Earning money from stock market has never been easy. It may took many months and years for a new investor to see their portfolio turning into green.
Beside of small individual investors, we all know that there exist some big individual investors too in the stock market. We know about them that they have earned the money from markets by investing wisely. They wouldn’t make mistakes as they are the Gurus (experts) in Stock Market.
With this perception, many think “because we are unable to find the way to earn money from stock market, shouldn’t we copy their portfolio and sit free of tension?”
Before finding about whether it is appropriate to do or not, we should know who are called big investors in stock market?
Who are BIG Investors?
Basically, any investor who has enough money power to influence the prices of liquid stocks and is dealing in crores, can be considered as Big Investors or Ultra Rich HNIs (High Net worth Individuals).
Here, we are discussing about the individual big investors and not institutional investors. It is because we are also individuals and not institutional investors who manages money of others.
In India, big investors like Rakesh Jhunjhunwala, Porinju Veliyath, Vijay Kedia, Dolly Khanna, Radhakishan Damani are some of the Popular and Top Indian investors in Indian stock market.
So, is it a good idea to follow portfolio of Top Investors like Rakesh Jhunjhunwala and copy them entirely to earn similar returns of Big Investors?
Let’s see…….
Investors like Rakesh Jhunjhunwala can’t take as big risk as you can take!
Individual big investors are handling hundreds or thousands of crores rupees! Even their small purchase in a stock might led to significant price movement. While same is unlikely to happen with small investors. That’s why, such top investors frequently avoid investing in stocks where small investors can still invest without impacting the share price.
Aim of popular investors like Rakesh Jhunjhunwala is always to grow their portfolio value as fast as could possible in a safest manner. Means, they wouldn’t take risky bets with huge amount of money.
While as a small investor, you have the capacity and power to bet with huge amount in risky stocks and face the volatility.
They could be happy with even 5x returns in 10 years! But will you be happy with it?
Any Big Investor who is holding Rs 500 crore in stocks might feel happy if this amount goes up to Rs 2,500 crore in next 10 years. And why not! They have earned Rs 2,000 crore in 10 years! Earning this kind of amount from stock markets is not easy!
Source: Business Insider India, Forbes
But as an small investor, if you hold only 1 lakh rupees in stocks, will you be happy if this amount goes upto just 5 lakh rupees in 10 years?
We wouldn’t be able to find what is the exact portfolio of Big Investors!
As per Sebi norms, if an investor holds less than 1 percent of the total shares of a company, then their is no requirement to disclose name of the investor in public! It means it might not be possible for us to discover where the popular investors like Rakesh Jhunjhunwala are holding less than 1% percent shares.
For example– if there are total 1000 shares in the ABC company, and you hold 9 shares in the company (which is less than 1 percent), then your information about this holding will not be disclosed in public. But if you hold 15 shares in the company (which is 1.5 percent of total shares and higher than 1 percent norm, then this information will needed to be disclosed by thd company in its shareholding pattern data.
We can easily find through internet where the big investors holds above 1 percent shares. But we can’t find where they hold less than 1 percent. Because of this, we wouldn’t be able to figure out what is the correct structure of their portfolios. Therefore, even if we try to follow their portfolios blindly, in reality, we wouldn’t be able to copy them entirely!
Hard to figure out exact timing of their entry and exit!
Beside of 1 percent disclosure norm, if any big investor is buying or selling any quantity of shares that is below 0.5 percent of the total equity shares of a company in a single day, then again we might not be able to gather data of transactions of them.
For clarity, we will needed to wait for the shareholding pattern data (published by the Company quarterly) to know about any exit or entry of big investors. This will push us far from our big investors and we wouldn’t be able to timely follow their every purchase or sale activity.
Sometimes, big Individual investors can also make mistakes!
Like us, big investors like Rakesh Jhunjhunwala or any other person can also make mistakes in stock market at any stage! Don’t think if they are rich, experienced and knows most of the secrets of stock market, they can’t make mistakes.
It is possible that if you followed your own brain and understanding while selecting stocks and creating your portfolio, you don’t make those mistakes that big investors are making! Even you can outperform them too!
Conclusion
Big investors are not going to bend their portfolio towards risk as much as small investors can bend. Investors like Rakesh Jhunjhunwala are managing thousands of crore rupees while small investors are managing a much smaller amount. They have the capacity to take higher risk while Ultra High HNIs like Rakesh Jhunjhunwala don’t have that capacity!
Small investors (managing thousand or few lakh rupees) can also easily enter in any less liquid scrip/stock without affecting the price of it while Big Investors can’t do similar thing. Purchases of Big Investors are always big thus more impactful on less liquid stocks.
That’s why, small investors are always able to take more risk and can grow their portfolio at a much faster pace than Big investors.
So, following the portfolios of big bulls in India and coping them to make an own exactly same portfolio is not a good idea at all. When an investor is managing several thousand rupees or lakhs, he/she has good number of options to grow their money faster than big investors by bending their portfolios towards more risk and thus less safety.
But yes, using portfolio data of Big Investors to just enhance the confidence level while making an investment decision in a stock can be useful.
Nice article