What are Rakesh Jhunjhunwala’s Preferences to Invest His Money

One of India’s most respected investors, Rakesh Jhunjhunwala is also known as the ‘Big Bull’. His investment philosophies and lessons are an inspiration for lakhs of investors across India. He has been referred to by many as the ‘Warren Buffet of India’, but he often used to humbly say that the former was ‘far ahead of him’.

A Chartered Accountant by profession, Rakesh Jhunjhunwala started his investment journey with a mere Rs. 5,000 in 1985 which grew to a staggering Rs. 35,000 crore by 2022.

So, what were the strategies that worked for him? Was he simply at the right place at the right time? Or was there a more nuanced approach to his investment style? In this article, we will learn from the tried and tested strategies of the Indian investment guru Rakesh Jhunjhunwala and his preferences for investing his money.

• Rakesh Jhunjhunwala believed in long-term investing, staying committed to well-researched stocks despite market volatility, and avoiding emotional reactions to market fluctuations.
• Jhunjhunwala encouraged investors to be fearless, make informed decisions, and not hesitate to sell when profit targets are reached while always learning from mistakes.
• Rakesh Jhunjhunwala’s preferences for investing his money were always based on understanding the fundamentals of companies, their growth potential, and trends before investing. 

Make sure you buy right and then sit tight on it

Rakesh Jhunjhunwala looked up to global investment wizards like George Soros and Marc Faber and drew great inspiration from their style of selecting stocks. The ‘Big Bull’ was often quoted saying that the market trends are your friend and once you decide after thoroughly researching the fundamentals of a company, you should ‘buy right and then sit tight’. He used to advise against relying on any kind of market tips or market noise for investment decisions.

So, as a new entrant into the dynamic Indian stock market, you should always keep in mind the long-term perspective over chasing short-term gains. If you adopt the trader mindset, you will give into the short-term rewards, which will not lead to a bigger payout in the long run. If you want to be a successful investor, your judgments should be based on the business model of the company, its operations, management, and prospects.

Simply put, according to Rakesh Jhunjhunwala, you have to look at the potential for growth the company promises and whether it has a feasible revenue model that can keep pace with the changing nature of the ecosystem it operates in.

The asset that will generate the most returns is your knowledge

Rakesh Jhunjhunwala believed that knowledge is your friend, mentor, and guide in the stock market. Hence, it is important to be well-versed in the workings of the market. Even if the price of a stock in your portfolio drops, there's no need to panic. If you've done your research and are confident in the stock you've chosen, trust your decision and stay committed through both the highs and lows.

Although the stock market might seem like an easy place to make quick money, the truth is far from it. You cannot be a successful investor with half-baked knowledge as it can lead to bitter surprises. It is important to take the longer and more patient route, where you research diligently, educate yourself with all the available resources, and remove any apprehensions or doubts.

However, it is important not to get overwhelmed or fall into the analysis-paralysis trap. Be well informed about the workings of the market and the industries that a company operates in so that you can make the right judgement call. All of these factors will help you pick the right stocks.  

Be fearless in your investment endeavours

Rakesh Jhunjhunwala was of the opinion that you should be fearless with your investment choices and not be affected by the fluctuations of the market. However, this attitude can only come after you have done a thorough research and the companies you have invested in have strong fundamentals.

As an investor, you should not be emotionally attached to your stock picks. On occasions when you make a mistake, you should be humble enough to own it and learn from it. If your investment turns out to be successful and it achieves the target price of the stock, you should not shy away from booking profits and selling off the scrip.

Your investment is a game of numbers, consisting of a target price, investment price, and stop-loss, so carefully select what works for you and stick to it with conviction.

Patience and perseverance are the ultimate key to success

The market rewards investors who stay the course. Hence, it is a virtue that every investor needs to have. Rakesh Jhunjhunwala often said that the stock markets are not an overnight success or a get-rich-quick scheme. You need to have skin in the game and believe in the long-term performance of the stocks you pick, no matter the highs and lows that the business faces. Eventually, if you have a sound rationale behind your investment, your investments will turn profitable.

The portfolio of Rakesh Jhunjhunwala corrected as much as 25-30% multiple times, but he never saw this as a situation to panic. Instead, he treated it as an opportunity to buy more, which eventually worked in his favour in the long run. 

Throughout his investment journey, Rakesh Jhunjhunwala and his preferences for investing his money led him to multiple companies, with some publicly known investments including: