After reading loads of books and attending multitude of seminars, here is my verdict.
The only key to making money on sustainable basis is diversify, diversify and diversify.
Sounds easy but goddamn so difficult to implement. Simple reason being that an average human brain is not wired to handle diversification. Most of the guys in the trading community fail to see beyond a basket of 5-6 shares.
You might make some money from these limited stock in a short term but eventually they will get too hot, and your portfolio will go down in flames with them.
If you invest in NIFTY ETF, you are investing in 50 companies that make the NIFTY composition, JUNIOR NIFTY ETF another fifty. So by tracking just 2 ETFs, you are tracking a diversified portfolio of 100 companies.
Doesn’t matter whatever promises any one gives you, investing in ETFs is your best bet of making money.
Ok, you don’t like some companies in NIFTY And NIFTY Junior, you feel you have the skills to identify 100 odd shares of your own. That’s very good as there is definitely more money to be made in individual stocks than ETFs.
But do you have the brains to handle a big portfolio of 100 ++ shares. Chances are very slim. That makes you one in a million guy. if you are, I guess you are reading this sipping champagne on your private yacht on way to south coast of France.
You have the brains but not yet so rich as you are a new entrant. My advise is that even then get hold of some software that would help you in tracking and managing these shares. You should be able to update every day your P & L and capital gains statement of your portfolio. You should have buy and sell range of every share in your portfolio.
Sound daunting, isn’t it. Well it for nothing they say that stock market is the easiest place to make or loose your money. If you have what it takes, you are not far off from the shores of Lake Geneva.