My mistakes with the stock market

Investing Strategies
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@Friends - I am starting this thread to share with everybody those mistakes I have made over the last 7-8 years and I sincerely feel - you should avoid making these.

@Seniors - If a topic/thread with this heading is existing somewhere please delete this thread. I could not find one and hence the start.

1] Buying into IPOs with steep valuations - e.g. Reliance Power

2] Buying into shares of companies because they had a tremendous one day fall and appeared cheap as compared to their usual valuations - e.g. Reliance Communications

3] Staying put into cyclicals and inability to book at 10% loss - e.g. Reliance Ind

4] Booking profits with Pharma & Consumer themes like Page Ind, Dr. Reddy’s, Supreme Ind, ITC because of extra caution arising out of volatility fears

5] Selling off completely my holdings into profitable and consistent companies like TCS inspite of no urgent need for cash just because they reached an all time high

There are many more and I shall keep adding to these as & when I get time.

Regards

Amey Desai

I sometimes feel that I take too long to learn :frowning:

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I have some 21 months of investing experience. I have done my fair share of mistakes in this period.

1). Lack of patience, too fast to entry/to fast to exit. (Have saved myself from few deadly falls, but had missed few multi-baggers). Had a tough time getting rid of it. I am yet to control it completely.

2). Investing without doing due research, investing by going through momentum. Haven’t burned my fingers because of this, as those stocks are from valuepickr seniors. But because of it, could never develop conviction on ideas.

3). Buying and selling gems like Ajanta multiple time, Had I invested in Ajanta and let it untouched it would have reached 4-8 fold in 2yr time. Have always found reasons to sell (high pe, low delivery volume, etc etc).

4). Inability to have any stock for long term. This is because of 1/2/3. The result, flat 15% tax on all of my profit. The most time I have kept my stock is Astral, that is for just 8 month till now.

5). My inability to get brid of my mental block of investing in high pe stock, even if I know they are not actually costly, and are not likely to quote at any less pe.

These days, I am investing in small number of well researched, well tracked stories, reading ARs of these companies, in a SIP kind of approach. That is taking care of 1, 2, and 4.

As of #3 is concerned, I have no solution, ajanta still looks over-valued to me at cmp, sold 1/3rd of my ajanta holding yesterday prior to bonus announcement.

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When I hsd 2 months of experience in stock market:

Continuously Buying falling shares of Satyam on day of Raju’s letter.

lost money

to recover money as early as possible I thought options trading was only solution.

So started trading options AND again lost money

To recover money lost from Satyam and OptionsTrading, again Options trading was only options

So again started trading options and lost money

AND GOT Trapped in loop AND in 3 years lost money which was 25 times money had lost in Satyam

So lesson:

When you are loosing money, just don’t have aim of recovering money.

Investment is not about revenge its about compounding

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1). Had to bear losses many times because of greed. expectation of high returns even though the probability of same could not be clearly ascertained. I think i have improved a lot on this front. Also the feeling that what if the stock price rises after my selling. ( e.g Firstobject technologies, country club)

2). Inability to book loss even after noticing grey areas in the business / company. ( e.g Bharati shipyard ,srei). Now I am able to book losses faster on realisation of mistake.

3). Not being able to identify the triggers and hoping that the company would grow say at a certain %age. Not trying hard enough to identify the negatives. still need to improve further.

4). Not giving proper weightage to the quality of mgmt.

5). Inability to assess / avoid opportunity cost.

6). Not giving due importance to position and servicing of debt by the company. Now i do look at this point.

7). Joined Valuepickr quite late.

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Interesting topic.

Let me add my sins.

a. Watching TV and doing trade based on breaking news. Breaking news can leave you broke in no time. Actually, news media(business or otherwise) in this country is completely sold to various vested interests and taking any action based on media reports is likely to leave you with a big hole. One example, There is a company named Spanco Industries. The company was doing good business around 2010 and it was on my radar, but I had kept myself away from buying it. One day I saw on TV(CNBC) that they have bagged a deal almost 6-7 times their current revenue. I thought this company is going to do excellent in future and started buying it. By the time I started purchasing, the share was almost 10% up. But, after 10 minutes, stock started falling like nine pins. The very same day the share fell by 20% from my purchase price. Next day newspapers said that this order is executable over 15 years. Anyways, I bailed myself out at 20% loss, but share is probably 50% down now from that price. Most likely, the breaking news was put on TV to make some idiots like me broke.

b. Buying a company because a big shot has bought it. This is another sin that I have committed multiple times with very poor outcome.

c. Buying a commodity/poor corporate governance company coz it is trading at a low pe(1-5).

d. Buying a company coz promoters are painting a rosy picture. Of all the investing sins, this one takes the cake. E.g., My reverse ten bagger(purchased at 700, sold at 70 with purchases along the falling price) in Bharati Shipyard was mostly coz of this. Promoters kept on saying that they have order book worth 5-6 years, they will grow at least 50% per year and so on and share kept falling.

