Common Investment Mistakes

Common investor mistakes article is not feelchild of me. Im just republishing the points of an article in rediff. The thought of republishing these points is, may be the fact of, reminding myself the popular mistakes while I make investment. Some of them, I think, I overcame, others Im trying to.

Hope this will be useful to others too.

Mistake No 1: .The first and biggest mistake is not to admit making a mistake

Holding a stock, rather 'fundamentally weak' stock, even after 15-20% loss and still believing it will come back old level may be the idea that one has to revisit. Most of the cases, it fell to 50% level and mind is not trained to accept the fact that mistake has been done; instead blame is put directly on something like global scenario, FII pull out and MF selling.

I remember a famous quote while reading this point - "In stock market its not impotant you lose or gain money, but its important how much money you lose when a stock fall and how much money you earn when stock raise". I think this can be rephrased like "Realizing the mistakes quickly and waiting for real appreciation are important in stock market play".

Mistake No 2: Buy on tips and wanting to make a quick buck

There is no mistake in taking tips. But the mistake is not doing home work to check value of the business interms of earning, profit, track record and divident history. It should be like you invest on a tip not because your close friend or so called analyst suggested but you know your analysis is right.

Mistake No 3: Buying a loser on its way down thinking you are averaging your costs

Averaging can be applied on a fundamentally strong stock which is available bit cheap due to overall market/sector correction. Otherwise money pileup will be with the loser.

Mistake No 4: Ignoring Risk in the investment and looking only at the returns

These days, insurance agents are selling equity linked insurance to people by showing the past performance of the ULIP scheme and illustration chart. Sad part is people start believing the illustration chart as bible and go by the insurance agents words. They dont even know the possible risk of entire capital wipe out in equity linked schemes. In "freakonimic" sense, these insurance people are no different from those days ran-away chit fund people. Fortunately or unfortunately market did not crash to show the real face equity risk. 'Investment is not risky but not knowing the investment is risky'

Mistake No 5: Buying penny stocks thinking they are cheaper and ignoring stocks, which are priced above a certain number like Rs 1000 thinking, they are expensive

This effect can be realized when the stock is traded at sub-thousand levels after the stock split. Infact liquidity should try to drag down the stock price in stock split cases. But in reality, people start thinking sub-thousand price of a stock with FV 5 is cheaper than thousand+ price of FV 10. This madness is well used by the business people to increase the market cap just by splitting the stock.

When a stock is called penny means the business is very small. There are lot of risk tags attached with the small business. Its agreed that profit will be huge when small business turns big business tomorrow. But picking that kind business takes more than the analyst tip. Dont forget, only very few businesses reach the league of infy.

Mistake No 6: Exiting Winners early and sticking to Losers

"Book profit" is the fancy term heard most these days. Everyone loves to book profit and see the money realized in the account. On the contrary, we hate to book loss (who'll like to see loss in the hands?). I believe booking profit is a strategy followed by the broking firms to boost the volume thereby getting more brokerages. Infact first (so called) strategy minimizes the profit, second strategy, of keeping the bad stocks, maximizes the loss.

Mistake No 7: Just thinking but not doing anything

It's very common to hear something like "I kept an eye on this stock, I had this stock in my watch-folio. But this stock has moved a bit by the time I decided to buy. Now I have to rethink after the price movement". At the end of the day, nothing happened except the bad feeling of not buying.
If any business turns your attention, if you believe a particular business will be the the next big thing and if you think the current management will turn the business into winning track then start investing into the business, no matter how big your invetment amount. No point in just watching and felling bad for the missing opportunity

Well, I believe everyone, just like me, may see themselves in these popular list. we'll strive our best to overcome these mistakes. Lets make investments an educated belief rather than just hope.

Note: All the main points are taken from the source article as they sound good for me. Descriptions under each points are my thoughts on the points. You may read the original article in rediff by clicking here.

Kalam.. The historic President.

Six years back, when Kalam was scientific advisor to defense ministry, he visited our college (TCE) to inaugurate a research facility. It was a best choice one can ever have to inaugrate the research facility. Staffs, students were thrilled to receive Mr. Kalam. Welcome banners were installed, auditorium was very well decorated, powerpoint show was prepared to showcase his subset of achievements, b-arch students started drawing the portrait of Kalam.

