namotasa bhagwato arahato sama sam buddha sa
I would like to know about my journey in investment world.
Investment for saving tax
Fresh out of college and in my first job, it became known to me that government would take more tax if I didn't invest. So I inquired and came to know about these primary options:
Perhaps in the next year, the equity markets didn't do well and I received a meager interest. Further, I checked the value of my investment and the principal hadn't grown much. It was disappointing, the happiness that I was seeking from the same level of growth wasn't there to be.
But then you can't always expect markets to rise, sometimes it falls. These are the risks associated with equity markets and you should have known. Further, to lower such risks what you should do is buy a SIP, Systematic Investment Plan. So rather than investing at the end of year, you ought to invest monthly so that you participate evenly and you do not lose out investing on the lows.
I took the advice and started the SIP- With time I regularly checked where my investment was and it wasn't growing. Worse, it was somewhere 2008 where Sensex was retrieving from highs. The cumulative of my investment was negative and my investment was worth less than what money I had put in. This was really sad.
Inquiry into Mutual Funds
So I searched and looked around the web. Interestingly the returns which Mutual Funds had posted with the rise and fall of markets were uneven. For example, when the market had risen 20%, the mutual funds posted returns of 15%. When the markets fell by 10%, the mutual funds fell by 15%. It is very puzzling. How can this be?
You know what, there are certain hidden costs associated with mutual funds. Either the fund makes money or not, the fund manager would charge fees. Plus there are certain operational costs associated with mutual funds.
For me, the mutual funds had lost all charms and they were ugly and unattractive instruments. I decided that I would not spend a single rupee on any Mutual Fund.
If I would have rather invested in PPF, I was guaranteed 8% return. Then the old folks started appearing wise by sticking to FD and PPF, after all they do recommend not taking much risk. I opened a PPF account and for whatever investment required for tax saving and with what money I could save, I would put it into PPF.
Increased risk appetite
How could I stay away from the market? The lure is so much, even if it was just a hobby. Perhaps I should try to balance my risk. Now that I had been around for a few years, I ought to be investing in stocks. Take the matters in my own hand, after all it is my money. Again, which company do I pick?
I began searching and I read many scripts. Taking lessons from investopedia.com to making virtual money portfolio in rediff.com. Reading into financial statements and looking into business model, market competency, product information etc.. I crammed myself with so much information that it hurt. Anyways I bought a few Bharti Airtel shares just to play safe.
However the stock fell and I was again puzzled. It is the best telecom company with terrific records and nothing but growth lay ahead in front of it.
Value Investing
I researched further and then I realized "A great company is not always a great buy. You have to determine the worth of a stock at a given time before buying. For example, Apple is a great company but the stock is overpriced." So you need to learn value investing. So I paused my investing for a till I learned more about value investing.
I learned that I should be a long term investor, look for the environment around for clues. Winning companies make product or services that sell. In general companies, like humans, have a life span. They are conceived, then grow and reach a particular stage and then they saturate and slowly become obsolete. Therefore it is imperative that you identify a company when it in adolescence. No point investing in a giant like General Electric which has reached full maturation. Take a brief look at financials to know check the debt, P/E etc. Further I should see where my investments are by regularly reviewing quarterly results, annual reports etc.
So I looked around for such companies and build my portfolio. For example, I bought my groceries from Big Bazaar and was quite impressed by it. A lot of people were moving into metros and organized retail was a growth story. Big Bazaar was simply expanding its retail space all over the country. It of course gave good deals to the customers and the store was always crowded. Giants like Walmart and Tesco were waiting to gain entry into Indian markets. Government at some point may allow FDI which would only help companies like Big Bazaar through funding etc. The stock was under priced as well and it made sense to buy it.
Plight of a retail investor
So I fed myself with more and more information. Constantly reading about stocks and companies in my portfolio and looking for new companies that fit the description "value investing". One fine day I woke up and news said the results are out and Pantaloon Retails (parent company of Big Bazaar) had performed below market expectations, the debt servicing was high and their electronic business wasn't doing good. By the time I could react, the stock was already trading down 5-7%. Sometimes as a retail investor, you feel that by the time the news has reached you it has become stale. Anyways I was a value investor so I stayed put.
