Let's give you some classic examples. We often hear analysts say that stocks would give you returns in the long term. What happened if my father had to buy a blue chip share of the 1980s like Mukand which was part of the Sensex and hold it for long term. The shares have gone nowhere in the last three decades.
What if somebody had to advise to buy a blue chip stock of the 1980s like Hindustan Motors to hold for long term. If one had to hold it for long term, it would have been a disaster. On the other hand if someone had to recommend to buy Reliance or Bajaj Auto for long term, he would have made money.
In stock markets, it's simple: If long term investment has worked for X, it would not have worked for Y. Therefore, is the mantra of long term stock picking valid? It depends on who has made money and who has not from long term stock picking. It may or may not work considering the above examples.
Ask investors in the US, what happened to once the bluest of blue chip "Kodak".
Expert advise of little use
Expert advise for traders and stock pickers is sometimes of little use. Till two weeks back everybody suggested that the Sensex would cross 30,000 points. Now since the air strikes on Iraq and tensions between Ukraine and Russia everybody is talking of risks to the Sensex rally from geo-political tensions.
The fact remains that we cannot predict the external environment, neither can we predict rules and regulations that change frequently. If I like a steel company that uses iron ore from Karnataka and buy the stock, I may be hit if iron ore mining is banned in Karnataka. There are plenty of such examples, from telecom to US FDA ban on drugs where companies have been badly hit.
Analysts always talk of the number of times they have got it right, but, never when they have got it wrong.
It's sheer God's grace if you have spotted a company like Infosys in the 1990s and made money through it. The bottomline is if you have made money through long term investing it's good, if you haven't the strategy is bad. There is no good or bad, sometimes stock picking works, while sometimes it does not. The best idea would be to follow the philosophy of Warren Buffet and buy when prices are low. The Sensex has moved up from 17,700 points in last August to 25,300 points today. So, are you buying at high prices today in comparison to last year, most certainly "yes".