced shares which I believed had potential. 

After that I began to look at capital protection. I became a buy-and-hold investor in the 90s. In fact, I still hold Hindustan Lever, Sundaram Fastners, Sundaram Clayton, Colgate, Asian Paints, Pidilite, Infosys, ITC and L&T.

As I mentioned earlier, I began by dabbling in the primary market. But once I began to understand annual reports and had a small portfolio in place, I cautiously ventured into the secondary market. A friend who started as sub broker helped with suggestions which I researched further. In exchange, I introduced him to potential clients.

#3. You need to give your investment time. But you can do that only if you have conviction.

I learned patience early in the game. Whether waiting for primary issues or for the right number of stocks in the Odd Lot market, the waiting period could be long.

For equity to work in your favour, you need to stay invested and refrain from constant tinkering of your portfolio. In this way, not only does the share price appreciate, but share splits, bonuses, mergers and acquisitions also work in your favour. And don’t underestimate the power of dividends.

1976: I acquired 50 shares of HUL (public issue) at Rs 16 per share. Total cost being Rs 800. I held onto them for a decade and increased exposure when possible. There were times of pessimism and questions about future prospects. I held on to my conviction and did not surrender even during the buy back offer. Later, HUL split its shares and the face value (FV) dropped from Rs 10 to Rs 1. So x shares got converted into 10x shares with a FV of Rs 1. The price of one share today is around Rs 2,220.

1980: I bought 50 shares of Sundaram Clayton (public issue) at Rs 14 per share. I added more when possible. Once the company was split (Sundaram Clayton and Wabco Industries), I got x shares of Wabco for x shares of Sundaram Clayton both at a FV of Rs 5. Recently, Wabco bought back the shares at Rs 7,300 per share.

#4. Equity is not an end in itself. Sometimes, you may need to book profits to take your family on a holiday, or maybe even an emergency. 

I had a medical emergency in 2001 for which I needed Rs 1 lakh. Back then, insurance companies only reimbursed amounts and cash-free hospitalization was not available.

I sold 200 shares of Satyam Computers which was then quoting Rs 500 per share. Later that year, the market collapsed after the 9/11 tragedy. Tech shares tumbled like nine pins and Satyam fell to Rs 130. I bought back the same number of shares and sold it at a profit later.

Also, draw a balance between saving and spending. Don’t hoard all your money. Book profits and use the money to create beautiful memories.

#5. Tame your emotions.

With patience and conviction, even an average person with common sense can make money.

The trick is to manage your temperament. There could be political unrest, rumours of war, a scam or, as we recently saw, a pandemic that causes panic in the market. Such times are telling. Emotions cannot be back tested, that is why bear markets look like wasted opportunities.

I benefitted during the Harshad Mehta Scam, Y2k bubble and last year’s crash. Don’t act on notional losses. Instead, channelize your attention to buying more.

#6. Be clear on what you are staying away from.

Properly selected businesses grow consistently on their own due to capable management. That is why management integrity is of paramount importance. A good business with a bad management may give substantial returns but there is no telling when anything untoward might happen. That is why I never invest in such businesses. I am okay missing out on superb gains from such stocks.

Investing is meant to be peaceful. I am not in this to get sleepless nights. And neither should you.

(Investment Always Involves Risk of Loss)
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ninan joseph
Feb 17 2021 03:50 PM
Nostalgic article - reminded me of my father, who used to apply for IPO. Everything was on physical form, filling up application to submitting it to a Bank. I think on a daily basis, newspapers used to publish the closing market price. When I used to check the cricket news, he used to check the share price news. All sale were manual, need to give the application to a broker. They will then search for the market to sell, I think there were local markets such as Bangalore, Mumbai etc (not sure).

Still remember names such as Sundaram clayton and MRF.
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