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Do you know a person who started with an investment of just Rs 5000 and built a wealth in just a few decades? He is also called the Warren Buffet of India and his name is Rakesh Jhunjhunwala. Today, we will learn about his inspiring investing journey and the 10 golden rules he followed to conquer the stock market.
So let's start with the real story of Jhunjhunwala ji. First let us talk about his early life. Rakesh Jhunjhunwala was born on 5 July 1960 in Mumbai. His father was an officer in the Income Tax Department and was himself interested in the stock market. Jhunjhunwala ji often used to listen to his father reading the newspaper and talking about the stock market.
From here, curiosity arose in him as to what the stock market actually is? He completed his Chartered Accountancy and started with an investment of Rs 5000 in the year 1985. Now let's talk about his first big earning. His first big bet was Tata T shares. At that time, Tata T shares were available at ₹43.
Jhunjhunwala ji bought 5000 shares and in 3 months that share reached 143. He earned lakhs in just a few months. After this he invested in many companies like Titan, LP, Chrysler, Ascots and SAIL. Titan proved to be his biggest and most successful bet, in which an investment of Rs 5 crore has today become more than Rs 8000 crore.
Now let's talk about Jhunjhunwala ji's 10 investing rules. Rule number one: have a long-term vision. Money is made in the stock market when you know how to wait. Jhunjhunwala had invested Rs 5 crore in Titan and held that stock for about 20 years. Today that investment has become more than Rs 8000 crore.
Now let us take the example of Tiden. The stock which was priced at ₹2 in 2002 has now become close to ₹3000. So what we learn from this is that great wealth is created only when you give it time to compound. Rule number two: Understand the business, not just the price. Chunwala ji did not keep any stock just because it was cheap.
He understood the business model of that company, its product and its management very well. For example, Chris Jhunjhunwala ji bought this stock because he was confident of the increasing role of the rating agency. From this we learn to look at the process and not the price. Rule number three: Do n't be afraid of risk, but take it wisely.
It is important to take risks but not blindly. Jhunjhunwala invested in many stocks that were unpopular at that time like Lupon Pharma and Escorts tractors when people used to shy away from them. For example, Escorts, he bought this share when no one was asking for it in the market. Later the company turned around.
Now the lesson from this is to be a contrarian but with data and conviction. Rule number four: Don't love the market, have logic. Jhunjhunwala ji was never emotionally attached to any stock. If he felt that there would be no growth now, he would exit. For example Zee Entertainment, he invested in Zee but booked profits on time as the business direction was changing.
The lesson to learn from this is to keep emotions out and the market is not your friend but just a game. Understand this. Rule number five: Patience is profit. He who has patience will also have wealth. Jhunjhunwala ji has waited for years for every big earning of his. Many stocks in his portfolio looked disappointing for 5 to 10 years but then got explored.
For example, he held Titan for 20 years. From this we can learn that do not try to become rich quickly. Wealth comes only through patience. Rule number six: Learn from the mistakes of others. Jhunjhunwala himself says that I have learnt the biggest lessons from the mistakes of others. He witnessed the falling stocks of many PSU companies and learnt how much damage bad management can cause.
For example, he never invested in Kingfisher Airlines because he did not trust Vijay Mallya's style. From this we can learn that you can make others' failures your mentor. Rule number seven: Book profits at the right time. The profit is not yours until you have booked it. Jhunjhunwala used to book partial profits in his multibagger stocks from time to time.
For example, he realized profits by selling some stake in both Titan and Lupin and invested that money in new ideas. The lesson is don't be greedy. Save your profits. Rule number eight: Avoid overconfidence. The market teaches everyone. Sometimes with love and sometimes with a slap. Jhunjhunuwala himself has suffered losses many times due to overconfidence.
For example, he lost money in companies like DHFL and A to Z Infra. Later he admitted that he had made a wrong analysis. The lesson we learn from this is not to consider yourself an expert. The market is the greatest teacher. Rule number nine. Do n't sell in panic. The market will go down and come up.
Nothing will happen by being afraid. Jhunjhunwala ji did not sell in panic during the market crash of 2008 but invested more in good stocks at that time. For example, he bought more shares of Titan and Lupin in the bear market. From this we learn that taking decisions on fair basis only leads to loss.
Stay handy and be smart. Rule number 10: Give the market time. Do n't do timing. No one person can time the market correctly over and over again. Jhunjhunwala ji says that time in the market is more important than timing in the market. For example, he did not try to buy any share cheaply and sell it immediately.
He had a 10-20 year view. The lesson to be learned from this is to think about new investments in trading. Friends, Jhunjhunwala ji was not just a successful investor. He was a thought. There was a belief that even an ordinary person in India can become a millionaire or billionaire.
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