Saturday, October 22, 2005

The cost of learning

Investing is a never-ending learning curve. Ever since I started investing in the Indian equity market (April 30th, 2004), the market has willfully expressed a number of emotions. Various moments of reckoning like the drop on May 17th 2004 when the BP government was going down in the exit polls, or when equities went into a frenzy by jumping from 7000 to 8500 in a trance only to slip back from 8900 to 7900 in half a month. In the process, I've been 40,000 rupees down, 180,000 rupees up and again down by 110,000 rupees. This is tamely called tuition fees which each investor has to pay at some point in this fascinating world of equities.

Over the last 18 odd months, I am putting some of my learning –
a) Always back your way of investing. I follow value investing and had always been a great believer in the buy-and-hold strategy but used to sell precious stocks for as little as 100% profit. Today if I would adhered to that strategy, I would have been atleast five times as rich.
b) Always diversify. You can sleep better knowing that you donot lose much if one company conks than knowing that all what you have to gain is on the performance of one company.
c) Never go in for penny stocks. I have currently two stocks in my portfolio which are negative profits stocks. My earning on both have been –48% and –52% respectively.

In the next few days, we shall go through a number of recommendations on the basis of value investing on some very interesting stocks in the Indian market.


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