recently a friend found out at the funeral of a lady that a ‘rod’ which was supposed to be put in her left leg was not put at all….only when her body was being burnt did they find this out…so he tweeted ‘please get an xray done after an operation…that all things are done’. I would go a step ahead and say ‘check that the doc has not taken away one kidney…..or some other part’ that too is important, is it not!!!
I have friends who have now grown so rich that banks and brokerage houses have assigned them ‘Wealth managers’ (WMD – wealth management divison and weapons of mass destruction!!). These wealth managers call them regularly, they know their credit balance, they know which pizza they eat, they know that 27,643 is their kids school fees, they know that 44,612 is their car EMI….of course they do not see their bank account..LOL
One such ‘friend’ recently invested Rs. 9 crores in an IPO. Obviously he did not have this kinda money, but he had about Rs. 3 crores, and the balance came as a loan. He applied for an IPO and got a lot more allottment than what he had bargained – leveraging hurts even in good times!
Since I do not wish to name the friend, the banker, the broker..let us take a hypothetical example. The share was issued at a price of Rs. 150…and because of the cost of borrowing etc. the cost per share to my friend is Rs. 189 per share. The share has opened at Rs. 142…..now he is wondering what to do….
My advice: Sell and get out. At the rate of interest at which he has borrowed, HIS COST PER SHARE will keep going up – and he will NEVER be able to ‘satisfy’ himself that he has been a good investor!! It does not matter what is your cost – if the share is a bad share at a bad price you are destroying wealth. The sooner he puts that money in an index fund the better it is for all of us!!
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