What are the things that hurt a speculator, trader and an investor?
Different things…but let us see…
- Leverage: Reckless leverage especially when you are dealing with client money or own friends, sibling, parents…money, Leverage can and does KILL. Using leverage is the equivalent of stepping off of a car and jumping onto an old 2 wheeler being ridden by a novice!. Most of us can’t control it (remember Yudhistir?) and the few who do still tend to lose money at some point in their career. Gambling with money you don’t have to earn what you do not need is amazing stupidity, but many smart people have done it in the past! Only the well experienced should even think of attempting it.
- Concentration: Keeping all your money in one share. Recently a company executive came to me – he had a net worth of Rs. 19 crores + a spare house + a big mansion of a house where he and his wife were living. Children well settled and not willing to come to India. His net worth was made up of Rs. 17 crores of his employer BANK. No logic or reason to run such a concentrated portfolio at any stage in life – surely not at age 68!
- Illiquidity: See what happens when you want to sell some real estate. Suddenly you have all buyers turn to sellers and there are no buyers for EXACTLY THAT HOUSE THAT YOU thought would fetch you Rs. 3 crores! the best offer for you is Rs. 2.37 crores and you have no heart to sell at that price..
let me think of more threats…
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