Lessons from the online mentor of 50,000 investors

Stock market is a place that demands a specific skill set – one must keep it in mind before pouring money into stocks, said Jakir-Ul Kabir, a retail investor who emerged as a successful investor and a trainer in less than a decade after leaving the market with losses during the 2010-11 crash.

Extensive studies of relevant books and a disciplined approach later helped him come back stronger, Kabir said in a recent interview with The Business Standard.

In 2009, at the beginning of his banking career, Kabir entered the stock market with his personal savings, and made some money until the 2010-11 market crash that cost him a lot.

In 2016, he came back to investing as a different man. He learned a lot, became a mentor of over a hundred retail investors who took his courses, while over 50,000 investors are learning about investment and trading through his YouTube channel named "Investing with Kabir".

"After learning the essentials, having the right skill set and mindset, you have to decide on how you want to place yourself in the market," he said.

It is important to be aware of yourself, your financial position, type of capital, risk tolerance level, and the needed rate of return to pick the right strategy in the market, he teaches.

For instance, one having an active profession should invest for a longer period with an expectation of around 20% annual return on an average which will enable him to make a fortune over years, while one who depends on the stock market may try to earn through trading.

For investing, the most important thing is patience which pays off if one learns fundamental analysis to identify good investment opportunities. The analysis should not be solely based on earnings per share. It should also include the business' growth model, cash flow, efficiency and honesty of management and the intrinsic value of the company shares.

On the other hand, trading that cares about market momentum instead of company fundamentals needs a good understanding of technical analysis of stock charts to identify profitable entry and exit points. This can be done in various time horizons, and the Bangladesh market is not suitable for too quick trading due to the absence of short selling and intraday trading.

Due to the mandatory holding of at least two working days, stop loss – the safeguard of a trader – cannot be applied in time if the market goes adverse.

If one decides to trade, instead of a 3-7 days of holding, the timespan should be extended to 3-6 months or even nine months in the Bangladesh market, Kabir advises.

He finds American hedge fund manager Joel Greenblatt's magic formula a profitable technique in the bourses of Dhaka and Chattogram and that is about finding the above average businesses having earnings growth when their shares are trading near 52 week low at a low price to earnings ratio and buying them for a year.

Greenblatt's funds generated a tremendous 35% annual return over years.

Speculating without learning, and discussing the market with others hurt one's stock market performance. Moreover, one should be busy learning winning strategies rather than continuously predicting the market direction, he said.

"If you are not ready to learn and get the right skill set, you better not come to the market," Kabir's valuable lesson.