Investing and trading wisdom from the Big Bull: Rakesh Jhunjhunwala

It’s hard to imagine that someone who is even remotely related to the stock markets would not know about ‘the Big Bull of the Dalal Street’ – Rakesh Jhunjhunwala. His trading journey from humble beginnings to becoming a billionaire has been a motivating factor for thousands of small investors.

Replicating that kind of success might look too far-fetched, but investors can surely learn important lessons from him. Let’s look at some of those.

What was his philosophy?

Focus on trading: As someone with a modest start, he relied on trading to build his capital. A trading mantra he mentioned everywhere was - “Vadhaare vadhaare levanu, ghataare ghataare bechvanu.” Simply put, it means buy the uptrend and sell only when the downtrend has started.

It is widely known that most traders typically lose money. How then was he able to buck this trend?

By being honest with himself and cutting his losses quickly. According to him, a good trader should know when to exit a stock and cut their losses. He believed in cautious but calculated moves rather than being driven by sentiments.

Research is key: He believed that one should invest in any stock only after conducting extensive research on the company. An as investor, you should be convinced on aspects like current financials, capex and expansion plans, management and sectoral outlook before making your stock pick. He believed in doing his own research. It helped him stay away from the herd!

Be patient: If you have done the research, then be patient. “As long as earnings are coming, have patience...,” he believed.

Diversify: Do not restrict yourself to one sector. Spread your portfolio across sectors. This will help you minimise the risks associated with market fluctuations.

Some of his major successes are listed below.

Source: News articles

The chart below highlights the top 5 stocks in his portfolio by market value (as of December 2023)

Source: Trendlyne

What can investors learn from Jhunjhunwala’s strategies today?

Value investing: Find cheap equities with solid fundamentals and focus on long-term potential rather than looking for short-term triggers.

Risk management: Rakesh Jhunjhunwala was not afraid to take risks. He invested in companies in growing industries or facing challenges. He believed these companies could grow rapidly and profitably. Most importantly, he always advocated effective risk management. Traders or investors should know how much loss absorption capacity they have before making any investment.

To sum up

Rakesh Jhunjhunwala’s journey is an excellent case study on how small investors can use both short-term trading and long-term investments to compound their wealth over time. As a big believer of the Indian growth story, he was consistently bullish on India and his investments reflected that. If nothing else, than investors can adopt his bullish India stance and passively participate in the growth story.