Why people lose money while investing…

It hardly matters whether it is equities or real estate, the reasons why people lose money is so simple to enumerate:

1. Not knowing the difference between trading and investing: they buy some shares, hope it goes up when it does not they sell off. Since they do not know whether they should be averaging (works only in a portfolio like the Index) or stop loss (a typical trading strategy).

2. Buying on a whim, holding for an uncertain, unplanned period of time, and selling unscientifically.

3. Buying a big high sounding share, holding for say 4 years (long term is more than 1, right?) and then selling off. One of the kids I know had bought Hindalco at a high price – Rs. 190. Then he did the classic job of ‘averaging’ by buying at 139….. Suddenly when I bought Hindalco (Mid May, 2013 at about 94….I called him. He had sold the share to buy some real estate….completely irrational portfolio building.

4. Not even knowing what is investing time horizon. Recently one girl stopped her SIP saying ‘I invested one year ago….I have got ONLY …….12% p.a.’. She has NO CLUE on what return she wants, needs or gets from other investments that she has made. Who is to tell her that if ppf gives her 8% and she gets 12% in equity, this is a brilliant return.

5. Completely goal less investing, redeeming, and NOT  calculating the returns using excel. This means that over a 5 year period if a share has doubled in value, they have no clue that they have got 14% return.

6. Being mathematically challenged and not even knowing how much they have EARNED in dividends! Innumeracy, is a disease.

…lots more..but this is today’s dose!!

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6 Responses to “Why people lose money while investing…”

  1. Mohana Ganesh on June 1st, 2013 at 2:37 pm

    Subra :
    All are not CAs like you. So why don’t you have a class for such people (which includes me). I mean it seriously. I have also made many mistakes and continue to do so, but in a lesser scale.

  2. Arre Mohana there is no connection between being a CA and understanding investing 🙂 but it helps I guess. You have my number, pick up the phone and ask.

    Holding a class, I refuse to organize, beg and plead with people to come for a FREE lecture…yuck it sucks. No I will not do it.

  3. Subra,
    Please make it a paid one. I am keen on attending your session anytime and every time

    It’s a pending request for a very long time now!!

  4. I’d pay too for a class/ session, online or real.

  5. Subra sir,
    Regarding your point no.3
    We all know money is made in equities when one buys right stock at right price so how can an common man who has no idea about all these stats know which stock when to buy?
    How can and where can we learn?any resourses for rest of us here?

    Thanks

  6. Wow mohana ganesh

    U have subra sirs number and dosent even use it.

    Man, i just came across this blog accidently few years back at a time where i was experimenting with stocks and learning the things the hard way. just got excited with the loads of info in the site and took the bold step of closing the a/c and started SIP. more than happy with the decision and have very realistic picture of portfolio building. Mind you i have a lot of difference of opinion with him but the direction from the thought provoking daily shots is an addiction to many like me to take our own decisions and own it too. one day if i get enough confidance i may reopen the demat account..:)

    Read, read, read is the only way and start immediately.

    One day i hope i will have a date with Subra sir just for me and will pay my Gurudakshina.

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