As investors, it is no use blaming the Government, RBI, or even Rana Kapoor for that matter. Investors who were already invested in Yes Bank had plenty of opportunity to get out of the stock, since the story has unfolded gradually over almost two years. Those who entered the stock later thinking it was a bargain committed an error of judgement, that’s all. There is nothing more to it.
To avoid “accidents” such as Yes Bank, one needs to have a proper investment philosophy, framework and process, and stick to it. For example:
-
Don’t deviate from your asset allocation & diversification strategy, no matter how attractive an opportunity looks . Some losses in investing are bound to happen, but ensure you stay in the game in the long run.
-
Don’t buy into a stock even if it looks a bargain if the correction is on account of governance concerns.
-
Averaging down to reduce losses is a totally flawed idea. Your loss does not reduce by buying more at a lower price. Check with an excel sheet if you don’t believe this.
-
Never rely on “unnamed sources”, experts on TV or Star Investors even though they might have actually bought those same shares . Everyone has their own logic and rationale for doing what they are doing, and you don’t know what that is. Nobody is working here to make you rich. Do your own analysis and rely only on it.
-
Sins of omission are better than sins of commission . When in doubt, better to let an opportunity pass by than suffer a loss.
This is by no means an exhaustive list but something that comes to mind with the Yes Bank episode.
Lastly, I want to say something specifically with regard to BFSI stocks . For a long time, media experts were touting private banks & NBFCs as “no brainers”. But don’t forget that BFSI stocks are most difficult to analyse, and all over the world, more “accidents” have happened in BFSI than in any other sector. I had written about this in the Yes Bank thread more than a year ago, please read this:
https://forum.valuepickr.com/t/yes-bank/1227/1110
One Bajaj Finance or HDFC Bank does not change this essential character of BFSI stocks.
This is not the first time an episode like this has happened, nor is it going to be the last. To paraphrase Buffet, the next time it happens a new set of investors will learn some very old lessons again.