You learn more in a down turn than in a rising market. 1999-2001 was a far better learning and stock picking period (for which the rewards came from 2003-7). Similarly now when the market was not doing too well you got a chance to sell lots of GOOD shares and the same were available at a lower price later on.

Monsanto Chemicals, Cummins, Coromandel International, Eid parry, ……….tons of shares where I sold at higher prices and covered when the prices were lesser. I still could not believe that I could play Reliance, Bharti airtel, ….etc for reasonably significant downsides – and later upsides too. Lucky me? Not sure.

I must consider my self very, very lucky. During the Harshad Mehta Boom, I bought an office space for personal usage. When the index reached 21000 I had no reason to sell. However just luckily I decided to get out of some very high price earning stocks like Tata Power, L&T, Hdfc, Cholamandalam, – because i thought the p/e was too high and invest in lower p/e stocks.

Then Tata Motors, Cholamandalam, Hindustan Oil exploration, Tata Investment corporation, Hindalco, announced their rights issues. Just to be liquid for these right issues, I sold again. When the issue actually came, I was sitting on cash, but had no desire to fill the rights form. So again was sitting on cash. I think God protects people who do not know what they are doing.

Other than God I should also thank Ken Fisher for his book – “Only 3 things that Count”. This book MADE me learn 2 things –

1) it is all right to be in equities during slow downs, but in fmcg and pharma rather than infrastructure and banking

2) Even if you do not believe in ‘timing’ if a portion of your portfolio can be save from the blood bath, your overall returns over long periods of time can be better than blind ‘time in the market game’.

However for all the readers I have a few lessons from 2008:

1. Like me, if you get lucky, do not argue against luck, protect your money.

2. Know the difference between skill and luck. I had luck so I sold enough shares to pay for the rights (and additional shares too!). If I had skill I would have sold much more, sold Kotak Bank, bought puts on Icici bank, sold Tata Steel and Hindalco.

3. Stock picking is tough – Bear Sterns, Lehman, Citibank, Morgan Stanley. Closer home Satyam, Cholamandalam, Dlf, etc.

4. Diversification did not help! – Debt in Nagarjuna group was wiped out. If you put money in a real estate pms, you lost.

5. Liquidity: when you need your money, if you do not get it, it is not there!

6. Leveraging which made you look smart in a bull run, can wipe you out in a bear phase.

7. Indexing works, indexing works, indexing works. Believing in ULIPs for wealth creation or Mutual fund investing based on Advisor’s skills and hoping to out performing the index is a nice fantasy like Santa Claus.

8. If your Advisor or fund manager has no transparency or you do not understand equity trading – you are better off in ppf.

9. Past performance is as useful as last year’s weather pattern on a particular day to carry an umbrella. If you get wet, do not blame the forecast.

 

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  1. I dont agree with the banking stocks as said here

    it is all right to be in equities during slow downs, but in fmcg and pharma rather than infrastructure and banking .

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