20.10.2020
People around us keep giving unsolicited advice that, in order to build wealth, investments have to be for the long term and stocks have to be accumulated over a time period. But, really, is it possible do the same with any random stock or sector?
Going through 5625 listed stocks on BSE, I found that 449 stocks have eroded investor capital over 1 year, 5 year and 10 year time frames. During the course of this wealth erosion, many became penny stocks too.
The sectors are well known to all: Power, Infrastructure, Realty, Textile, EPC etc are well documented as wealth destroyers due to various reasons. Lets look at the stocks which haven't lived up to investor's expectations, even on a longer time frame.
- Automobile & Auto-ancillaries
- Banks
- Finance
- Infrastructure
- Power
- Realty (Real Estate)
- Textile
No wonder many of these sectors and stocks stand out of favor and the markets are skewed to only a few stocks and sectors. A good reason for under performance of many portfolios and MFs.
Who said Investing was easy and building wealth over long term was child's play?
Definitely investing is not a childs play because it's the return that haunt you in long term. Firstly, you should always choose to build position slowly rather than investing your overall capital in one go. Secondly, considering fundamental and growth prospects of specific company is not enough, you should also consider the overall sector that company belongs to plus every macro factor having a slight chance to affect that sector. Never feed your company more than its value. A tight monitoring and rebalancing can save you from incurring losses in long term.