Celebrity Investors: Mimicking Them Might Not Always be a Good Idea!


Many investors, especially newcomers try to mimic the portfolios of high-net-worth celebrity investors in an attempt to rake up some gains. It is very common to see stocks soaring to new highs after the news of a stake pick-up by a well-known investor breaks as almost everyone on the street flees toward those shares.

One of the biggest problems in getting into a stock after the news is that, almost every time the stock price would have already gone up significantly, making it a relatively riskier bet for you as compared to the one you are trying to mimic. As everyone starts lapping up the shares, they bid the price quite high, sometimes even hitting the upper circuit. 

And sometimes it’s not a difference of a few bucks, the shareholding pattern of the company gets reported every quarter, meaning there could be a delay of up to 3 months before you get the hear about a celeb investor’s new stake. However, it might also happen that you could grab the same opportunity at a lesser cost but the possibility of the same stock delivering significant losses should not be ruled out.

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Also blindly having a faith in someone else’s stock-picking ability could not be your way to success. Everyone in the stock market goes wrong many times, with no exceptions at all which includes all big fund managers, large institutions, prop trading firms etc. But what sets them apart is their risk management, which I would probably call the holy grail. You can definitely mimic the investment idea but what about the discipline to hold on to it which generally spans for years.  

You can copy someone’s trade but how would you know about their exit strategy or their time horizon etc.? Most importantly, you would be having no idea about how much capital someone is risking on that investment or what is their risk appetite. Making it more realistic, a high net worth investor’s risk on a single trade could easily surpass a lot of folk’s lifetime earnings! Let that sink in. 

I am not saying, these high-profile investors are bad at investing, (obviously they have made their name being great at investing) however, just knowing the name of the stock they are getting into is surely not enough to go in sync with their journey. 

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Let’s say a big investor has a INR 100 cr portfolio and he decides to invest INR 2 cr in a stock, that’s a mere 2% of his entire portfolio. Now you get the news and throw every penny you have into that one stock (not literally) or in the worst case, you decide to borrow money to increase your bet and potential gains. Now if the stock falls, you would be having absolutely no idea of where to exit, while on the other hand, that big investor might already have exited! 

If both stayed in the game and the stock goes to the dogs, then who would lose big? The big investor would lose around 2% but you might take a bigger hit as your concentration was much higher. 

Now you would ask what about if the stock surges like anything! Sure, that’s also a possibility, but how many retail investors can hold onto multibagger gains? And not to forget, the bigger the P&L (with respect to your account size), the bigger would be your emotional swings.



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