I think this should be good enough for time being.

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Among the several mistakes that I have done so far, the following stand out:

1). Hasty decisions (exits and entry): like getting out of page @ 1200 after having spotted it early at around 900, not being able to patiently wait for a correction in an attractive stock going through a bull run, etc. (sometimes these decisions helped like exit in case of GRP, or entry in case of astral, but it still counts as a mistake).

2). Frequent churning of portfolio - everytime you make a change in your portfolio you tend to loose a few percentage points in terms of not just brokerage but since you cannot time the entry/exit properly (unless you are good at trading!). This is actually has overlap with mistake no.1.

3). On paper rosy picture may not necessarily translate into good returns: as Donald had put it in one of the threads, it is a question of valuations. no one can accurately predict how the market will value a stock. P/E re-rating should never be the sole theme of any investment.

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Committed most of above at one point of time or other I feel money making phychology in mere mortals work alike…in initial phase of investing carrer

it is only after maturity / spending time in market/ making lossess thatmake you a more matured investor to do homework before shelving money / keep eye on results / take lossess quick and so forth.

that said, even today stock immidiately start rising after I sell and falling after my purchases…have’nt learned buying piece meal as yet and lot of learning still to go as said miles to go…

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Other than the common mistakes cited above couple of mistakes:

1). Investing based on High growth stock list. I bought ICSA, Tanla becasue they were fast growth cos. Initially the positions were profitable, so added as stocks kept falling. Remained in denial as the growth disappeared.

2). Tried to book short term loss for tax purpose. I had Hawkins bought at about 1200. It has crashed to 860. Thought of selling and buying again at lower rate. Sold all and could buy only 20% of the quantity at 840. The stock just zoomed. And I couldn’t get myself to buy being anchored to the price of 860. Bought finally at 1600.

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I guess ordinary investors has paid hefty tuition fees to the market in their early days in one way or the other.Apart from the ones already discussed I have lost hefty sums due to corporate governance issues(Everonn, DCHL, CEEBCO to name a few). Also rosy pictures from promoters (GVK Power, Canes Softwares, Aban Offshore etc.)

Strangely enough IPOs had been mostly a positive experience with good money made in Coal India, VA Tech Wabag, CARE. Even made money on Reliance Power ! Sold on the day Anil Ambani announced the bonus and stock rose to 450 (cum bonus).

I think the fundamental change was earlier the focus was on buying stocks low and selling high, now it has changed to owning businesses and be part of their growth stories. Long term investing is all about Compounding. Nothing else matters as much.

A platform like Valuepickr can help a lot to novice investors in their early days to start avoiding the pitfalls from the very beginning, saving precious time, money and mental tension. Unfortunately I joined TED, Valuepickr quite late and learnt the hard way.

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Interesting topic and one which Charlie Munger will approve of highly. I have not made big losses in my investments - am in the market for last 4 years.But recently made a loss in Wockhardt, which I think could have been avoided. Purchased after reading their investor presentation ( very impressive) and got sucked into the growth story. Have realised that one should not ignore a company’s history. Also compounding machines like Page,Asian Paints, HDFC bank, Gruh,Supreme Industries, Indusind bank etc. should be sold not because of overvaluation or overall volatility but only if there is an issue in business fundamentals. Sold Supreme a few months back only to buy it later as its a compounding machine and could not ignore.Similarly, bought Gruh at Rs 35 and sold when it doubled only to buy at 200 last year. For me in Indian context, an honest and upright management is very very important.

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Golden Words…

Compounding.

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1.Had not come across valuepickr and screener.in. Was using moneycontrol.com for screening stocks. Rakeshjhunjhunwala’s Titan/Crisil were from Miscellaneous sector. Came across Kaveri Seeds in miscellaneous sector at 550 rs while screening stocks based on EPS. Never tried to probe further. Later it zoomed to 4 digits within a span of few months. Couldn’t invest in Kaveri seeds till now.

2). Found Vijay Kedia’s investment in Atul auto and Cera 1 yr back at half of the current price. Didn’t invest.

3). Had shortlisted Jammu and kashmir bank around 800rs based on EPS. Couldn’t understand the balance sheet of banks. Even now i find it tough. Haven’t invested in banks.

By now had learnt to look into balance sheet. Had picked the above stocks without going through balance sheet and all :slight_smile:

4.Came across screener and later valuepickr.Saw Ajanta around 400 after Ayush’s recommendation. As usual missed it.

