5 mistakes I made in my first stock market Investment

POSTED BY manish ON November 6, 2010 COMMENTS (113)

Do you remember your first stock market trade and how you behaved at the time? Just like you, even I, have made some really stupid mistakes in stock market Investment.

Today, I would like to share some mistakes (only the big ones ๐Ÿ™‚ ) which I made during my first trade in stock markets. Its worth discussing, how I could have avoided those mistakes. You can learn from them too!

investors mistakes

Mistake 1 : Buying on Others Recomendation.

27th Nov 2007 : I had just got my spanking new trading account and I was so eager to trade and make lots of money(How to start in Stock Market) .

I saw an Orkut community recommending GTC India – a “Buy” Recommendation. There were several good reasons discussed there,ย and an extrapolation on how it can reach from current price of 600 to 2000 in some months. ย It looked like a “donโ€™t-miss” trade. I bought 10 shares @ 560/-.

Mistake : Buying only on recommendation and not analysing the opportunity well, over relying on others recommendation, buying a company which I do not understand enough .

Learning : Never buy, just on recommendation! Do your own study and analysis. When you buy on others recommendation,ย you don’t take responsibility if there is any loss, which is dangerous in markets.

Hear others but listen to your self. See other factors like market trends, sector view, global markets, future prospects et al. Once you are fully confident that its a good trade and you feel comfortable with it… go for it.

Mistake 2 : Being too greedy

After 3 days : Just after I bought the shares, it went up from 560 to 800 in 3-4 days. I thought that its moving as expected, and bought 10 more shares at 800. Within another week, it went up more to 950! Now, I was flying!

I bought 10 more shares @955 again, to reach the target of 1500+ . My average buy price was now 772 . I was feeling little bad for not buying 30 shares directly @560 in the start .

Mistake : Greed! Pure & simple… This is a very common mistake, aย big mistake at that – so big that it will be among the top mistakes investor and traders do. Buying more wasnโ€™t wrong. It was the intention behind the buy. There is nothing wrong in increasing the position once it moves to your target, but it has to be backed up with strong reasons and study.

It should be a trade with high probability of success. In my case, it was not. It was just a recommendation from someone in an orkut community, with a couple of lines, explaining, why it will go up .

Learning : There was no need to buy more shares that point in time. I should have just sat back and watched. The Stock market is just like our life, you need to have a level of satisfaction in your life and stock markets.

If you want more and more and more, you might not get anything. Inย fact, you can lose heavily. Because of greed, I invested more than I could afford to lose. I took an unwanted and unaffordable risk, because I only saw profits and never the potential losses.

Mistake 3 : No profit booking on Time

After 1 week : The prices were not moving now. It was going up a bit then coming down again and was stuck in a range of 900-1000. It went up to 990 once. For a time being there was doubt in my mind if it will not move up to 2000 and will return back to my buy price levels.

Mistake : No profit booking. There was a sharp rise in shares price from 550 to 900 in just 2-3 weeks and that is rare. It doesn’t happen to every stock, it was an excellent return, but i did not book profits.

Instead of making the best of the situation and taking the (not so bad) profits, the market was offering me,ย  I wanted more and more and lost even what I was getting. ย The reason was Greed, again.

Learning : The better thing to have done, was to book profits, at least partially… Situations change in markets, I never checked on any news regarding the company after i bought the shares, and I was never updated about it. Every time you get some good profit, its a wise idea to at least book some partial profits out of it (Unless you have really strong reasons to hold it for long) .

Mistake 4 : Having Ego

In next 1 week : Prices now started coming down. It came to 900 first, I was scared and told myself that I will book profits once it goes back to levels of 950+. It never did! Then it came back to 800 and I regretted not booking a profit at 900 and said to myself again โ€œI will book it for sure when it comes to 850.โ€

Guess what? It never did! Then it went up a bit again and went up to 850 . I forgot my promise to myself & allowed my greed to take over my promise. It went down again after that and now it was near my average buy price. This was the time I was feeling, โ€œWhat a big fool am I, for not booking Great profits!โ€

I could have sold it at 0% profit, & yet I didnโ€™t, because I would look a fool in my own eyes. Why Stock Markets Attract and Look Easy

Mistake : Ego ! Fear of losing part of profits, another mistake was the fear of not making any profits and fear of losing some money . Fear! Fear! Fear!

