Running a Portfolio Management Service

If I were to think in terms of possible entrepreneurial ideas that I might like to implement in the future, portfolio management services would rank pretty high. Even though I'm a pretty qualified and an experienced translator and professional linguist in my language combinations, I wouldn't like to necessarily start a translation or a localization company.

But it does look pretty attractive to me if I could have sufficient capital to do two important things in my life. Both are equally important in my perspective. The first is to run a series of highly successful educational institutes with excellent faculty. The second is to offer portfolio management services. I am sure I could offer good returns compared to conventional investments such as bank term deposits.

When the stock markets crashed about two weeks ago, I bought Parsvnath stock at Rs. 103 [$2.45] per share and on Friday, July 25th, it was quoting at Rs. 117.75. So, I had a notional gain of Rs. 14.75 or about 14% in two weeks. On July 25th, the stock made a high of Rs. 122.

I guess that is a pretty good return. If one sells at a 14% profit within two weeks and then sits pretty till the markets present another opportunity, and buy again, one could be making a goldmine. This is why I feel I could really offer excellent portfolio management services.

Post-Crash and Purchase

Today the Bombay Stock Exchange fell by 500 odd points and the National Stock Exchange touched its low for 2008. The biggest lesson in the stock markets is to buy like a long term investor in a falling market. This requires a huge amount of guts and belief in one's positions. This was one lesson I learned myself last year even though I was familiar with Warren Buffett's story. Last year, I built a pretty good position in Gujarat NRE Coke [pretty good position for an individual small investor] at Rs. 58 per share but couldn't be patient and then sold out at Rs. 61 per share but within 3 months of my selling out, the stock had zoomed to Rs. 120, and then it went up even further. So, if you think a stock is good, it is good, irrespective of market crashes and recessionary conditions.

Anyway, I had discussed Tata Motors and Parsvnath in my earlier blogs. Today, I purchased both stocks in small amounts. Another secret is to buy in small amounts so that one tends to get the best price and one's investment is normally protected. My purchase price for Tata Motors was Rs. 512 and I bought Parsvnath at Rs. 169 per share. I had discussed Tata Motors as looking attractive at Rs. 540! So, I got it at a 13-month low. And I got Parsvnath at a 12-month low. I think these are pretty attractive prices. I'll keep on adding small amounts but I'll not buy Tata Motors if it crosses Rs. 525 and I'll not buy Parsvnath if it crosses Rs. 180. This way, I am making out my personal SIP-Systematic Investment Plan, without going to a mutual fund.

I expect the Indian stock markets to be subdued for the next 5-6 weeks. They may perk up a bit by August in view of the results of the latest quarter which are announced in September. They may also gyrate to the tunes of Wall Street. So, this means that there are going to be sufficient buying opportunities in the next six weeks and there is no hurry to go out and buy everything at once.

It is this staggered approach that really helps a small investor in building a big portfolio. Always remember that what goes down always goes up and what goes up always comes down in the stock markets. I really think this is exciting stuff. This is a real bargain buy situation, where you get the best possible discounts on the brands that you always wanted.

Investing in the Indian Stock Markets--Introductory Comments

For those who have never invested in the stock markets, it might seem like a muddle and there are some who would say that the stock markets are a gamble. There are some colleagues of mine who are academics and they feel that it is quite unbecoming of an English Professor like me to invest in the stock markets or to possess an active interest in investing. But my interest in investing goes back a long time. It was active in my family and the first person in my family to invest in the stock markets was my grand uncle. He invested in the Bombay Stock Exchange [BSE] most probably before the Second World War. So, I bring a genetic experience to investing in the markets that is at least six decades old.

I never attended a workshop or a training session on investing nor did I ever complete a degree or a diploma or an MBA in Capital Markets or an MBA in Finance. But I picked up my skills slowly, observing at home, reading widely and investing myself.

If you study any great investor, such as the great Warren Buffett, who I consider a guru, there's always something very precious that you will learn. Buffett is never in a hurry to buy. You can always say that well, he's old, so, he could afford to wait. But this is actually a very sound strategy and it has reaped rewards for many people in the past.

The first lesson that you learn from these stalwarts is that what goes up always comes down and what comes down always goes up in the stock markets. So, when there is a great euphoria in the stock markets, that is probably the best time to sell and make a profit. And even if you buy in the euphoria, you should buy in limited quantities and you should buy only front line, blue chip stocks.

To take a small example. In February 2008, I bought some shares of Parsvnath Developers [NSE Code: PARSVNATH] for Rs. 190 per share, then by May 2008, it had gone up to Rs. 235-240, which is a gain of Rs. 45 or 25% within a span of three months. And today, on June 3, 2008, it is back at Rs. 189 per share. As of today, the year low is Rs. 169 and the year high is Rs. 598. We know that there are fears of a depression in the markets and that most people are scared of the recessionary fears in the US. But Rs. 190 is not a bad price because when I tracked the stock price last year, there were at least five occasions when I had bought the stock at Rs. 270 a share and sold it at Rs. 350 a share. And today, at Rs. 190, the stock seems to have few takers. The fears are justified because the markets feel that Parsvnath is a real estate company and that the subprime crisis will affect its fortunes. One doesn't discount the market fears and one does not doubt what the markets think but unless the company were to be completely wiped out like Bear Stearns, there isn't much of a crisis. And even in the case of Bear Stearns, after the controversial J P Morgan deal was sealed, its stock price went up!

I hope you liked this small introduction to the Indian stock markets and I will follow up with more posts on this subject in a regular manner. Please do feel to comment and to share your views.