5). In 1 yr had become adventurous and hence missed Astral and others due to valuations even though seniors were convinced about the growth.

6). Somehow the portfolio delivered around 15 % in 1 year. Have not lost money except in Roto pumps. Invested around 144. Now its at 103 rs. Yet to come out of it.

Opportunity cost and not following seniors hit me more.

Even now i find it tough to visualize growth. Have started to rely on technical/fundamental analysis.

Now am willing to pay more and go with the flow.Have the risk appetite to have only few stocks which are technically/fundamentally strong. And i rarely churn the portfolio without any negatives on the technical/fundamental front.

Was earlier obsessed with low p/e stocks.

Learnt growth is the key and markets have their own reasons which are right most of the times.We must respect it.

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Just gotta posted here to went out my experience i open public so i will not dare do the same again(i think so)

Started Direct Equity in November 2010. Like most people it was based on tips and friends suggestions. Was doing the same during first half of 2011.

Then started reading buy and hold later value investing.No this did not improve me i was holding on to 25+ stock mostly loss making thinking buy and hold is great idea without even knowing what the company business is for eg A2Z,Elecon eng,SJVN etc i did not even know what they are producing or selling.

Then started learning more about Fundamental analysis,more on value investing and then joined Valuepickr in early 2012 or late 2011. Did i learn then NO… i thought i hit a jackpot site where many bigshot come and post excellent details of companies they have researched. All i had to do was read couple of posts and see how long the thread is and invest in them with lent idea and zero self conviction.

I benefited a lot with that strategy as many where good companies . But i never knew when to sell or buy more. Say couple of multibaggers i did not know should i sell/buy waited for someone to post something to make call.

Few of them started making loss and never knew what to do.

Realized later how little i knew and everything so far is just luck without work. I haven’t come out of this habit completely.Still i have bought few stock on others ideas.

Now i have started reading books as i realize only person who can help me is myself. Getting rid of stock which i just bought as other said so. Adding only those that i understand and know well. Haven’t learnt things completely but i am sure with reading more and discussing more here and twitter i am gaining my own knowledge.

Now the only view i take on any of my holding is long term like buffet said buy a business only if your comfortable the market closes tomorrow and doesn’t open for 10 years.

Long way to go,i am sure Valuepickrs are here to help me make that journey success.

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The list can pretty long :slight_smile: and i have been thinking about writing it here, but every time i procrastinate, so let me start with 1 for the moment.

Mistake #1

Having multibagger’s in portfolio BUT with small allocation. That really hurts, i tell you. In my short investing career i had the good fortune of participating and seeing fabulous runs in stocks like Kaveri & Astral. However, i missed a chance to participate really big in these.

Reasons as per my analysis -

1). I didn’t take the Portfolio allocation thread very seriously, or rather didn’t act on it. I was fixed on a strict allocation level for each of the names. I hope i am learning from my mistakes, and now getting better at the art side of the this whole thing.

2). I did take a long time to learn and develop the right level of conviction on these stories. Of course, which means I didn’t do the hard work on them.

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Mistake #2

Over emphasizing buy and hold.

Most of my 50% long term blue chip holdings that i discussed above, i now hold for over 2+ years, accumulating every now & then. I thought same rule should apply to the other half of portfolio, which is more or less modeled on valuepickr picks,

I nowrealize, same rules can’t apply for all companies. So, i have to better my sale strategy, specially for this part of the portfolio.

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I read so many threads with mistakes made by others and i had a good laugh when i read yours(no offence), as this was my major mistake also. and realizing too late. it is indeed a shame, to book profits too early, esp. in growth stories,as is a shame to hold on to a loser, wishfully thinking, things will change.

But, for me, my mistakes are teaching me to improvise, and i try not to repeat my mistakes, so that goes as a learning, which books cannot teach initially,i mean they did teach, but i did not follow, thinking, i am much smarter, but humility comes,( very rarely naturally), and most times when we are punished for foolish mistakes, and i think even in investing a bit of humility finely helps as we are ever learning and try to be ever cautious.

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A really nice thread for sharing mistakes. I had been in markets from 2007 saw the highs of 2007 and lows of 2008.

