The more I meet ‘investors’ (they think they are investors) who seek alpha (like my friend SS says – since they do not keep accounts they do not know) and some who even claim that they get alpha….here is a list of shares that I destroyed yesterday:

Computer Point, Chokani International, Chimique Laboratories, Svadeshi Mills Limited, Shaan Interwell Ltd, Maikal Fibres, AMEI Power, Krishna Filaments. Collective value NIL. Cost price: A couple of lakhs in the 1990s.

So on an opportunity cost basis worth at least a million if not more…and like the Englishman says “One day if we can laugh at our mistakes……”

Well these are the costs of seeking alpha. These shares were bought because a cousin’s friend said it is a good buy. One was because a friend’s cousin said it is a good buy. One because the Chairman was buying (I got carried away by titles in my younger days – did not realise that if you create the company, YOU HAVE TO be the Chairman – after all nobody else will :). One chairman used to call himself a partner of a big CA firm. He was actually only a Director. LOL.

One company was raided on the basis of information provided by his brother in law. There was Fera violation, Income tax violation, …the works.

One company Chairman laughed when I asked him if was in trouble. One month later he committed suicide. I have not mentioned his company name – his children are still around. Simple decencies for a guy who stole money from all and sundry but did big time charity 🙂 (if u can call distributing stolen money charity).

The worst thing is not only I lost my money I also lost it for some of my friends, relatives, sister, father, cousins, ….naively believing alpha chasing is fine. I still find many people chasing alpha….now as the Englishman says ..”I hope I can laugh…..”

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  1. Second your thoughts. It takes guts & honesty to admit one’s mistakes. Appreciate that from you.

    However, one has to take Risk (in other words, lose money) to make money in markets. Not all your risks will work out well in the end. But, I am sure, since you took risks, you are FAR BETTER OFF now – both in terms of financial worthiness & knowledge.

    “Alpha” chasing with penny stocks, non-viable business models will lead to losses. If one wants to invest in smaller businesses / stocks – look for companies with strong position within its space. Of course, always diversify amongst stocks. And you have to factor Management ability, honesty, shareholder friendliness as well. After all, a la Satyam can be lurking somewhere. Thks.

  2. Subra,

    There is sane advice in here for those chasing alpha but when greed precedes needs, one will continue to delude oneself and end up making the same mistakes, which we all commit in order to learn the bitter truth.

  3. Aniruddha,

    I have used that line in my book..”if u think financial literacy is expensive, try financial ignorance” the other line I like is
    “Finance is changing, are you?”. One of the chapters i have written is ‘Changing strategies for changing times” ….after all we are in a dynamic world. 2002-7 strategies would not have worked in 2008. Strategy which worked in 2008 would have bombed in 2009. 2010 ..will bring in newer problems…so changing is a MUST. Thus learning becomes a must…

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