Welcome to a channel dedicated to Indian traders and investors. In this session, we will cover 7 key lessons that every investor can learn from the king of the Indian stock market. But before we get going, if you’re new to this channel, don’t forget to subscribe and don’t miss out on all that learning.

He is one of the most successful and admired investors in the Indian stock market. As of 2019, he is one of the richest men in India with assets of over 20,000 crores. So, what is the secret behind Rakesh Jhunjhunwala’s success and what is that you and I can learn from him?

So here are the 7 important lessons from his life for everybody.

Lesson number 1 – Look for companies with a competitive edge

One of the investment philosophies of Rakesh Jhunjhunwala is to find companies whose success is hard to replicate, meaning that the company must have developed some edge over its competitors that are hard, if not impossible for others to copy. Take, for example, his investment in the credit rating agency, CRISIL. When Jhunjhunwala invested in CRISIL, a lot of stock market gurus were scratching their heads as to why he invested in a credit rating agency, leaving aside so many well-established marquee names. But the reasons became clear very soon. As the Indian economy grew the need for a rapid credit rating agency increased and CRISIL quickly established itself as the largest player in this market.

The kind of brand and positioning that CRISIL  has established for itself was very hard for any new entrant to replicate and all that reflected in the stock’s price. Jhunjhunwala invested in CRISIL back in 2002, when it was trading at about 200. Since then, the stock has gone up to eight times trading at around 1600 rupees and another surprise investment of Jhunjhunwala was in Delta Corp, a casino business. Of all the businesses out there, people wondered why he decided to pick a significant stake in the casino business. But Jhunjhunwala knew that in India, it’s extremely hard for new companies to get a license for casinos and also very few companies had the experience to operate large scale casinos successfully, and Delta corp had both. This competitive edge, made a lot of money for Delta Corp and Jhunjhunwala as the stock has gone up 6 times in the last 10 years. The main takeaway here is that we should look for companies that have a competitive edge.

Lesson number 2 – For becoming a successful investor, you don’t have to be right all the time.

One of the common myths we have is that successful investors are the best stock pickers and that they’re right all the time, but if you look at Jhunjhunwala’s track record, he has been wrong a lot of times. Some of his recent failures have been dish TV, which fell about 70%, DHFL which fell about 80%, Mandhana retail ventures fell about 80% and Geojit financial services, which fell about 70%. However, despite these mistakes, his wealth is still growing.

Do you know why? Here is he is secret. When he’s wrong, of course, he’s taking all these losses, but when he is right, he makes so much money from one stock that all his losses on losing investments are negligible in comparison. Take, for example, Titan, he bought Titan when it was trading five rupees, and today it is over 1000.

So, this one stock of Titan has made him more money than all the losses of dish TV, DHFL, Mandhana Retail and Geojit Financial Services combined. That is the power of finding the right opportunity. So instead of worrying about being wrong, we should focus on finding the next big opportunity that has the potential of generating immense wealth.

Lesson number 3 – Trading versus Investing

Jhunjhunwala was not born into a rich family. When he came to Mumbai to start his career in 1982, he only had 5,000 rupees in his pocket. Now you can be the best investor in the world, but with only 5,000 rupees in your wallet, you still cannot become rich because investing needs capital and without capital, knowledge is of little use.  He was very much aware of that.

Therefore, he started his career as a trader, not an investor. He spent over a decade trading actively to build the capital required for investing and trading. It not only gave him the capital to invest, but also the knowledge of the stock market, which later became critical to his success. Jhunjhunwala says that trading should be used to generate short-term gains and investing should be used to turn those short-term gains into long-term wealth.

Even to this day, Jhunjhunwala trades actively because he sees that trading keeps him mentally sharp and engaged with the market. If you’re not sure about the difference between trading and investing, we have explained that in a short video using examples. Do check it out in the description.

Lesson number 4 – Go big on your conviction

One of Jhunjhunwala’s personal qualities that almost no one talks about is this ability to go with full force when he finds that right opportunity. Let me give you some examples. Back in the 1980s, the stock of Sesa Goa was trading at a very discounted price of 24 to 25 because there was a depression in the iron ore industry. However, Jhunjhunwala saw a huge opportunity in this undervalued stock and invested about one crore rupees which at the time was a majority of his capital.

This trade was very risky and had it not worked out, would have incurred huge losses for Jhunjhunwala, but this bet did work and it worked so well that in a matter of few months, Jhunjhunwala made 400 to 500% profits on this one trade. Later in 1989, he made another bull move. The stock market was down before the budget announcement because everybody thought that VP Singh’s government would announce a budget hostile to the stock market.

