Early in my investing career, a loans expert asked me, “what are you going to do, if the firm you have invested in suffers a large share price loss”?

No one invests to lose money.

But investing in equity markets is different from giving a loan or buying a product from Amazon. If you buy a product on Amazon and it is defective, you return it and should get a refund. When you give a loan, you try to ensure it is repaid to you in full. If repayment is interrupted, you try to understand why and encourage compliance.

In Direct equity investing, one has to expect some amount of losses. If you do a lump sum investment in 10 companies of an equal amount, the returns in a 5 years period will look something like this. 5 companies will be loss making for you. 3 will be barely giving average returns. But 2 should give you outsize returns, of 5-10X. All this together should give you Sensex average or Sensex plus returns.

The right thing to do when you see an equity investment fail, is to exit fast and reinvest in the stronger firms. Exit the losers and reinvest in the winners.

To the loans expert, my answer is, “book your losses, and lose the battle, to win the war”.

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Regards, Punit Jain

DISCLAIMER

This document has been prepared by JainMatrix Investments Bangalore (JM), and is meant for use by the recipient only as information and is not for circulation. This document is not to be reported or copied or made available to others without prior permission of JM. It should not be considered or taken as an offer to sell or a solicitation to buy or sell any security. The information contained in this report has been obtained from sources that are considered to be reliable. However, JM has not independently verified the accuracy or completeness of the same. This is a marketing collateral. The securities quoted here, if any, are for illustration only and are not recommendatory. Neither JM nor any of its affiliates, its directors or its employees accepts any responsibility of whatsoever nature for the information, statements and opinion given, made available or expressed herein or for any omission therein. Recipients of this report should be aware that past performance is not necessarily a guide to future performance and value of investments can go down as well. The suitability or otherwise of any investments will depend upon the recipient’s particular circumstances and, in case of doubt, advice should be sought from an Investment Advisor. Investment in securities market are subject to market risks. Read all the related documents carefully before investing. Punit Jain is a registered Research Analyst under SEBI (Research Analysts) Regulations, 2014. Registration granted by SEBI, and certification from NISM in no way guarantee performance of the RA or provide any assurance of returns to investors. JM has been publishing equity research reports since Nov 2012. Any questions should be directed to the director of JainMatrix Investments at [email protected]. Name of the RA as registered with SEBI – Punit Jain, SEBI Registration No. INH200002747.