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Tweet Buster: What snakes and ladders game teaches us about investing in a bull market

In the last one-and-a-half years, several stocks across the spectrum have given multibagger returns but it was the retail investors’ favourite stock ITC that stole the thunder last Thursday with just a 7 per cent rally, sparking a meme fest on Twitter and other social media platforms. While traders are still debating over the reasons behind the sharp up move in the tobacco-to-hotels conglomerate, analysts say underdogs may lead the next leg of the rally on Dalal Street.

In this edition of Tweet Buster, we sift through the social media channel to bring out the best of investing gyaan, market strategies and the do’s and don’ts of navigating a volatile market.

The goldfish investor

Edelweiss Mutual Fund’s MD and CEO Radhika Gupta took inspiration from a Ruskin Bond story and said investors should be like goldfish. “A lot of noise, news and social media is out there to agitate you, make you squirm and scream and change direction. Don’t let it get to you. Corrections come, like those neighbourhood cats. But they also end,” she said.

Investing vs trading

Value investor Vijay Kedia compared trading in futures to milking a bull.

For Option traders

Zerodha co-founder Nithin Kamath said from Sep 27, stop loss market (SL-M) orders won’t be available for options as NSE is stopping the facility. “This should help avoid freak trades and reduce its impact significantly.”

For higher and steady returns

DSP Mutual Fund’s Kalpen Parekh said we ignore that higher returns come with a lot of temporary uncertainty and so we can’t handle volatility. “FDs have taught us that we get steady returns every year. Equities have taught us we get higher returns. These two results wire us to aspire for higher & steady returns.”

Investing is a game

Parekh said in the game of snakes and ladders, there are three snakes between the numbers 90 and 100 that take you down all the way. “It is important to be lucky and careful at higher numbers. True for valuations too in such high bands. Large corrections or poor returns happen from such high levels of valuations.”

Protection against volatility

Parekh said a fund with lower volatility and lower return can still earn a higher return than a fund with higher fluctuations and higher returns. “Lower volatility funds keep our anxieties low and we end up staying invested longer. We own FDs for long as the returns are straight line.”

For ITC fans

Independent market expert Sandip Sabharwal said ITC’s capital allocation has been very bad. “Very few businesses had the cash flows that they had but the strategy was always a mash-up. Management is too comfortable with cushy offices, good salaries, ESOP’s etc. No drive,” said he.

Market vs economy

Sabharwal said short-term stock market movements and the long-term direction of the economy are two different things. “Stock markets cannot go straight up. If they have a frenzied up move period then the decline will be painful for those who don’t recognise the risks,” he said.

Gems from Ian Cassel

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