But Jhunjhunwala was of the opposite view. His view was that VP Singh, who himself comes from a business background would never present a budget that would hurt business. So, he put all his money in the stock market just before the budget. This again was a very risky move because had the budget been really bad as everybody was predicting, Jhunjhunwala could have incurred some serious losses, but his convictions turned out to be right. The budget was indeed business-friendly and the stock market rallied so hard that Jhunjhunwala’s net worth went up 20 times within a matter of few months.

The most spectacular move, however, he made was when Harshad Mehta was pumping the stock market aggressively in the 1990s when the whole country was celebrating the bull market and the average investor was buying at crazy valuations, Jhunjhunwala was shorting the market aggressively.

He was convinced that the valuations of the market were unsustainable and that the stock market bubble would pop any time. Therefore, he put an insane amount of his wealth shorting the market. Finally, when the Harshad Mehta scam was exposed, the market did crash. As a result, Jhunjhunwala made a lot of money, but what people don’t know, and Jhunjhunwala later admitted in an interview was that if Harshad Mehta would have continued to scam for one more month, Jhunjhunwala would have become bankrupt.

That is the extent to which Jhunjhunwala goes when he’s convinced about an opportunity. Now, an average investor like you and me cannot and should not take these kinds of risks.

But the fact of life is that when there is no risk, there is no reward. I don’t advise you to take the risk taken by Jhunjhunwala, but at the same time, if you want to make serious money from the market, you cannot be afraid to take even a moderate amount of risk.

So, get educated about the market first, and then don’t be afraid to take calculated risks by the way. If you want to learn more about Harshad Mehta’s scam, do check out the video in the description below and also, we have linked videos that explain how shorting works.

Lesson number 5 – Have a lot of patience

One of the amazing qualities of Jhunjhunwala is his immense patience with the stocks. For example, during the time of making this video, only 2 stocks from his portfolio were giving positive returns and the rest of them are in red, but he doesn’t care because he buys the business and not the stock.

As long as the fundamentals of the business are intact, he doesn’t sell even a single stock. He has seen so many stock market cycles that he doesn’t get scared from the occasional stock market corrections. He knows that the next bull market will take care of all his problems. Take, for example, his investment in Titan.

At one point, the shares of Titan fell 30% from the top. Now, if one of our portfolio stocks fall 30%, wouldn’t we panic and take some impulsive decisions. He, on the other hand, didn’t sell even a single share of Titan because he believed in the business of Titan and that patience paid off handsomely.

Today, Titan is the biggest wealth generator for Jhunjhunwala. It’s something he might’ve missed, had he taken any impulsive decision. I think we all like the concept of patience, but the moment our portfolio starts to show some losses, we panic and start making bad decisions. That is the difference between an average investor and an ace investor like Jhunjhunwala.

Successful investors like him have developed a very high level of tolerance to stock market fluctuations, and they are not easily shaken out of their investments. The next time you panic about your investments, remember to be rational and patient rather than being impulsive and impatient.

Lesson number 6 – Develop a passion for the stock

If you look at the journey, he has always been passionate about the stock market. When he was just 9 years old, he used to ask his father how the stock market worked and was fascinated with how the prices fluctuated daily. Later in life, his passion gave him the strength to cross the initial hurdles in his career and always stay motivated despite his initial failures. Even to this day, you can see him joining the quarterly conference calls of the companies, where he has investments like Federal bank, Titan, and Lupin, etc, where he asks very sharp questions to the management and provides feedback, in case he feels the management is not on the right track.

For his status, he could easily have someone else do it for him, but he’s so passionate about the investments that he wants to do it himself. This is a great lesson for all of us, especially the ones who look for stock market tips. Jhunjhunwala says that if you want to become wealthy, you need to do your research and develop a passion to learn.

If you depend on others for stock market tips or suggestions, you will never find the kind of success that he has.

The last lesson 7 is Life is not about regrets and is about learning

While researching for this video, I’ve watched a lot of interviews with Rakesh Jhunjhunwala, and one of them was by Ramesh Damani, who himself is a very successful investor. Referring to a series of recent losses that Jhunjhunwala incurred, Damani asked Jhunjhunwala whether he had any regrets.

To that question, Jhunjhunwala gave a very insightful answer. He said that life is not about regrets and it’s about learning from every mistake he made.

He said he had learned something new and those mistakes made him a better and more mature investor and those mistakes were his teachers. So, the next time you regret making a mistake, use it as a learning opportunity to become a better investor and a better person.

These were the 7 lessons from Rakesh Jhunjhunwala’ stock market success and hope that you learn something new.

All the best….