When discussing stock trading, few people either master it or fall into the category of complete novices. This raises the question: why do the great bulls of the Indian stock market consistently support value investing when intraday trading can potentially yield 2%-5% profit in a single day?
On June 6, 2024, the stock prices of Hindustan Aeronautics Limited (HAL) and Power Finance Corporation (PFC) surged by approximately 6%. An investment of 1 lakh rupees could have easily made 6,000 rupees in profit. Even a modest 2% daily profit could turn 1 lakh rupees into 52 lakh rupees over a year, equating to an astonishing return of approximately 5100%. Why then, do investors settle for annual returns of 12%-20% when they could grow their money exponentially?
The Risks of Intraday Trading
The answer lies in the inherent risks of intraday trading. While the potential for high returns exists, so does the possibility of significant losses. A 2% daily loss on an investment of 1 lakh rupees could reduce it to approximately 1,800 rupees over 200 days, equating to a devastating -98% (negative) return.
If you're curious about a mix of intraday profits and losses, don't miss our blog explaining how the probability of consecutive profitable trades drops to 1.56% by the sixth successful trade.
The Stability of Value Investing
Comparatively, value investing offers more stability. With value investing, you can gain or lose around 15% over a year. By choosing quality stocks like HDFC Bank, HUL, Asian Paints, Titan, PFC, and HAL, and holding them for more than five years, investors have historically never lost money and have earned returns between 30% and 1200%.
Example: Stock Price Performance Over the Years
Here's a snapshot of the stock price performance for select stocks from June 6, 2020, to June 6, 2024:
Stock | 6 Jun'20 | 6 Jun'21 | 6 Jun'22 | 6 Jun'23 | 6 Jun'24 | CAGR |
HDFC Bank | 1033 | 1500 | 1380 | 1606 | 1559 | 9% |
HUL | 2087 | 2342 | 2291 | 2716 | 2555 | 4% |
Asian Paints | 1638 | 2924 | 2886 | 3237 | 2910 | 12% |
Titan | 990 | 1679 | 2204 | 2861 | 3333 | 27% |
PFC | 69 | 98 | 89 | 152 | 473 | 47% |
HAL | 315 | 531 | 948 | 1583 | 4670 | 71% |
Leveraging Professional Expertise in Financial Planning
If selecting stocks and timing your entry and exit isn't your forte, consider relying on experienced fund managers by investing in mutual funds. Fund managers use various valuation methodologies, read earnings reports, evaluate leadership ethics, and future expansion plans before making buy or sell decisions.
I am currently enjoying an XIRR of approximately 22%. You can read more about my investment journey here. If you seek to grow your money through disciplined investing, connect with our expert advisors at Sampann. Download our app from the Play Store to start your investment journey today.
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