I have been actively investing since last 12 months.Have a mixed experience. My biggest mistake has been so ordinary. Selling off the good ones (since they been making profits) and hanging on to loss making one’s hoping they will give returns. Lesson learnt : I should have just switched from scripts that only made losses to known profit making one’s.
Now, this is one thread where i can readily contribute .
i have committed many mistakes in my 10 odd years of investing adventures - and I’m very much a student even now.
my list of mistakes/learnings goes below.
Not realising/forgetting that buying a share is an act of investing in a business.
Over the long run, price of a stock has to fall in line with the value of the business.
Investing without knowing key business parameters is a BIG mistake.
Not tracking the business & tracking share price : Like any rookie investor , i used to track the stock price instead of the business. thats a big No No.
a business owner would track key business parameters. A retail shareholder should do the same!
While we may believe that company X has a huge market opportunity, a shareholder needs to keep an eye on the balance sheet/P&L/Cashflow parameters like D/E ratio , CFO etc.
I have learnt this lesson at the cost of a few lakhs.
Our own domain knowledge, our own biases can make us overlook the bloating balance sheet or the deteriorating business parameters!
Seeing stock market as a place where you can place bets about future.
ex: our own beliefs that company X is the future of technology Y can drive us towards taking ‘bets’.
One needs to go back and learn about Mr Market.
Only way for a rookie to get expertise is by learning! - not by following hot tips, not by following great investors but by learning why certain businesses/business-patterns work exceedingly well.
i.e, why large cap stocks are large caps in the first place
why certain stocks often command a higher P/E.
how brand power works in building a business etc
Best way to learn is by reading/travelling and developing a wider view of the world around us.
5. Read Annual reports - thats what they are meant for!
if you are the owner of a business, you must know how its being run.
Though this is often a boring activity, i’m still learning on this - i see it as a key trait of a good investor.
Lastly, the biggest mistake
6. accidentally buying ‘intelligent investor’- without knowing anything about benjamin graham - in 2005 and keeping it on shelf, unopened, till 2010.
This and this alone has costed a LOT - not in terms of actual money but in terms of opportunity cost! - losing 5-6 years of investing without realising that it can be done scientifically is a big loss!
Though the book can potentially put one to sleep, i consider its lessons as bedrock of investing.
I have put my learnings in generic terms because these basic lessons act as deterrants against mindless investing - thats like half of the job done!
More like a checklist on what to avoid - even if one manages to avoid some of these pitfalls a lot of misery can be avoided!
I started investing way back in 2008 with just small amounts.At that time I used to search the net,watch tv and used to buy the shares based on the tips provided. Mostly it was buy, book profit and sell strategy. But many times it did not work. I will narrate you my first lesson when I bought “Concurrent Infra” after searching on the net and I concentrated my portfolio on that stock only considering that it will give multibagger returns. The stock was coming down and I was buying to average but the decision did not paid. I suffered a huge loss in that. I learned two good lessons.
First never buy the stock on anyone’s
recommendations without researching why the stock will move further. The second thing is never buy the stock when it is going down thinking it will come up in some time.
I tried to form my methodology during all these years of which some points are
- Do not see the price of the stock, see what is the market cap of the share to get the first understanding.This I learned when I was buying Kaveri Seeds- The stock price was at 1700 when I bought this stock. I was hesitant to buy but I build the conviction after doing some research regarding the stock and then bought it I got the conviction later when I read the thread on VP about kaveri
- The share price is not an indicator of what its current value is, it indicates the future value of the company. People buy the stock because there will be some growth in the sells and profits of the company and if the company is not able to deliver then the share value can come down
- Judge the comapany by its ratios first. RoE, RoCE, Debt to Equity
- discussions with Management gives better understanding but I have not done that yet may be some time in the near future I will be able to converse with the management asking them queries to get the insights of the business
I got to know about VP forum when I was searching about Avanti feeds.Really a good platform to share your views, concerns, experiences. I am learning new things everyday regarding stocks, Investing and personal finance.
I always dreamed of how I can catch the companies when they are young (in terms of market cap-Smallcap) and screener gave me the platform where I will be able to know the companies which are growing quarter on quarter with low debt and good RoE and RoCE.
