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Avoid this Mistake Today to Make Big Profits in the Market

Jan 22, 2020

Ankit Shah, Research analyst

There is a change of wind in the markets.

For a long time, a narrow group of bluechips cornered all the gains.

But now there's a rebound in the broader market.

I showed you in my last editorial how the BSE Smallcap index closed at 12,119 on 22 August 2019.

That was a 40% crash, from its January 2018 peak of 20,047. Hundreds of individual stocks fell more than 40%.

But since then, smallcaps have been making a comeback. In fact, since the start of 2020, the uptrend has accelerated!

You can see this not just in the numbers. There's been a lot of anecdotal evidence too.

Over the last two years, I've talked to my friends and acquaintances about their investments.

Many of them are deeply hurt and disappointed by the steep losses they had to suffer. Some of them simply stopped talking to me about their investments.

I'm sure many of you can relate to this.

It's painful to see your portfolios deep in the red for such a long time. After a while, people simply stop looking.

But now... I see a change of behaviour.

Many investors, my friends included, are seeing a big recovery in the value of their stock portfolios.

Suddenly, there's a renewed sense of hope and optimism!

Of course, the value of their portfolios may still be well below the highs of late 2017 and early 2018.

But after the painful bloodbath for so many months, the current rebound feels like a soothing breeze.

If the small and midcap rally continues at the current speed for the rest of 2020, many of your stocks will be back to where they were when you purchased them.

But hey wait...

There is one very critical detail you need to know.

Based on how you think and act now, one of two things will happen...

  • You could make just average profits.


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The Small Winner

This struck me when I was talking to a dear friend recently who runs a family business.

Most of his stock investments were based on tips from friends and his broker. Over time, the winning stocks left his portfolio, leaving behind only losses.

Until a few months ago, his portfolio was deep in the red. Although he is a long-term investor, he is mostly focused on the price movement of his stocks.

But when I spoke with him last week, he sounded much better. The recent rally in small and midcaps had revived his investing spirit!

He was hopeful the rally would continue through 2020 and that he would be able to 'recover his cost'.

This last point hit me hard.

And it got me thinking...

Is this how many investors are thinking about the rally?

I'm sure some of you can relate to my friend. After seeing your stocks plunge, all you want is to recover your capital.

So, my friend has been fully focused on recovering his cost. He is even thinking of liquidating many of his shares once they get back to his purchase price levels.

There's a big problem with this tendency. It's an automatic reaction to the prolonged pain in the small and midcap bear market over the last two years.

After suffering the agony of falling stock prices, just 'recovering your cost price' feels like bliss.

But is that really what you want?

Did you invest in stocks just to recover your money?

A big, big NO.

You came to the markets to make big money.

And that's the goal I want you to stick to. I don't want you to just 'recover' your money. Rather, I want you to win big.

I want you to ride the next big wave that will not just make you some small gains, but completely transform your fortunes.

How do you do it?

How do big winners think?

What are big investors and traders doing now?

And what can you do to make the best of what's happening in the markets right now?

In my next editorial, I'll reveal the secret that differentiates the men from the boys in the game of investing.

Stay tuned...

Warm regards,

Ankit Shah
Ankit Shah
Editor, Equitymaster Insider
Equitymaster Agora Research Private Limited (Research Analyst)

PS: If you want a simple and fast way to keep up with the markets and not miss out on a potential double or triple-digit profits because you didn't have time to read our reports... Equitymaster Insider is perfect for you.

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Jan 22, 2020

Good Experience and expertise

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