But the enthusiam was trimmed down a bit after security persons took over the college a day before the function. Every entry was questioned, thorough scanning done all over the possible Kalam visiting places. Sudden restriction put big question on people's mind over in-person meeting with Kalam. Guest house which is beside Men's hostel was kept ready to accomodate Kalam and team. Kalam reached the premises around 10 pm. Staff members and students thronged to the guest house to get the glimpse of Kalam. Securities started playing the expected spoil sport by blocking the students few hundred meters away. We knew Kalam was inside the guest house and started waiting for him, decided to go to the room after seeing his face.

But waiting was just 20 mins, he emerged from the guest house and directly walked towards the students standing few hundred meters away. Security people had no say after that. He started interacting with us and started asking questions like "what are you going to become?" "In software, what exactly you are planning to do", "What way you believe you can contribute to india?" "What are the papers you have submitted?", "What is your next level in your research?". He knew all the happenings of software, electronic industry. He knew the trend of research work each student spoke. He knew what is the next in those field. Above all he knew how to link those developements to the development of India. After speaking to the people, he directly entered the hostel premise and spoke to the students on the way. He started roaming the college campus and went to the auditorium. He was impressed with the decoration, called the students involved with the decoration, congratulated/thanked them for the decoration work. He then directly went to the place where his potrait was given final touch. He was amazed to see people giving final touch of his portrait, autographed on the the portrait and patted on the back of b-arch students. In the auditorium, he met the staff members and enquired about the facilities, research works expecially a DRDO work went during that time. Kalam leant, suggested, lectured on the research topics. Whereever he saw a student, he would started enquiring the student's ambition, his work apart from studies. He never bored of asking questions. He was eager to know the young minds and wanted to 'inginite the minds'. By the time he hit the sack it was around 3 0 clock.

Next day, I took a big fight with my friends to occupy the seat on the aisle to get close glimpse of Kalam. I will remeber forever the curious smile he gave while passing me. After inaugurating the research center, while delivering the speak he went very detail on Karumuthu Thiagarajar's (TCE founder) life, his dream, his charity, most of which we never heard before that. Even principle, out of his curious, asked him the soure of all these detail on founder. He told he read a book written by Karumuthu Thiagarajar which was available in the guest house library. What to say about this man? he finished a biography of the founder after 3 pm. The energy to learn new things, eagerness to know other's ambition, enthusiasm to guide others are never faded even in his post 70's. I had great respect for Kalam ever since I read wings of fire but I realised his larger than life persona only after seeing him.

You may wonder why is this stupid guy blogging about Kalam on a event which happened even before Kalam became President?

Today, I felt heavy hearted after seeing the political leaders sidelined Kalam by not considering his second term. More than sidelining his candidature, the worrying fact is sidelining his vision. These politicians dont want a speaking, dreaming, visionary President. I didn't see/hear any leader speaking for his Vision 2020. These people are making mockery on the spirit of a man who turned India self reliance on the fields he worked.

We all know President job is a rubber stamp job, only people who were not able to walk were selected as President to take rest in a big palace for their so called good service. I felt very bad when Kalam was appointed as President, for a job, only disabled, lazy people occupied. But he changed the face value of presidency. He wanted to use this platform to voice his vision, travelled length and breadth of the country to stimulate the young minds. Like his persona, he changed Rashtrapathi Bhavan(RB) a model place - he made Rashtrapathi bhavan a first public building to implement rain water harvesting, enabled solar energy in RB, cut the RB expenditure, developed a herbal garden, digitized RB library of 16K books, hosted veterinary hospital inside RB and not to forget the moghal (flower) garden. Now, I proud to have had the stature of Kalam in the seat of presidency. He has shown the world how effectively (even) the job of presidency can be used.

Kalam may not be the President of India after a month but he will be the Model President of India ever!!!

Pazhaverkaadu Trip

My first long bike trip from Chennai. Pazhaverkaadu is one of the famous bird sanctuary in Tamilnadu. You need to see lot of gramatical, accent stuff when you speak english, but british wont bother about other language pronunciations; Pazhaverkaadu - Pulicat is yet another example. Pazhaverkaadu was unusually calm, picturistic, enjoyable place. Boat ride was awesome. 12 kms of boat ride, driver cum guide cum life saver, 3-5 hours of site seeing - all comes to Rs. 350/Boat. Where would you get such a cheap boat ride?

I have posted trip photos here. Photos didn't capture all the enjoying moments of the trip because we didn't go for trip just to photograph and pose.

I should thank my friends for accompanying me and made this trip memorable. Thanks guys!!!