FDI retail
Market buzz was that the government is soon going to open retail market for Foreign Direct Investment. Pantaloon retail zoomed in the expectation. One day government made the announcement and stock went like a rocket. However the retail association prepared for a nationwide strike and negotiated with the government, seeking protection for small businesses. The government obliged and rolled back its order. Excuse me, what just happened? The stock crashed more than 10%. A few days later, someone from the cabinet announced that FDI will be back, stay tuned. Anyway the stock was so volatile that was too much for my nerves to handle.
Greeks running out of money, FIIs unimpressed
At the same time, Greeks ran out of money and euro crisis was beginning to shape up. Since France and other countries held its debt, the whole Europe was reeling under pressure, they could not afford a default. All the investor were fleeing to safe heavens such as dollar, and debt of countries such as America and Germany. Global investors were also staying away from risky bets such as developing markets
Indian markets all of sudden became unattractive for foreign investors. Macro factors were coming into play - the interest rates were pretty high that hampered businesses, government didn't bring many reforms and policy was paralyzed. So when the FIIs pulled out money, the market fell even more as the developing markets are highly volatile. My portfolio began to bled day by day. Everyday I returned from work only to find out that portfolio is down 1-2%. I began to wonder if "value investing" fits in Indian context. My predicament was further fueled by a friend who said "Boss in India, all the market is gamed by big players. Retail investors are only there to lose money. Why don't you look at various IPOs, it is all hyped by big boys just to make money. See where those companies are now."
My patience with value investing was growing thin and it became apparent to me that only place market is heading is downwards. Finally I sold my entire portfolio and I was freed from the daily turmoil. I accepted the losses and felt relieved as to not feeding myself with information.
Other instruments
However I still continued to follow the news and perhaps I had a sense of idea where markets are heading. There was no good news in sight and the downward trends continued. Nifty was hovering around 4800 and there was no reason why it should come up. Economies like Italy and Spain were behind Greece, there debt was mounting and no one seemed to buy it. Debt markets were dictating equity markets around the world and there was nothing much to cheer. Also, all the equity markets around the world seemed to be linked. So if the unemployment was down in US, markets rose there and Japan and other Asian markets followed suit. Anyways the euro debt problem wasn't going to be solved overnight so the market should continue to slide further. Take a guess what I bought next.
Yes, I bought options on Nifty. One day Nifty was trading around 4850, I sold call options at strike price 4900. The bet was that I was selling insurance to anyone who feels that Nifty would end above 4900 next month. In case if it did end above 4900, my losses would mount however I was covered till 5000. What I thought "Come on, I will take on anyone who feels that market is bullish". I promised myself that if it did indeed reach 5000 I would buy a call and accept loss.
Then I began to reflect what was happening to me. I was so grossed in the news that it didn't feel pleasant. I was up before the market were open flipping through various channels for any news coming out of Europe. While at work, I read the news and continuously monitored the Sensex to see what's happening. So much so that I felt exhausted and loaded with thoughts that won't disappear even while I was asleep.
Politicians in Europe came to rescue
Angela Merkel and Nicolas Sarkozy announced that they would come together and lead other European nations to form a "fiscal union" and tackle the debt problem. All of a sudden, market began to recover hoping some action to tackle crisis. The market was primarily driven by events and the main actors were Merkozy as the duo were called. Anyways, I had to continuously watch news to see what the fate of my investment would be. I thought if the euro debt problem was solved, I was content to lose the bet I made.
The meeting of Euro nations was a success and the market cheered. Even though UK opted out, the majority of European nations accepted to form a "Fiscal Compact". The Greeks and bank association accepted the deal Merkozy gave them. Greek debt would be slashed, and in turn it would have to bring some austerity measures. Bankers also accepted some losses.
What happened to my bet?
The reaction was that Nifty not only bounced back and crossed 5000, it crossed 5100 and was touching 5200. Wait a minute, wasn't the euro debt problem not going to be solved overnight?
