The 5 Secrets to Create a Jhunjhunwala-Like Portfolio

A massive amount of content has been published on Rakesh Jhunjhunwala this week. Unless you've been liking in a cave, you probably heard of his passing away on the very same day.

After the customary messages of condolence and remembrance flooded the internet, there came the flood of Jhunjhunwala quotes on the market. These were fun to read and were quite instructive too.

But then the internet went one step further...

I'm sure you have read, or at least seen, articles about the Rakesh Jhunjhunwala's portfolio and his rise to fame and success. He was truly one of the top investing gurus of India.

And that's fine. But after reading these articles, I was left with the impression that we are missing the woods for the trees.

Everyone sems to be aware of precise details of his investments... when he bought a certain stock, when he sold, how much money he made on an investment, etc.

These details are important but they pale in comparison to the big picture. Jhunjhunwala was worth Rs 460 bn when he passed away.

So the real question to ask is this... How can I create wealth for myself like Rakesh Jhunjhunwala?

Instead of worrying about buying specific stocks, it's more important that we understand wealth creation in the stock market.

1. Circle of Competence

The first point to understand here is that you need to walk your own path in the market. No one ever got rich in stocks by copying someone else.

Warren Buffett calls this your 'circle of competence'.

This means you should invest in only those businesses you understand.

For example, Jhunjhunwala understood the gaming business. This is why he invested in Nazara Tech.

But many people may not understand this business model... and that's fine.

The key to long term wealth creation is to buy great quality businesses and hold them for years, even decades. Jhunjhunwala held the stock of Titan for 20 years.

You can only do this if you have very high conviction in the business and the management. And that is not possible if you are investing outside your circle of competence.

2. Think Long Term

Trading can make you a lot of money if it's done right. Jhunjhunwala himself would trade a lot. But most of his wealth was in his long term winners.

This is crucial when trying to create a Jhunjhunwala portfolio. You can trade all you want. You can make short term investments.

And they may deliver good profits.

But if you want to become really wealthy, then long term investing is the way to go.

Not everyone can do this. You need patience and strong conviction. But if you have selected your stocks correctly and have bought the stocks at the right price, your work is mostly done.

3. Management Matters

• 'The house of Tata is blessed by God'.

The Tata group is famous for its high ethical standards in business. You could say they have set the benchmark for other businesses in India.

Jhunjhunwala appreciated that. He made a lot of money in Tata group stocks over the decades - Titan, Tata Motors, Tata Power, Indian Hotels, and more.

4. Bet Big when the Right Opportunity Comes Along

When the global financial crisis hit, the stock of Tata Motors had crashed. It's purchase of JLR looked like a bad decision.

Tata Steel's investment in Corus was already in the dumps and investors thought Tata Motors would meet a similar fate.

The stock had crashed and it was even trading below book value in late 2008.

It was a great opportunity to buy the stock in large quantities...and Jhunjhunwala did just that.

The rest, as they say, is history.

5. Have Faith in India

One of the reasons why he was called India's Warren Buffett was because he shared an unlimited optimism about his country.

Buffett is a perma-bull on America.

Jhunjhunwala was a perma-bull on India.

He was convinced the next (and biggest) bull market was just around the corner. He was sure India would do great no matter the challenges. He is famous for saying that India's economy would overtake that of China's in 25 years.

Many did not believe or agree with him. But the numbers of such people have greatly reduced over the years.

10-15 years ago, it was common to find many people who would mock his unbridled enthusiasm for India and the Indian stock market.

Almost no one mocks this kind of attitude anymore. India is well on its way to becoming a developed nation by 2047.

If we achieve that, our economy may indeed overtake China's by then. Just imagine the wealth that will be created in our market.

These are the real secrets behind Jhunjhunwala's wealth.

People today are focused on his stock picks...and that's understandable.

But if you want to create huge wealth for yourself in the stock market, dig deeper into how Rakesh Jhunjhunwala got there. Finding the right stocks is only one part of the whole picture.