My lessons in equity….part 2

http://www.subramoney.com/2011/09/my-lessons-in-equity/

Please read the above-mentioned post. As well as the comments, and I will give u an update.

Now an update on this post.

Mr. R is known to me and I called himĀ  a few days ago. This was because I was taking a trading position in Hindalco – at about Rs. 92.

I thought since he had bought his first lot at 240, he should buy some more – at 90!

He tells me, Sir I sold off the shares!

‘Why did you sell off the shares?’

R: Sir I wanted to invest in real estate…

Me: But hey this would not have been much – 600 shares * 110 Rs. – is not really much

R: Sir every rupee counts while buying a house so I sold all my shares and used that money to make the down payment.

Me: It means you bought at 240, averaged at 180, then at 147 – and then sold off ALL THE SHARES AT 110?

R: Yes sir, more or less. In the meanwhile I may have got some dividends, but otherwise this data is correct.

Lessons for everyone:

1. Averaging does not work in a SINGLE SHARE – especially in a commodity product like aluminium or sugar!

2. By mistake if you have bought a good share at a bad price, play the patience game, YOU have no choice.

3. If you have made the mistake of buying at a high price, DO NOT make the mistake of SELLING at the lowest price. R seems to have done that too!

4. Admit that being a CA is nice to feel proud about, but it does not TEACH YOU ANYTHING about being in equity markets. The CA degree helps if YOU decide to learn, that is!

5. Learn about equity markets before signing cheques to buy shares. That is difficult.

 

 

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One Response to “My lessons in equity….part 2”

  1. Dear Sir,

    I am a regular reader of your post, on point number 3, sometimes it makes sense to exit because you never know what is the lowest level a stock can go and it will recover or not,and sensex is also full of some crap companies and like you i would not like to name the company of my neighbour from U.P.

    Thanks

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