Ever thought of replicating the portfolio of a big investor or a fund house? Everyone is tempted with the thought of earning money easily. And in stock market easy means greasy! Once you get in the habit of finding easy ways of earning money through stock market. It will stick to you like a grease and make your work even more difficult.
Replicating other’s portfolio, for making money in stock market, is not a good option. WHY? Let’s look for the reasons.
1. WHOM WILL YOU COPY?
The very first step for replicating someone’s portfolio is finding that person. There is not just one renowned investor or fund house in the market. The most common answer for this question is the previous year’s best performer.
But, how will you get all the information of trades performed by them, accurately and immediately. Suppose, Mr. X bought 10,000,000 stocks of z company. And by the time you get the news the stock has already gone up by 15-20% from their buying price. And even worse, your entry point can be their exit point.
What makes you feel you so assured that the fund whose portfolio you are replicating, will again be the best performer of year. There are innumerable such examples, which shows the best performer of a year biting dust at the end of another.
Everyone has their own point of view. Two persons sees the same situation differently. And it is a matter of personal preference.
The future of any company does not depends on its past. Rather it depends on its present. While looking at performance, please don’t just depend on previous return factor. Although it is a good point to choose your investment option. But, not the only one.
Many other factors also play a very important role in deciding the movement of a stock. So, it’s very important to analyse them all. And if you are putting in your efforts to analyse them all. Then why to depend on others choice. Go on and make your own choice.
2. WHAT WILL YOU CHOOSE?
Have you ever seen the portfolio of a fund house. It contains 40 to 50 stocks, which brings diversity to it. This diversity helps to survive the volatility of the market. The volatility of market is that one thing which cannot be kept out of it.
Now, imagine the capital to be raised, for making investment in those stocks. This is a very serious problem to consider.
And another important part of this question is, WHEN TO BUY THE STOCK?
This is a very serious question to think before investing. God forbid, but if you buy a stock during it’s down move. And it still continues it’s down move. I don’t need to tell you, what happens in such a condition.
I have seen many such peoples who have been trapped in a stock, just because of buying it at the wrong time. It is very important to have a thinking about the stock’s movement along with reason for movement. And you will know the reasons only when you put in your extra efforts and do some research about the stock.
3. RISK TAKING ABILITIES:
Bigger is the investor, bigger is the risk taken. If an ace investor’s invested amount is eroded by 20% or 30%. It might not affect them the same way. But is the same with you?
They have more money on their side, as compared to retail investors.
So, investing in a stock without knowing about the risks involved is not a good option.
It is quite commonly seen, many fund houses buying stocks of a company which is not performing good currently. But, they have their own strategy and reason behind buying those stocks. Which we will never know. They have their own stop losses decided for every investment.
Also, you will not be immediately notified about the selling of stocks by them. This might widen your loss.
So, it is not a wise choice to blindly follow them.
4. FAKE NEWS:
I have read it at many places, “CLICK HERE TO KNOW WARREN BUFFET’S COMPLETE PORTFOLIO”. But one thing that forbids me from clicking on the link is “TRUST”.
I don’t have trust on the news source? If you have then go on.
But, I’ll tell you my reasons of not trusting the news source:
I. From where did WARREN BUFFET’S portfolio reached the news centre. Did he personally give them? No one has an appropriate answer for this question.
II. The websites where I read these kinds of articles, are the ones which do not have a reputed name.
III. My instincts tell me, “ IT’S A BLUFF!!!”.
So, these are my reasons for not copying others portfolio.