2024-09-16 00:00:21
So that we do not face any problem regarding money at any point in life, we want to invest along with saving. Since the first step of investing is to take risk, people are also worried that they may have to suffer a huge loss of money. ET Wealth learned some similar experiences from industry experts and financial advisors etc. We can also learn a lot from their personal experiences. Know how these experts started investing and what was their experience.
Trading requires discipline and experience
Vijay Kedia, founder and MD of Kedia Securities, says that when I started trading in the stock market, I had no knowledge and no guru. I chose F&O in the greed of getting more returns by investing less money. Initially I got success. Maybe it was beginner’s luck. But it faded soon. I was in loss within just 1 year. Trading requires more discipline and experience than investing. My mother even had to sell jewelry to compensate for my loss. He said that I advise investors not to be attracted to futures and options.
Learn these lessons
- Don’t get attracted to futures and options. The success rate here is only 1%.
- Trading requires more discipline and experience than investing.
- Always keep a stop loss in trading.
It is necessary to invest in different places
MD and CEO of Bajaj Allianz Life Insurance, Tarun Chugh, says that in 2001, the bank I was working for suddenly shut down. I became unemployed overnight and my income stopped. I went to England for new opportunities. There were many challenges here too and this changed my thinking towards financial security. Gradually, I started investing in shares, bonds and real estate. This brought diversification in my portfolio. I also bought life insurance. The most important lesson is financial planning and investing in different places instead of investing in one place.
Learn these lessons
- Do not invest all your money in one place.
- Don’t depend on a single income.
- Make sure to create an emergency fund.
Buying on dips is not always right
Vidya Bala, co-founder of PrimeInvestor.in, says that due to lack of understanding of sector cycles in the stock market, I invested in bad stocks. In 2006, I invested in a sugar stock which was at the top at that time, believing that it was moving upwards. I became overconfident with the good returns it gave since 2005. Later it fell. With every fall in the stock price, I invested more in it. Later the stock price fell by 70-80%. After 7 years, I had to sell it for less than one-fifth of its cost. I have now started avoiding getting involved in things that I do not fully understand.
Learn these lessons
- It is very important to understand the sector cycle.
- Past performance is not a guarantee of future performance. Just because a stock has performed well in the past does not mean it will always perform well.
- Sometimes it is important to face losses and move on.
Be prepared for bad times
Dhirendra Kumar, CEO of Value Research, says that when money is available easily, we often do not spend it wisely. In 2008, I suffered a setback. I had invested a few crores of rupees in shares. But the market fell and I had to sell it at the lowest price, which resulted in my loss. My situation was such that I needed money, but I did not have many options. This also taught me an important lesson that always be prepared for sudden things. Keep your financial planning simple. Avoid getting into new investments without complete understanding.
Learn these lessons
- Keep financial planning simple. This will help you control your financial situation better and avoid major risks.
- While investing in the stock market, fully understand how the company in which you are investing works and how it earns money.
- One should be prepared to face sudden situations in life.
Buy property to live in
Varun Gupta, CEO of Grow Mutual Fund, says that I got swept up in the real estate wave in 2013, just 3 years into my career. Bought a house worth Rs 1 crore in Gurugram on a loan of Rs 60 lakh. It proved to be a wrong investment. There was also a heavy burden of EMI of Rs 60 thousand. This limited my ability to take risks and try different options at the beginning of my career. I was lucky that I got good profits from my first startup which gave me good capital for my second startup. After this, in 2019 I was able to repay the loan. But this process of repaying the loan took me 6 years. This gave me a lot of financial stress.
Learn these lessons
- Investing by taking loan can be risky.
- It is better to invest in long term investments like mutual funds, SIP. This not only gives financial stability but also reduces the risk.
- Real estate should be purchased only for personal use and not for investment purposes.
Never buy shares with borrowed money
Naveen Kukreja, Co-founder and CEO of Paisa Bazaar, says that one of my biggest mistakes happened early in my career when I was in England. I started investing in global stocks during the global financial crisis. After seeing initial gains, I used margin money to invest in blue-chip stocks hoping to get returns higher than the margin cost. But the global banking crisis of 2008 led to a massive drop in the market. As stocks fell, margin calls were triggered at the worst possible time, causing me huge losses.
Learn these lessons
- Always invest with your own money, which you can keep invested for a long time. We should always invest for the long term and not for the short term.
- Never invest based only on the rising trend of the market.
- We should only use as much margin money as we are willing to lose.
Don’t run after short term profits
According to Mrin Agarwal, Director of Finsafe, I invested in penny stocks in 2007 trusting the recommendations of the brokerage house. They pushed me into short-term trades promising good returns. Their business model was based on making commissions from frequent buying and selling. When the market crashed in 2008, I lost almost 90% of my investment. This experience taught me that chasing short-term profits in trending stocks is a dangerous game. It may work for some stocks, but it does not last in the long term.
Learn these lessons
- Your own research is important. Do not blindly trust outside advice.
- It is important to know what the business and profit model of the people you are working with is like.
- Short term trading often involves higher risk and the potential for losses is higher.