The article based on a video interview, first published on April 19, 2021, has been re-published after Rakesh Jhunjhunwala died aged 62 on Aug. 14, 2022.
Billionaire investor Rakesh Jhunjhunwala admittedly has made most of his wealth by short-term buying and selling of stocks. And yet, he wouldn't recommend that to anyone else.
“My personal opinion to people is don't trade. Out of 10 lakh, 9.99 lakh lose. Trading requires the basic defeat of the human ego, which very few people have. It needs recognition that markets go to extremes on both sides. There is nothing logical or reasonable here,” Jhunjhunwala told BloombergQuint's Niraj Shah in a session at the Shri Ram Economics Summit 2021.
Jhunjhunwala cautions others from trading as it is a high-risk, high-reward activity filled with short term gratification. The only reason he started trading was the lack of initial capital to invest.
“To invest, you need capital. So how do I get capital? The only way was to borrow or trade. Therefore, I studied trading. Trading is at the heart of all my wealth,” he said. “If I didn't earn in trading how would've I invested?”
Yet, if anyone is keen on trading then Jhunjhunwala has a word of advice. “If you want to be a good trader and a good investor, then do one thing: keep the two apart. Don't let one drive decisions for the other. I don't mix my trading with investment,” he said. “If I buy a stock and it goes down I don't put it in my investment portfolio.”
The stocks which I trade in are generally not the stocks which I invest in.Rakesh Jhunjhunwala, Partner, Rare Enterprises
Bull Or A Bear? Chameleon, He Says
The market veteran, who's popularly called the “Big Bull” by television news, said he doesn't care about such tags. Eventually, the goal of an investor should be to make money, he said.
“I don't think it's good to be a bear or a bull all the time,” he said. “You have to be a chameleon. We've got to change as the colours change.”
He said he has made a lot of money from bearish positions in the market. “The mantra to success is to be a realist.”
Watch the full conversation here:
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