Still I am learning the new things from my mistakes. Now a days I do not wantch CNBC and othe channels. I have concentrated my efforts on web research,VP forum only.
1.Value pickr platform is right place to learn basics of investment.
2.l am thankful to all seniors as well as other members who are daily giving inputs to understand basics of market.
3 Everyone makes mistakes in the start but after getting knowledge from platform like valuepickr the chances of repeating mistakes minimised to great extent.
My number 1 mistake for all my years as an investor has been to sell too early, in other words not knowing when to sell.
Earlier I sold as soon as my calculation of Intrinsic Value was hit. Then I waited for overvaluation of 25% to 50%.
Now I don’t sell until I’m sure I have a better opportunity to invest the money, usually much bigger gap between price and value.
What is TED here?
Ted is a defunct forum now, earlier it was used to be very active stock discussion forum.
I have only 1.5 years of market experience and i’m learning day by day:
1: Biggest mistake, i bought my first stock when it was hitting everyday low and low and accumulating more in loss.
Era infra: first bought [email protected] and keep on adding in down, currently i have [email protected](Average price).
currently holding it in the hope that atleast i can get atleast theinvested money back, i dont know i’m right or wrong in this case of holding this loss making stock.
I bought this stock without any analysis, just it was on 52 week low so i bought it and then on tv CNBC they were saying to buy so bought more and then to make the average price, i added more.
After this i got one chance to get it out when the stock came back to 33 but with the greed i didnt sell and the result is it is 85% loss now,
still holding, not daring to book the loss.
1: Dont follow tv and media or any recommendation or friend recommendation.
2: dont by 52 week low stocks, just because they are 52 week low
3: if a stock is going down and the fundamental is also not good then dont average your price, sell the stock and book loss and come out of it.
4: Do a thorough analysis, still i’m not able for this but trying to learn.
5: Earlier buying stocks on low pe and high EPS only, dont do it.
6: Dont follow the price fluctuation day by day, do th stock check on weekly basis.
7: dont have more then 10-15 stocks in your portfolio.
8: money allocation to all your stock should be followed…still i’m not doing it and need to learn.
9: have patience: before i was buying and selling frequently , net i’m in loss
10: Better to follow SIP for good stocks.
11: always have some case, when market corrects buy good stocks more and hold.
12: Don’t be greedy and don’t afraid.
Many mistakes committed and learning is in progress.
Read Good books and learn and learn from all the seniors and from others mistakes.
My key learning has been that just as there is such a thing as over diversifying your portfolio, there is also such a thing as over concentration. Getting this balance right is still work in progress.
My key learnings are:
- Do a lot of diligence on management. Biggest losses come from management which are not looking out for minority shareholders. There are many ways to judge this.
- Only invest in stocks where you understand the business. If you don’t understand the business, don’t invest.
- It is good to average up on a stock as confidence builds in a company/stock. Many times we anchor ourselves to the initial price and want the stock to come back to that price. However, if you can see yourself holding it 5-10 years there is no harm in buying more at higher price.
- Mentally think through how you will react if the stock you have purchased falls by 10%, 20%, 30%, 40%. Do the reverse for stock that is approaching your sell price.
- Know your stocks/business better than most. This means keep track of what is changing in that business/price and be willing to act.
My mistakes (and hopefully learnings) run into many. Mentioning a few below:
- Not having an investment philosophy - Given the fact that an investment philosophy is always Work in Progress and evolves with time, this is an ongoing evolution for me. In my first year of investing I was a trigger happy kid with a loaded gun (money to invest and not sure how to go about deploying it). As a result my initial investments did not have an underlying theme or philosophy. The only thing which i had in the back of my mind was to invest in low pe companies with high dividend yield. As a result i ended up investing in many psu companies (NMDC, ONGC, Oil India)…
Over a last few years, my style has changed as has been the kind of companies i look to invest in. I am guessing this will change further as i become more mature as an investor.
Not researching enough about the company + A desire to quickly put money in a new found company - Aaargh! Will i ever master this…I havent suffered too big a notion loss in my investments so far, but that has more to do with random luck than anything else. I am never satisfied with the amount of research i do on a particular company and i definitely need to invest more time on this. One of the challenges i have faced is on companies which are microcaps (and hence not too much of public info available),especially those which are on the B2B side where brand visibility is hard to determine.
