Why do people believe Rakesh Jhunjhunwala blindly?

What if I tell you that I have lost 50% of my portfolio value in the last one year. Would you want to hear me, take advice from me regarding stock market?
Probably no. Simple reason being that if I have good understanding of stock market, then I should be able to make money for myself.
Now you look at Rakesh Jhunjhunwala (aka THE BIG BULL).

He started with a capital of Rs. 5000 in the 1980’s and has converted this money into about Rs. 6000 crore currently. Clearly, it is a statistic which will stagger any investor or market participant. YOU WOULD WANT TO LISTEN TO THIS MAN AND HIS LEARNING OVER THE YEARS SO THAT YOU CAN POTENTIALLY REPLICATE HIS SUCCESS.
However, there are a host of pitfalls if one follows him or his portfolio blindly. Some of these are mentioned below.
  • His risk appetite is significantly more than the retail investors. As most of you must be knowing. Rakesh is a very active trader and maintains a trading book as well as investment book. His trading profits are also significant and over the years he is known to have take risky bets. Remember investing in JP Associates when it was at all time low.
  • His investment horizon and patience levels is significantly different from most of us. This makes a huge difference. As on September 30, 2008, his portfolio was about 12000 crore which is now reduced to 6000 crore. To him it does not make much difference as in the future when midcap smallcap rally would be back, his portfolio would again swell. Also he has made so much returns in stock investing that he understands that losing some is a part of the game. FOR RETAIL INVESTORS WHO STARTED INVESTING IN 2018, THINGS COULD BE VERY BAD.
  • It is a myth that investors such as Jhunjunwala do not make mistakes. They do make mistakes such as investing in Dewan Housing. But the difference is when they get is right they mint 50X and potentially 100X. For instance, Rakesh bought TITAN at an average price of Rs.3 in 2002–2003 and the price today is almost Rs. 850 More than 250X. But he had the vision and patience to hold on for so long. WE WOULD HAVE SOLD MUCH MUCH EARLIER.
I totally get it why people follow Rakesh Jhunjhunwala. But please learn from the man and his experience. DO NOT FOLLOW HIM BLINDLY. HIS RISK APPETITE AND INVESTMENT HORIZON ARE DIFFERENT FROM US.
I would to like to end this with one of his favorite lines.
“ I AM NOT SCARED OF MAKING MISTAKES IN THE MARKET. BUT I DO NOT WANT TO EVER MAKE A MISTAKE WHICH ERODES ALL MY CAPITAL AND I CANNOT PARTICIPATE AGAIN IN THE MARKET”
A Lesson for Retail Investors perhaps. Make mistakes but only those which you can stomach and still remain in the market!!

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