Over the course of your investment life, you will receive a lot of help from well meaning people (completely incompetent in investing but some with empirical evidence of luck in investing). Some of it will sound as follows:

1. Invest in Life Insurance policies like ULIP: this advice will come in the second month of your job, from your dad’s friend. He will want to sell some ULIPs to you.

2. LIC is a good investment: the endowment plans of LiC or any other life insurance player is at best a good SAVING instrument, not an investment instrument.

3. Real estate is the only form of investing where you will always make money. Each person will say about equities, gold, land,…..depending on their own experience. Bull. No one asset class creates wealth. It is your own BRAIN that creates wealth.

4. “You are too dumb to make money on equities”. There is a tendency for most journos, authors, bloggers, advisers, to say this. If you meet the managers managing your funds, you will not worry about this advice! Equity investing can be learnt, and HAS TO BE LEARNT, but it is not impossible to make money on direct equity.

5. ‘Friendly uncles and aunty advisers’ will lock you in on terrible back loaded funds, ulips, endowment plans – most times it will be worth taking the loss and getting out.

6. ‘I made a lot of money in INFOSYS, so buy INFOSYS’: amazingly stupid, but advice that is repeated on a daily basis. Be careful.

7. “Buy penny stocks like ‘Moschip’ – how much lower can it go from Rs. 4” . It gets worse ESPECIALLY if you make money in a couple of deals. Life long you will keep looking at such shit. Remember even if you made money ONCE, it was luck, not skill.

8. ‘Repay all your DEBT and then START investing: Surest way to hell. Yes if you have a home loan at 11.5%, DO NOT INVEST in Nsc, kvp, ppf – they all pay LESS than your loan rate. However do continue your SIP – you never know whether it can get you 12% or 24%.

9. Why are you buying this share for trading, you should use this money as a margin and buy in FUTURES or even better buy a call OPTION – you will make a much higher QUANTUM of profit.

10. Buy my news letter, i will tell you things like ‘stop loss’ in investing and ‘averaging’ in trading. lol.

all these pieces of advice are TOXIC. guaranteed to cause violent death…

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  1. While I completely agree – repaying ALL DEBT and then investing is not good .. if one gets a good windfall shouldn’t one look at reducing/eliminating debt ? Esp home debt ?

  2. Dear subra,

    Absolutely true. Lic policies and ULIP erode half of the young savers wealth. (god! I am not the trap for that). Eventhough i tell my collegauges they are simply saying Guarantee!!!!

    God s grace But i got escaped because of you.

    thanks and Keep writing!!!

    regards
    Vignesh

  3. Good one Subra. I am a regular reader of your blog for the past couple of months. Keep writing for the good of the society.

    Thanks,
    George

  4. Let me understand what ‘equity investment can be learnt & has to be learnt’ as said in the article. Our country full of engineering grads thanks to mushrooming of colleges in every state (by the way half the seats in AP found no takers y’day, wonder how many can read & understand the balance sheet & annual report of any company.

    Exposure to direct equity during training & initial 5 years of job for any youngster is a high risk game. We may then say MF route. Even this has made complicated given the several number of MFs and invariably they have to depend on someone to get the clear picture. It could be lack of understanding or no interest or any other reason, it is too difficult for most of them to grasp ‘fundamental’ analysis. Unfortunately today’s environment of investment is more of ‘herd/rumour’ mindset devoid any rational analysis.

    We just have to remember the Buffet words that ‘never ask a barber whether you need a haircut’. In same line, don’t expect anything different from ‘equity gurus’.

  5. when warren buffet said ‘never ask..barber..’ he meant DO NOT ASK A BROKER. If you do not learn about equities, and do not invest in equities, you will NEVER amass wealth – unless you are doing your own business.

    Child policies: completely avoidable nowadays.

  6. When you are in to direct equity, u have to give 100% time in research…..lot of ppl out there dont understand balance sheets, DCFs etc…etc…they get scared by this many numbers…so they go to so called fund m(d)anagers….& may end up buying poor performing funds…..& go out of equity market…..

    Simple way is to buy entire market vie Index….no need of analysis, no need of predictions…be happy with long term market return…….invest in collective luck of market then in luck of a single stock or fund manager…..

  7. Sir
    is investing in etf’s good idea? In current scenario please suggest some good etfs. Regards jitendra

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