Here is a query that I got from a person whom I know from my blog….(I do not know her except through emails, but she is a very smart professional).

Here is the query “Had a visitor from xyz securities yesterday. He wanted me to open a trading account offline.I have a broking account which has since gone dormant(I had used to to invest in 2 IPO’s a long time back – Cairn and GMR) Started talking to me about direct equity, the necessity to book profits from time to time, futures and derivatives and intra day trading.

When I told him that I was’nt interested in F&O or deivatives and intra day trading, he told me of another plan, where I need to invest a minimum of Rs one and a half lakhs of which he would use a third for long term stocks, and the rest for weekly and monthly direct equity rotation.

Sir, Should I invest in direct equity? Should I do profit booking of the 2 shares I own?

As for the trading part I can almost read your mind “the only person to make money by trading is the broker” 🙂 ”

End of quote

My reply:

Absolutely right! Keep away from opening a broking account. Use the old one to sell these 2 shares which you have bought. Read my blogs which say why it is difficult to make money by applying in an IPO.

Continue your SIPs and decide to invest in equities only AND ONLY if you are sure that you can invest in learning about equities. A person in another profession should not, repeat should not deal in derivatives. When a relationship manager (he might be an MBA for all you know) says something, remember, he is from the sales function not from the fund management side of the business.

The necessity to book profits from time to time is like a doctor saying…’See you have  got cancer…you should not have out side food’. Fantastic but useless information AFTER A PERSON has already been detected of cancer.

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  1. “A person in another profession should not, repeat should not deal in derivatives.”
    When a person is willing to learn then what is the harm in derivatives?

    And trading is where the money is. You got a recent economic times article about intra-day trade

  2. No harm in trading, no harm in derivatives. When I was a broker I used to love the traders and the players in derivatives. Still love them.

  3. Good to post a comment after a break! The advice given in the above blog is very appropriate. But why change the opinion in the comment section because ET speaks highly about intraday.

    Trading is like risky feat we watch in discovery channel; possible for only few and fatal for all the others. SIP or investing in good shares with a long term orientation is the way.

    You yourself have mentioned that the only guy who makes money in trading is the broker.

    Having worked in the broking industry, I continue to have friends who trade for others in commodity, derivatives and I don’t know what else. I too love them!! But not what is being done to their customers. The interesting part is that these people after listening to me for long have quit trading (atleast that is what they say) but make other do the same for their ‘bread and butter’ or ‘idly and chutney’.

  4. me changing my opinion because of ET? You got to be joking Muthu. NONE of the persons I know will believe that I changed my mind because of an article in ET.

    as a broker I love clients who give brokerage – and I see nothing wrong with that. If they lose money, it is their problem. All is well with the world!!

  5. Agreed. Understood your pun, belatedly though! A broker would definitely love his clients even more than his wife! Happy trading. Let us give new lease of life to broking industry!

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