Risk management is important

Hello

I would like to share one story of my successful client.

One of my SUCCESSFUL client who had made 2 lacs out of 10 lacs investment since JULY 2012 by giving enough time in research and choosing good stocks. But he was not satisfied with the performance. I am calling him SUCCESSFUL because on Jan 2014 His investment was 6 lacs rupees and was in loss of 2 lacs rupees. So he started investing 25000 every month and recovered loss of 2 lacs and made a profit of 2 lacs. So total 4 lacs profit in 1 and half years which is very good. I can say he is the one who actually taught me Stock Analyses.  He even realized his mistakes and learnt from his mistakes. He just realized if his researched stocks are back-boned by good risk management he may get better return. So he asked me to implement his idea on his researched stocks. To our surprise if proper risk management was implemented he would have made 7 lacs profit in 2.5 years that comes around 18% return.I made the analysis and realized the following facts

1) Research is not Important Risk management is important. We even backtested on worst performing stocks of nifty it gave profit of 10%.

2) Knowing Maximum drowdown (i.e. Difference of the Maximum gain to Maximum loss) is very important so that we are not scared in bearish market. In his case there was drawdown of 32%. Isn't it a good business that one time risk of 30% can give 18% every year. I have other system where max drawdown is 27% and it give 70% return annually if you stay invested for 6 years. 

3) Our system  was not taking position when market was range bound or bearish. We had cash in hand which we could invest in FD or other fixed instrument instead of participating in bearish market.

4) We have adopted Average in profit strategy. I.e We will add more qty in profit giving script instead of loss giving. Retail participant do exact Opposite of this that is why they make loss. They multiply loss.

If you have portfolio which you want to back test on our idea  you can contact me.