Bought Stocks based on recos from money control and ET. Finally got confused in between and left it out. Few days i tried investing using options. I was fairly successful but it was a difficult task to do since options values can change drastically on a daily basis. Bought stocks on high and sold at rock bottoms - learnt the lesson i need to accept the loss and try to find another stock. And many more lessons like lost money in CEBBCO due to management issues[this could not be avoided since CEBBCO till then never had management issues],lost money in zylog due to bottom fishing…best lesson learnt --didn’t buy KFA since i thought airlines is a costly business to run…i didnt understand how they can make money…this helped me save some money atleast and change my perspective towards stocks

I try to do the follow rules now

1). Whenever i buy a stock i buy a mimimum lot like 50k or 1 lac…when you invest good amount of money you would atleast think twice

2). I never buy stock at 52 week high…I wait till it atleast falls by 10 to 20 % …This is applicable only if i am interested in stocks

3). Stopped following Money Control …i feel too much of noise and this information can act against us. IN fact last one year i never tracked sensex …i track my stocks on a weekly basis. Its good to track them on daily basis just in case if you one of your stocks is next satyam you need to get out of it asap…

4). I dont envy others stellar picks…ppl can earn money by investing in a good pick but we must not envy their returns and feel bad for our returns. this can act in two ways you may tend to buy the stock or you can sell your current picks expecting to find something better than the current stock. I do not want 100 bagger in 10 years. I need to find a 5 bagger for next ten years

5). Recently lot of ppl bought NCC and spice jet since someone bought these stocks…i refrained since i didnt understand their business properly.

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I thought of putting down my learnings(won’t call it mistakes) from Stock Market experience till date

  • Don’t chase too many ideas due to various biases and charms and develop a long term strategy(still to develop one completely).I went with almost 20 ideas and understood why and which ones works OR don’t with stock market experience only

  • Allocate max limit as per your % allocations strategy to maximum conviction ideas as max money is being made by betting big only ex - lot of big investors and they are rich due to just few stock pickings by betting big on them only.
    I could see this in my portfolio performance over a period of time

  • Understand business model of company thoroughly as few disappointments in results gives a great opportunity to pick more. I realized after i understood few companies models better like Ajanta, PI etc and why i missed the good opportunities earlier

  • Valuations matter while buying stocks as they will revert to mean over a period of time and will limit your end result.
    Also, buy stocks only when are atleast 15-20% down from earlier top. Multiple stock buying taught me this over a period of time

  • Most important try to understand atleast known risks with business and try to minimize them to limit downsides in stock selection. Ex - Kaveri and Avanti in my scenario as i don’t do thorough research and didn’t understood risks properly.

I think in Indian Cricket terminology, if we can Chose stocks with long term thinking like Sourav Ganguly, having consistency and longetivity of Sachin tendulkar and most important temperament like Rahul Dravid, we shud do good in stock market

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Some out of many. .

  1. Chasing stock prices rather then waiting for opportunities to buy into them i.e mainly buying into stocks to avoid a feeling of lost opportunities.
  2. Under researched buying and irregular updates and information gathering on invested stories leading to inability to allocate sufficient capital in good developing stories or getting out of bad ones with acceptable losses.
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Nice thread and sharing of mistakes by everyone.As Rudra mentioned above, As an ordinary investor I have paid hefty tuition fees to the market in my early twenties and created an absolute mess in my portfolio.

In my first job after college Some of my friends used to claim making 2-5K everyday from trading,this encouraged me to open a demat account sometime in 2010.I had no idea how market works and what to buy and with no background in finance or markets i bought my first stock by randomly picking a name I liked in broker Account home page buy recommendation ticker messages.Somewhere I read stocks should be for longterm and should be bought cheap , so devised a strategy to buy stocks near 52 week lows or P/E low and kept buying such stocks for about 1.5-2 years.I had no idea what else to check other than P/E or Price and did not bother to put in effort to learn either,most of my friends and colleagues kept mentioning it’s just a gamble.With this strategy I soon ended up with some of the biggest wealth destructors [you name it I must have had it :slight_smile: ]and PSU stocks …JP Associates/KSOIL/Concurrent/IVRCL/JSPL/Unitech/Rei Agro/Suzlon/Opto Circuits and PSUs BHEL/NTPC/NMDC/SAIL/IDBI etc.Most of these only kept going down and soon i lost most of my interest in markets.In short a totally clueless investor.The biggest losers were KSOIL and Rei agro… sold at 95% loss recently :slight_smile:

Finally Modi wave took over in 2014 and even my portfolio started moving up and started tracking it again.After the elections even my 60-70% down portfolio turned green.Sometime in middle of 2014 suddenly I found valuepickr and other such superb blogs and even though Initially everything looked alien to me soon it started making sense.Even though I am still a novice,I can confidently say I have learnt a lot over the last 1 year from valuepickr and seniors and here are some of my learnings from the past.
1)Nothing substitutes hard work.Work hard on a business you like and build your own conviction.
2)Buy stocks only after going through a detailed checklist not because someone suggested,Keep reading and learning about companies you own and keep
updating the checklist.
3)Don’t be afraid to ask for help,Accept it when you have no idea ,everyone will help you as much as possible.

Btw most of my friends who used to earn 3-5K daily have left the markets and decided to never comeback again :slight_smile: :slight_smile:

Thanks,
Anindya

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