Views on Life & on Equity Investing

Wonder, Wealth & Abundance

Investing Mistakes

with 3 comments

Some statements I find hilarious from stock market investors, hopefuls, greenhorns and sharks aka Investment Professionals alike – no insult intended šŸ™‚ – its a fact

– “Maybe you can invest 3,000 Rs in this stock, all you can lose is little but gains can be manifold”

Do you mean 1% of your portfolio or 0.1% of your portfolio ? that way you may need to buy 100-500 stocks. I don’t about you but I don’t have billions, so I find investing less than 5% of portfolio meaningless.

– “I bought this stock for a ten bagger, therefore I will be very disappointed if it only becomes a five bagger in next 4-5 years”

Why did you buy any other growth stock or equity instrument growing at 10% or with expectations of a two bagger in five years ? Isn’t opportunity cost too high given a certain 4-5 bagger in hand.

– “Industry has very bright future, therefore this company must do well”

Well I have yet to see a stock in India do well in solar energy or alternative fuel, remember XL Telecom or Asian Electronics ? Crowd is almost always late. With a few exceptions like Praj.

– “This stock is high risk high return”.

Apparently even university educated “professionals” / “experts” write this statement in research report. Nobody made money by “high risk high return” stocks on consistent basis.

– Not investing soon enough in life.

Even I made that mistake in life by investing later than I could in equity instruments. Long term compounding is a great power.

– Not knowing the basics

Investing without adequate knowledge. Asking others for tips. Nifty that can be bought for a very minimal commission as a benchmark will beat the aggregate of Mutual Funds, your money in a Mutual Fund is financing the salaries and office buildings of fund managers.

– Chasing past performance of Mutual Funds

Can never say enough on the topic. Knowing a bit about how the world works I neither feel safe to part my money to mutual fund nor inserting a coin in a vending machine (always a risk of power failure / fault in delivery) as opposed to dealing with living person; unless you go round the whole building or neighbourhood looking for a vending machine with stuck snack, so it drops twosome for you ;-). You can call me value hunter.

– Ignoring diversification altogether or over diversification.

There is no cant-miss-stock in this Universe, atleast I have not come across it, therefore no stock deserves 100% portfolio allocation. If you area a billionaire or trader and have too much time at disposal, march ahead with 500 stock portfolio. I figure index and a sleepy investor would outperform your hard work.

– Having un realistic expectations

50%+ compounding per annum ? Get real, wake up. It may be possible in some years. Snap out of it.

– Holding too long or too short

Difficult and case specific. Have to be in the game long enough to know how long to hold. But not long after you found something 2X better.

-Too much faith in your stocks

Have you noticed the bias that kicks in in owned stocks ? Look for counter argument at all times, not confirming evidence, what can go awry, worst case scenario.


Written by amitdipsite

June 2, 2011 at 11:11 pm

Posted in Uncategorized

3 Responses

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  1. HI Amit,

    Please share your views on Coal India.. I see lot of potential in this and also almost all the people are gung ho on this one. Given the Scarcity of coal , Management's capability …I can see it reaching 1000 levels in 2-3 yrs… What's your Call on this.???

    sandeep maddali

    June 3, 2011 at 5:17 pm

  2. Hi Sandeep,

    I don't know a diddly squat about Coal India. I don't even look at 250,000 Crore market cap stocks.


    Amit Arora

    June 3, 2011 at 10:00 pm

  3. Hi Amit,

    Yes. I expected this reply from you. But still i would request you to scale down on some points like …

    1. In future about 5-6 yrs ahead,what could the Market Cap of the India's Most valuable firm…it can be it Reliance or Coal India or Cairn India or any other Emerging MidCap.

    2. Would be glad to know World's Highest Market cap company( Guessing CoCa Cola or Apple .. Not Sure).

    3. Also i would like you to give your view on Long-term Capabilities of Cairn India.. given the Reserves they have and also the Pedigree… Can it Cross ONGC's MCap in forseebale future???

    sandeep maddali

    June 6, 2011 at 11:03 pm

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