Deal With Failures Like A Boss

Feb 21, 2017 | 06:53 PM IST

Inspiring stories are not only about success, but they are also about how successful people deal with failures. If any success story just paints the uni-dimensional image of a person's success, it is bound to mislead the readers. Success can only be determined by how a person sails through the choppy waters of adverse times as it's the adversity which is the true test of the character.

Similarly, in the context of stock market, people often cite examples of Warren Buffett and Rakesh Jhunjhunwala. Mostly they focus on the successful aspects of their careers. But it will be even more inspiring to understand how they cope with the failures. For a change, let's shift our focus from their extraordinary successes to their untold failures and try to understand how they dealt with hard times and restored their old glory.

The Masters On The Wrong Foot!

Both Rakesh Jhunjhunwala and Warren Buffett have uncanny similarities in their investment style, but few know they resort to same measures while dealing with mistakes. In 2008, Warren Buffett increased his company's stake in ConocoPhillips, an oil company. At that time oil and gas prices were at their peak. The cost of the deal was several billion dollars. Needless to say, Mr. Buffett was expecting a surge in oil prices. However, soon after the deal went through the oil prices started to crumble. Mr Buffett graciously acknowledged his error of judgement and called it a 'dumb investments'. However, the point to note here is - after committing this mistake he hasn't repeated a mistake of a similar nature. That's what we call learning from one's mistakes.

Rakesh Jhunjhunwala once candidly acknowledged that he paid quite a high price for his overzealousness in investment. He said that on many occasions he ended up investing a lot of money in illiquid stocks. As illiquid stocks are difficult to manage they pose a great risk to investors. Jhunjhunwala usually buys a high volume of stocks, in case of misjudgement the losses he incurs are extremely high.

How The Masters Bounce Back

But as the masters are known to turn the failures on their heads, Jhunjhunwala too derived positive learning from his mistakes. He says that never go overboard in your investments, even if you are convinced about the prospects. His advice to investors is to invest only 15% of the portfolio value in one stock. That's a value advice for all those short-sighted traders who keep looking for Rakesh Jhunjhunwala stock tips.

Key Takeaways For The Retail Investors

There is a saying, smart people learn from their own mistakes while super smart people learn from others mistakes. Here's an opportunity for retail investors to learn from the mistakes of the people who are on the top of their game. Both Rakesh Jhunjhunwala and Warren Buffett have been a victim of some erroneous judgement on several occasions. But unlike other investors, they don't panic when losses show up on the horizon.

Most of the times losses phase out if you have a long term investment perspective. On the other hand, some stocks adamantly keep heading downward, in such cases, one has to bite the bullet and book the losses. The bottom-line is you never enjoy 100% success in stock market. In your portfolio, there are always going to be some stocks which wouldn't perform as per your expectations, but the focus should always be on overlapping failures with success. That the success mantra which has kept Jhunjhunwala and Buffett afloat for ages.

 

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Niveza Editorial Desk : We are a team of stock market nerds trying to stay ahead of the herd. We spend our grey cells everyday to pave a smooth road for our clients in the shaky world of stock market. While...
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