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, 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. 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. Indian markets are too shallow and the same people play in all the markets, so suddenly liquidity dries up everywhere.
5. Liquidity: when you need your money, if you do not get it, it is not there! Cash is very useful in bad times, and suddenly you find even AA kind a bonds selling at a huge discount. Your mood to sell at such prices will just not be there. Handle your emotions.
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. For a person NOT WILLING to pore over data, indexing works. Remember I know enough DIY investors and investors who have an IFA, have a range of mutual funds, and are happily UNDER-PERFORMING the broad indices.
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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