My opinion turned out to be totally wrong and I didn't see this coming at all. I told myself "You are a loser. You are no good a trader. You should have stayed out of this. You don't understand the markets. Go and close your bet". I prayed "Just bail me out this one last time, I swear I will never invest again, especially in F&O".
However the market seemed ridiculously high and guess what I did - I bought a put option and doubled my bet. This time my loses were limited but I would win the bet only if the Nifty closed below 4900.
Back to the news, the Greek prime minister returned home and seeking ambition in his political career, announced a referendum as to accept the deal being offered. The Greek people would decide their own future. The market turned red and uncertainty loomed again.
Nifty option expiry
The Nifty also retreated from highs. It eventually ended up at 4750 so I made money on both the bets. There was no happiness in being a winner. After all the emotional turmoil I had to bear, was the money really worth it? What happiness does money buy you anyway? Plus the money gets electronically credited to your bank account so you don't feel that you have won a bet. Investing all of a sudden had lost all charm for me.
I had again made similar bets the next month but lost all interest to track it continuously. This time ECB stepped in and printed a lot of paper money such that all the markets were up. So I lost my bets.
Anyway what do you do when your investment grows? When you make a winning bet. You tell your friends success stories how much profit did you make and how. It can be equated to sowing seeds of greed in your friend's heart, bringing out the unwholesome hidden desires in them.
I deeply regret what I did next. I explained the whole F&O game to my brother-in-law. My sister was expecting a baby at that point, and they have a mammoth house loan so the whole expenses were on the rise. He also made some silly bets and lost more money. Not that he shared with me much but I am certain he would have had trouble managing family finances.
Investing is ankusala
I had grown increasingly disenchanted with the whole "investing as a hobby". It didn't led to my growth and only to my deterioration. It has lead me to morally unwholesome state and I would categorize it as wrong livelihood and thus avoid it.
I would like to know about my journey in investment world.
Investment for saving tax
Fresh out of college and in my first job, it became known to me that government would take more tax if I didn't invest. So I inquired and came to know about these primary options:
- Fixed Income such as fixed deposits, Public Provident Fund and the likes. Further all these are loathsome instruments as you only get a meager return of interest and the lock in period is on the higher side. These options are for the elderly folks. Young people like you can take risks.
- Mutual Funds - This is the investment for you. Money gets invested in equity markets and you dare not doubt the story of Incredible India. FIIs are pouring into India from all corners of the world
- Stocks - It is very risky and you would require a trading account etc. You are a new investor and let the experts take care of your money.
Perhaps in the next year, the equity markets didn't do well and I received a meager interest. Further, I checked the value of my investment and the principal hadn't grown much. It was disappointing, the happiness that I was seeking from the same level of growth wasn't there to be.
But then you can't always expect markets to rise, sometimes it falls. These are the risks associated with equity markets and you should have known. Further, to lower such risks what you should do is buy a SIP, Systematic Investment Plan. So rather than investing at the end of year, you ought to invest monthly so that you participate evenly and you do not lose out investing on the lows.
I took the advice and started the SIP- With time I regularly checked where my investment was and it wasn't growing. Worse, it was somewhere 2008 where Sensex was retrieving from highs. The cumulative of my investment was negative and my investment was worth less than what money I had put in. This was really sad.
Inquiry into Mutual Funds
So I searched and looked around the web. Interestingly the returns which Mutual Funds had posted with the rise and fall of markets were uneven. For example, when the market had risen 20%, the mutual funds posted returns of 15%. When the markets fell by 10%, the mutual funds fell by 15%. It is very puzzling. How can this be?
You know what, there are certain hidden costs associated with mutual funds. Either the fund makes money or not, the fund manager would charge fees. Plus there are certain operational costs associated with mutual funds.
For me, the mutual funds had lost all charms and they were ugly and unattractive instruments. I decided that I would not spend a single rupee on any Mutual Fund.
If I would have rather invested in PPF, I was guaranteed 8% return. Then the old folks started appearing wise by sticking to FD and PPF, after all they do recommend not taking much risk. I opened a PPF account and for whatever investment required for tax saving and with what money I could save, I would put it into PPF.
