Beat the Inflation-the Dalal Street way Part II- Be a ‘Calculative’ Investor
My Dear Students,
Let’s continue with where we ended in the last article. In the last article, I had promised you to tell my story of the missed bus. But before that, I would like to coin a new term for you called ‘Calculated’ Investor. A ‘Calculated’ Investor is the one who takes a calculated risk while investing in share market without getting carried away by the so-called markets experts are saying. He/she invests based on his/her own analysis after taking inferences from various advisors.
Now let’s understand my story, this is when I was in TYBCOM in the year 1992-93 at K.C. College. I was totally surrounded by Gujrati and Marwari friends who belonged to business families and discussing share market and its upward movement due to Harshad Mehta scam was our daily routine. During that period, one of my friends came to me and told me to apply for Initial Public Offer (IPO) of Infosys limited which was known as “Computer wala company” those days, the term software company was not in the business back then. My friend told me that this company can make you millionaire after 25-30 years, you will own up a bungalow in South Mumbai, a luxury car etc. Hearing this, like an obedient son, I went to my father and asked for Rs.10,000/- for investing in this company. My dad was so angry that he slapped me saying that Rs.10,000/- was his 3 months’ salary in the year 1992-93 and investing in the share market is not our cup of tea. I was totally dejected because I could not invest in Infosys but that day, I decided that I will definitely invest in the share market actively once I get a job, and that exactly I did.
For your information, that friend of mine who invested in Infosys shares back in 1993 have created a wealth of Rs.13 crore just by way of market appreciation and bonus issue (dividend Not included). So, imagine an opportunity I missed to possibly own up a college in Mumbai.
But friends please do not get carried away, there are two sides to every coin. My impulsive decision making also costed me heavily in 2004 when I lost amount close to Rs. 1 lakh on single day in Ashok Leyland futures, the day on which Shri Atal Bihari Vajpayee lost election which he was sure of winning due to India shinning campaign.
With this, I would like to draw your attention to some Do’s & Don’ts related to share market investments:
- Assess your Risk Profile, if you feel that you have low risk appetite, then go for relatively safer forms of market investment like Mutual funds, Exchange traded funds etc.
- Invest based on fundamentals of the Company, have Goal based investments.
- Study the fundamentals on your own from the Annual Report. Non finance students can take help from authorized financial consultants (& Not from friends).
- Be patient, give yourself sufficient time so as to see the multiplying effect on your investments.
- Be in touch with your investments, keep reviewing it on regular intervals.
- Don’t be afraid to book your losses in case your investment is not giving you the desired returns. Right decisions taken at wrong times are much better than wrong decisions taken at right time.
- Study the economic conditions, Government policies, RBI announcements so as to evaluate the impact on your investments.
- Build a balanced portfolio giving weightage to various industries, companies and asset class (Shares. Mutual Funds, ETFs) based on your risk taking ability.
- Always read a business newspaper and view business channels to evaluate the latest happenings in the share market.
- Never ever invest based on tips given by best friends & so called financial experts.
- Don’t keep blind faith in any recommendation given by TV experts, review their recommendations yourself before investing.
- FOLLOW STOP LOSS i.e. an advance order to sell shares when it reaches a particular price point. It limits your loss or gain in a trade.
- Don’t fall in love with your investments, review them and sell them depending on market situation.
- Don’t keep any emotional bias towards your investments. I was holding one share which my childhood friend had recommended, eventually that share became ZERO and I lost lot of money on that deal.
- Don’t keep all the Eggs in the same basket. Spread the risk by investing in various asset classes like shares, mutual funds, Exchange traded funds etc.
Students must take formal training before they start investing / trading in the share market, there are certain courses offered by BSE, NSE which are good for graduate students and students of 12th standard may evaluate the option of pursuing their graduation in Financial Markets.
So, Get Set Go dear students, Create a Calculated Wealth and retire happily.
Thanks & Regards,
CMA Sarvottam Rege
M.Com., FCMA (India), CMA-USA
Mentor, Corporate Consultant & Academician with Industry Oriented Approach
CMA Membership No.: 19018 (India), 7110039 (USA)
Member of Institute of Directors (IOD) (Membership No.: 200103)
Contact No.: +91 8452848028 (WhatsApp) / 9892605240
- The views mentioned above are Author’s personal views and has no connection with the institutions he is associated with.
- The author has 22 years of Industry experience & 11 years of Teaching experience, currently heading the B.Com (Financial Markets) (BFM) course with one of the leading colleges in Mumbai.
- The author holds few shares in the companies mentioned above, but does not have any vested interest with respect to speculative motive.