What are the things that hurt a speculator, trader and an investor?

Different things…but let us see…

  1. 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.
  2. 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!
  3.  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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  1. *Lack of discipline* ranks very high too, esp during uncertain times. Basically you start of saying ‘if X happens, I’ll do this, but if Y happens, I’ll do that’ and when X or Y events do happen, you fail to execute your plan or do the opposite! For instance, if you say to yourself, “I’ll sell this stock when it is expensive” and then it does shoot up 3-4x times and is now expensive but you fail to sell it … or you say you’ll buy more when it falls but when it falls you are scared and don’t execute on your plan missing a huge opportunity.

  2. i would also add knowing ‘how to deal with high pressure sales calls’.

    i don’t do any trading, so every time i log into my icicidirect account to check the portfolio, i’m assured of a call the next day from my ‘relationship manager’, who will urge me to make a sample trade – just sell & buy back the share at least once a year – to keep my account active. when i point out that i have not done that for 3 yrs & my account is still active, he claims it may happen anytime without notice. when i ask him to send me the clause from our contract which states this, he says they are not allowed to send e-mails!!!

    many times i wonder how my dad (or anyone who is 70+) would have handled this. i just hope they ask someone before acting on it.

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