Increased risk appetite
How could I stay away from the market? The lure is so much, even if it was just a hobby. Perhaps I should try to balance my risk. Now that I had been around for a few years, I ought to be investing in stocks. Take the matters in my own hand, after all it is my money. Again, which company do I pick?
I began searching and I read many scripts. Taking lessons from investopedia.com to making virtual money portfolio in rediff.com. Reading into financial statements and looking into business model, market competency, product information etc.. I crammed myself with so much information that it hurt. Anyways I bought a few Bharti Airtel shares just to play safe.
However the stock fell and I was again puzzled. It is the best telecom company with terrific records and nothing but growth lay ahead in front of it.
Value Investing
I researched further and then I realized "A great company is not always a great buy. You have to determine the worth of a stock at a given time before buying. For example, Apple is a great company but the stock is overpriced." So you need to learn value investing. So I paused my investing for a till I learned more about value investing.
I learned that I should be a long term investor, look for the environment around for clues. Winning companies make product or services that sell. In general companies, like humans, have a life span. They are conceived, then grow and reach a particular stage and then they saturate and slowly become obsolete. Therefore it is imperative that you identify a company when it in adolescence. No point investing in a giant like General Electric which has reached full maturation. Take a brief look at financials to know check the debt, P/E etc. Further I should see where my investments are by regularly reviewing quarterly results, annual reports etc.
So I looked around for such companies and build my portfolio. For example, I bought my groceries from Big Bazaar and was quite impressed by it. A lot of people were moving into metros and organized retail was a growth story. Big Bazaar was simply expanding its retail space all over the country. It of course gave good deals to the customers and the store was always crowded. Giants like Walmart and Tesco were waiting to gain entry into Indian markets. Government at some point may allow FDI which would only help companies like Big Bazaar through funding etc. The stock was under priced as well and it made sense to buy it.
Plight of a retail investor
So I fed myself with more and more information. Constantly reading about stocks and companies in my portfolio and looking for new companies that fit the description "value investing". One fine day I woke up and news said the results are out and Pantaloon Retails (parent company of Big Bazaar) had performed below market expectations, the debt servicing was high and their electronic business wasn't doing good. By the time I could react, the stock was already trading down 5-7%. Sometimes as a retail investor, you feel that by the time the news has reached you it has become stale. Anyways I was a value investor so I stayed put.
FDI retail
Market buzz was that the government is soon going to open retail market for Foreign Direct Investment. Pantaloon retail zoomed in the expectation. One day government made the announcement and stock went like a rocket. However the retail association prepared for a nationwide strike and negotiated with the government, seeking protection for small businesses. The government obliged and rolled back its order. Excuse me, what just happened? The stock crashed more than 10%. A few days later, someone from the cabinet announced that FDI will be back, stay tuned. Anyway the stock was so volatile that was too much for my nerves to handle.
Greeks running out of money, FIIs unimpressed
At the same time, Greeks ran out of money and euro crisis was beginning to shape up. Since France and other countries held its debt, the whole Europe was reeling under pressure, they could not afford a default. All the investor were fleeing to safe heavens such as dollar, and debt of countries such as America and Germany. Global investors were also staying away from risky bets such as developing markets
Indian markets all of sudden became unattractive for foreign investors. Macro factors were coming into play - the interest rates were pretty high that hampered businesses, government didn't bring many reforms and policy was paralyzed. So when the FIIs pulled out money, the market fell even more as the developing markets are highly volatile. My portfolio began to bled day by day. Everyday I returned from work only to find out that portfolio is down 1-2%. I began to wonder if "value investing" fits in Indian context. My predicament was further fueled by a friend who said "Boss in India, all the market is gamed by big players. Retail investors are only there to lose money. Why don't you look at various IPOs, it is all hyped by big boys just to make money. See where those companies are now."
My patience with value investing was growing thin and it became apparent to me that only place market is heading is downwards. Finally I sold my entire portfolio and I was freed from the daily turmoil. I accepted the losses and felt relieved as to not feeding myself with information.
