Strategies of RETAIL INVESTORS - Part 2.

For some reason the investors whom I have seen succeeding and sticking for the long term had been people of over 60. Not that they finished all their commitments and responsibilities, to come into the stock market. But they used the investments to make a living. I mean they really made money investing in the stock market to meet their needs. My next story is also about one such person, and it is true.

This Gentleman was young and married in his 20's. As he was a well educated professional, obtaining a lucrative break overseas was not a big issue. He worked in these countries for a while, and started saving a decent amount. During this period 2 new entrants joined the family. Eldest was a boy and the youngest was a daughter. However He had to learn one of the most shocking news in his life one day. He found his wife to be unfaithful. Although it was tough, he divorced his wife, and succeeded in taking the custody of the 2 children. Thereafter he chucked his highly paid job to make way for him to be with his children. He had to take care of them, educate them, and above all he had to now think of earning an income to feed the 3 of them. He put a sizable portion of his savings in to a fixed deposit, and secured a safe monthly income for them. The next he looked in to the stock market. A small % of the rest of the savings he invested in forex. These were the 3 lines of investments he decided to make. This was the basis or the foundation of his plan for the next 30 odd years. He too did not invest on a house of his own, as he had to put all his wealth entirely on serving and looking after the kids. Both of them were given the best of education in some of the well known schools in Colombo. He has now educated the children and both are in their 30's and doing really well in life. The daughter went on to build a house for which he too contributed. But still he is investing, which is what kept him going for such a long time.

His strategy in the market I can summarize as follows;

- Due to his responsibilities he was compelled to come to the market after 10.30 a.m. This gave him  an advantage as by then the trend is established.
- He hunts for stocks where the prices are below the nett asset value. He knew them by heart.
- Also he wants counters with smaller share capitals, but doing well in profits, and becoming big.        which makes the companies to capitalize their reserves, and split, so that he increases the number of shares he is holding.
- He also wants high dividend paying companies.

His order entry and exit is as follows:
- Always put GTC buy orders on down markets way below the prices they are trading at.
- Always put GTC sell orders on up markets way above the prices they are trading at.
- He would never ever put buy or sell orders for more than 500 shares. Even if they are trading below 5 rupees.
- The trick was to accumulate many when the prices are falling. Then to sell at the maximum when the prices were increasing.
- If he gets stocks at lower prices and move up immediately in a few days, he would sell.
- Also if he sees the prices turning down after going up extra-ordinarily high he would amend the orders, and sell fast.
- As he does this for a living, he knew he had to be diligent in the way he was handling.
- He will never sell a stock for peanuts, always wanted the maximum possible price.
- He was disciplined, brave and patient. That's why he would buy even when bombs were exploding, and the war was at it's best for more than 20 years of his investment career.

He did not have it written anywhere, but he had it written all over him. This has made this guy successful , and for me he is one of the unsung heroes in the Colombo Stock Market.

It is not easy to make money in the stock market, but not hard.