Portfolio construction - Oh boy is this important. And this as the case with #1 and #2, this too is Work in Progress for me. What started out as a random sprinkling of cash in disparate companies, has evolved into a more focused approach for me (but still miles to go). I do consider portfolio allocation segmentation (by market cap, by industry segments). But more insights into this would be greatly helpful.
When to sell - Dont know when to so far. Have not churned my portfolio a lot and i still dont know the answer to this. Whenever my portfolio has become skewed or overly heavy on a few companies i have tried to rebalance the same through fresh investments in the other companies.
If i am not adding to my current positions and also not selling then am i convinced about the company i own? - WIP again for me.
Price Anchoring bias - Big time problem, especially when it comes to averaging up.
Valuation methods - Again WIP. My investing journey started with a desire to have passive income (and hence my leanings towards Dividend paying companies initially). Hence i did some experimentation with Dividend Distribution valuation methods. Subsequently i discovered valuations based on Book Value (Assuming the company were to go bust what would investors get). I still dont know the best way to do valuations.
More to come later. Can keep going on…
your point number 3 when to sell is the most difficult part of investing and to avoid taking any emotional decision, I have taken a decision to sell 5% of the holding when the price moves up by 5%.
This will be done 5 times and after that I will leave the stock and will take a call on the business potential of the shares,
any views from expert
I like talking about my mistake which every investor should know - a)taking huge leverage b) taking futures position using leveraged money in addition to cash position c) investing very high portion in a stock d) not having sl even when business did not perform holding on using hope e)talking to mgmt - they almost always confuse you giving you this false importance making you hold foolishly f)holding on to hope for a long lone time
Everyone - please do not repeat my mistakes - i have come out of it but it was a costly lesson well learnt.
a lot of mistakes with lessons but still keep making some of the same mistakes, i think it is built into human nature
not selling even at 10x profits
buying dabba stocks on tips
averaging loss making trades leading to complete loss of capital (read likes of KS Oils)
getting married to a stock
staying put despite corporate governance issues
buying the momentum but not taking the exit
sure there’ll be many more but we gotta learn our lesson and move ahead
Not buying enough and selling too soon.
I found many gems including Britannia, Aurobindo, NBCC, Swaraj Engines, VST etc.
Not allocating enough % of the portfolio is a big mistake and selling too soon is even bigger.
Vision to see, courage to buy and patience to hold. - Tom Phelps
I have been investing from 2004, fortunately i was able to get in and get out at right times and didn’t suffer a huge loss in capital.
Used to feel i am some how gifted. But in last few years i am into reading a lot of books, blogs and valuepickr. Now i understand i was quite lucky to escape unhurt. I will say my biggest lessons would be capital allocations, researching into business and selling strategy. Hoping to learn more and become wise as time passes on. My suggestion for any investor is to start reading lot of books and especially about human psychology
My only regret was not taking a loan in 2009 crash and investing in stock
I invested in property and property and property - Did not get great returns on almost 5 properties compared to money in stock. The only good thing about property is that its difficult to exit and re-enter and there is no easy way to check the progress of your investments on daily basis so there is no panic when it crashes
My idea was that you need one property to stay and another one to get a residual income during retirement. I probably should have stopped at 2
Waiting for the next crash - will take a loan and invest
Avoiding a crash is near impossibility - I had indications, that the market is overheated, back in July 2015 through a newsletter that I follow and was advised to proceed with caution. A mini crash came in Feb nevertheless it was impossible to take money from the table.
Can you please mention the city where you invested in property if possible? I think the property price rose crazy between 2008 to 2014 and after that there was some sort of cool off.
Mumbai and London, both however are in low lying areas, with global warming on the horizon (50-100 years) I am inclined to sell all but my other half does not agree - well I think they will survive until I die so its going to be someone else’s problem.
The ones in London appreciated quite a bit, still doing good. Historically every 45 years the price you pay for the property becomes half annual rent hence if you had paid 4k for property in 1971 I think you would have got 8k per annum in rent on the same property today
My assumptions was based on that - stocks have given higher value but the problem is that with stocks you only measure the companies that have survived, not the ones that liquidated. I think a full market etf performs better than property if left unattended for that much time