Other instruments
However I still continued to follow the news and perhaps I had a sense of idea where markets are heading. There was no good news in sight and the downward trends continued. Nifty was hovering around 4800 and there was no reason why it should come up. Economies like Italy and Spain were behind Greece, there debt was mounting and no one seemed to buy it. Debt markets were dictating equity markets around the world and there was nothing much to cheer. Also, all the equity markets around the world seemed to be linked. So if the unemployment was down in US, markets rose there and Japan and other Asian markets followed suit. Anyways the euro debt problem wasn't going to be solved overnight so the market should continue to slide further. Take a guess what I bought next.
Yes, I bought options on Nifty. One day Nifty was trading around 4850, I sold call options at strike price 4900. The bet was that I was selling insurance to anyone who feels that Nifty would end above 4900 next month. In case if it did end above 4900, my losses would mount however I was covered till 5000. What I thought "Come on, I will take on anyone who feels that market is bullish". I promised myself that if it did indeed reach 5000 I would buy a call and accept loss.
Then I began to reflect what was happening to me. I was so grossed in the news that it didn't feel pleasant. I was up before the market were open flipping through various channels for any news coming out of Europe. While at work, I read the news and continuously monitored the Sensex to see what's happening. So much so that I felt exhausted and loaded with thoughts that won't disappear even while I was asleep.
Politicians in Europe came to rescue
Angela Merkel and Nicolas Sarkozy announced that they would come together and lead other European nations to form a "fiscal union" and tackle the debt problem. All of a sudden, market began to recover hoping some action to tackle crisis. The market was primarily driven by events and the main actors were Merkozy as the duo were called. Anyways, I had to continuously watch news to see what the fate of my investment would be. I thought if the euro debt problem was solved, I was content to lose the bet I made.
The meeting of Euro nations was a success and the market cheered. Even though UK opted out, the majority of European nations accepted to form a "Fiscal Compact". The Greeks and bank association accepted the deal Merkozy gave them. Greek debt would be slashed, and in turn it would have to bring some austerity measures. Bankers also accepted some losses.
What happened to my bet?
The reaction was that Nifty not only bounced back and crossed 5000, it crossed 5100 and was touching 5200. Wait a minute, wasn't the euro debt problem not going to be solved overnight?
My opinion turned out to be totally wrong and I didn't see this coming at all. I told myself "You are a loser. You are no good a trader. You should have stayed out of this. You don't understand the markets. Go and close your bet". I prayed "Just bail me out this one last time, I swear I will never invest again, especially in F&O".
However the market seemed ridiculously high and guess what I did - I bought a put option and doubled my bet. This time my loses were limited but I would win the bet only if the Nifty closed below 4900.
Back to the news, the Greek prime minister returned home and seeking ambition in his political career, announced a referendum as to accept the deal being offered. The Greek people would decide their own future. The market turned red and uncertainty loomed again.
Nifty option expiry
The Nifty also retreated from highs. It eventually ended up at 4750 so I made money on both the bets. There was no happiness in being a winner. After all the emotional turmoil I had to bear, was the money really worth it? What happiness does money buy you anyway? Plus the money gets electronically credited to your bank account so you don't feel that you have won a bet. Investing all of a sudden had lost all charm for me.
I had again made similar bets the next month but lost all interest to track it continuously. This time ECB stepped in and printed a lot of paper money such that all the markets were up. So I lost my bets.
Anyway what do you do when your investment grows? When you make a winning bet. You tell your friends success stories how much profit did you make and how. It can be equated to sowing seeds of greed in your friend's heart, bringing out the unwholesome hidden desires in them.
I deeply regret what I did next. I explained the whole F&O game to my brother-in-law. My sister was expecting a baby at that point, and they have a mammoth house loan so the whole expenses were on the rise. He also made some silly bets and lost more money. Not that he shared with me much but I am certain he would have had trouble managing family finances.
Investing is ankusala
I had grown increasingly disenchanted with the whole "investing as a hobby". It didn't led to my growth and only to my deterioration. It has lead me to morally unwholesome state and I would categorize it as wrong livelihood and thus avoid it.
