In the ‘Mahabharat and Stock Market’ series, we try to take life and business lessons from arguably the greatest epic of all-time, the Mahabharat.
If you haven’t read the first article in the series, read – Ekalavya Story
Today, we delve into another fascinating story, which most of us have already heard.
It’s the Abhimanyu story which has lessons of great courage, but also why half-knowledge can prove to be deadlier than not knowing anything.
Abhimanyu was the 16 year old son of the great warrior Arjuna, when he decided to take part in the Kurukshetra war between the Kauravas and the Pandavas.
On the 13th day of the battle, Guru Dronacharya laid out the complex ‘Chakravyuha’.
Only Arjuna and Shri Krishna himself knew how to enter the Chakravyuha and exit it.
As Arjuna was away on that fateful day, the Kauravas tried to trap the Pandava king Yudhisthira and claim victory.
Between victory of Dharma and Adharma stood a young boy – Abhimanyu, who knew how to enter the ‘Chakravyuha’ but did not know how to exit it.
The 4 Pandavas reluctantly allowed Abhimanyu to enter, but promised to stay close to him.
The young boy made his way through the complex circular formation. He fought bravely against some of the top warriors of the time, but eventually fell to his death when all of them combined together and killed him.
Mahabharat Stock Market Lessons
There are quite a few lessons we can learn from the story.
Lesson 1 Half knowledge is dangerous: A lot of people who enter the stock market, think earning money is easy. A majority of these people have very little knowledge or experience.
Think about it. A person needs to study in school for 12 years and then spend anywhere between 5-7 years in college before he is considered to be capable enough to get a job by himself and earn money.
Even if you think college and degrees are over-rated or not necessary to earn money – basic education is still very important.
But people who enter the stock market, believe they can invest money and earn without putting even a few years into learning.
Stock tips from a friend or buy calls from a business channel, cannot make you rich. You need to learn, only then can you think of earning.
Even if you get success initially, be rest assured, the market will take all of it away. The inexperienced or those with half knowledge will get slaughtered like Abhimanyu.
He was brave and legendary, but there is nothing brave in putting your hard earned money and hoping you’ll make big returns quickly.
Lesson 2: Knowing when to sell (Exit) is more important than knowing when to buy (Entry)
Abhimanyu knew how to enter, but didn’t know how or when to exit. This killed him.
Similarly, in the stock market, buying a stock is actually the easier part.
Knowing when to sell – you will soon realise – is much tougher.
Suppose you buy a stock at ₹ 100 and it rises to ₹ 125. Will you sell it or hold on? Let’s say you hold.
The stock falls to ₹ 115. Now you begin to fear, what if it falls further. The same uncertainty, but you decide to hold.
The stock falls further to ₹ 105. This time you are too worried that you will lose all your gains, and you sell. The stock rises, and before you know it, it has gone to ₹ 150.
That’s a missed opportunity.
Once you sell a position, it’s very difficult to buy it again.
The other selling mistake that many people do – is wait for a loss-making stock to come back to the buying price.
In most cases, it does not. If it does, and you exit at you buy price. It’ll rise further, making you regret your selling decision.
Another example: A stock you sell today for profit, can rise by 20% tomorrow. Anything can happen in the market and this has happened several times.
In fact, those who are experienced in the market will tell you. The stock they just sold, has risen 5-10% minutes after selling.
And the last lesson from the Abhimanyu story is ‘COURAGE’.
It takes immense courage to stay invested in the stock market when it crashes. How many can hold their stocks when it crashes 30-40% in a matter of few days – like it happened during the COVID19 market crash this year?
Very few have the courage to hold, let alone buy.
It’s only when stocks are bought during a bear market – when quality companies are available at throwaway prices – that investors can make serious money in the bull market.
And buying in bear market requires immense courage. The fear will be so much that you expect the market to fall 50% more. But like it has happened this time, it rises by 30% and within days, you’d have already missed a great opportunity.