Where is the finish line?

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Have you ever been visited the Mahalaxmi racecourse ( Mumbai). It is a fantastic place, every first Sunday of February a derby race is organised. ( Derby is a horse race similar to what you have seen in Race Movie)

Epsom Downs Racecourse - History, Races, Directions and More!

So how do you bet on a horse?

You analyse his height, weight, age, the weight of the jockey, the Winning history of the horse, winning history of jockey etc. You make a similar comparison of the participants ( other horses) and try to conclude that this is the best fit as per my knowledge and you bet on the horse.

Let’s take a second scenario on how you bet on lottery tickets?

You just pull out your favourite lucky number and wait for luck to fall in your favour.

Now, what is the difference between both events?

Both events need a sheer amount of luck but one thing you did more is the adequate analysis of race.

What happens when you have done all the background check and yet you fail, you go on to the next analysis with almost care of not occurring the same mistake again while betting on the next one.

So in derby, there are few horses on the same line while in the lottery there are a few 100s of tickets you need to select and in Investing you have >5000 Indian companies ( BSE Listed). from which few companies you need to bet, how you bet and what amount of capital you allocate that make your fortune.

There is a psychological difference between investing and in derby. In Derby you place the bet with the view of entertainment and not to earn a substantial return from it, so you lose out the fear of losing money while in investing you continuously monitor and try to interrupt the compounding process. Take in a similar way if you have given an option of change your bet via ongoing race you frequently bet on different horses and end up losing all money and winning a no one.

So in investing when you have a lot of companies you try to sell one and buy another and again sell and buy, in this process you start deteriorating the quality of investment and start investing in penny stocks which favour a very chance of loss of capital.

In Investing you are leading your own race, don’t look at someone’s profit and find it lucrative and follow them. You have to develop your own methods, your conviction, your approach towards the market, your risk capability, your awareness and thorough research on the company business model and seek to understand the structure growth in the long term horizon. This is your individual race, don’t make your bet like what others think, it is extremely important to understand what you think. After all business environment is changing so fast you may get wrong, learn from mistakes and try to bet on other stock which will be suitable for you and not the group thinks what is suitable for you. Conviction is the only way you can make 20x-100x while if you are not convicted you end up with extremely poor returns.

So in investing you have to draw your own finish line to get the entry and exit from the stock. The magic of the market is it will teach till you don’t learn. He never gives up, he sucks the capital. so makes sure you learn early and learn better at less price.

Thanks for Reading,


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Pujan Shah

Pujan Shah

Pujan is a Commerce Graduate from Mumbai and CFA Level-3 candidate. He does Financial Analysis, Financial Modelling, Valuation, Sector Analysis, and loves to read about every aspect related to Finance.
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