Learning : โ€œWhen your boat starts sinking, you don’t pray… just jumpโ€ Once you are doubtful, surrender to markets wish. See what markets are showing you, not what you wanted to see. Markets are supreme and no one can be smarter than the markets.

Leave your ego at your home, when you go in front of Markets. The markets tell you whatโ€™s going to happen, not vice versa. Accept that you are wrong and you made a mistake. Then move on.

Mistake 5 : No Patience

After few days : Then the prices started falling andย plummetedย to 600 (my original buy price). Now I was in loss. I was proven wrong, but I just couldnโ€™t accept it. I kept trying to prove myself right by holding it and hoping it would come back up. Yea, you know… It never did ๐Ÿ™‚ .

It went lower and lower and lower and I was just praying & ย hoping that itโ€™d return back to a level where Iโ€™d be happy to sell it. It never did! It went up to 300 and I sold it all in frustration. Then, I saw it go down to 250 and bounce back to 500! Now, I was feeling like I was cheated by the market for not giving me the right opportunity to exit.

Mistake : Impatience, Fearย  and not cutting my losses short. I exited at a very bad time, at almost the lowest price then. There was an opportunity for me to exit at small loss, but taking a loss hurts the ego and it did. Not cutting my loss in time was the result, of my not defining my loss early enough.

I should have had thought of it earlier. Then, Iโ€™d just pull a trigger, when it reached that level, without emotions. Fear overtook common sense, Fear overtook logic .

Learning : I should have defined my Target and Losses before taking the trade. I should have been realistic and logical. I should have waited little mo.re time and then exited at a better price. I should have consulted someone, better than me (At that time though, even a street dog could have given a better advice than me :))

Price of GTC INDIA after this Incident : It never went above my price levels after that and went to Rs 55 after couple of months , even today (Nov , 2010) , its hovering below Rs 65 only .

Conclusion and Summary

My first trade was not at all planned and โ€œno planโ€ is โ€œa plan to failโ€. Fear ! Greed ! Emotion! Ego ! Impatience! These are the elements of Failure in Stock markets. Manage them well and youโ€™ll do better !

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113 replies on this article “5 mistakes I made in my first stock market Investment”

  1. Surendranath says:

    Nice Article..

    Yes, don’t go by other’s advice. Pick your stocks, do some fundamental research and then invest. Be patient and track your stock price over a considerably long period of time.

    1. Thanks for your comment Surendranath

  2. Shirly says:

    Wow.. What if I say I had exactly the same experience during my first tradings.. But i did not sell my shares.. and everyday they are just going down and later i lost interest and only focussed on my full time work.. The shares that i bought are still lying there for 2 years now. And i am thinking of restarting all over again with more study and with all your recommendations. Any advice you would like to give me?

    1. I strongly think you should take a break as of now. Give yourself 2-3 months of no markets ! .. Only then restart things !

  3. siva rama krishna says:

    Thanks & Appreciation for your article !
    Win and lose are two options one will need to face mandatory in Stock market.
    Experience and emotional control will be learned & managed by time .
    Intelligent Investor learn from others experience, beware of it and try to do the same (old or new mistakes) or correct by trimming with the article knowledge.
    This article will help us by not letting the market saying market cheated me(Bear) ,out of market permanently ! Managed the cheating market(Bear) and some how finally jumped on the bull by the advice of this article.

    1. Hey siva rama krishna

      Thanks for sharing your experience with all of us. It was a great learning.

      Manish

  4. harsh says:

    excellent article sir, you are first whom i see say truth about your self, respect.

    1. Welcome .. Glad to know that harsh ..

  5. Sandeep Garg says:

    Hi Manish
    Excellent aricle. It shows to be an intelligent investor, everyone should have a hold on greed, emotions, fear and have patience.

    sandeep

  6. Happyinvest007 says:

    Hi Manish,

    I am thinking to start investment into stocks and gone through your amezing articles which are very helpful for new-comers. I have one doubt, can you please help:

    As on today, cost of SBI share is Rs. 333.15 so if I opened DMAT and Trade account and purchased 10 shares of total cost Rs. 3331.5 After few months or years cost goes to (lets assume) 500 then at that time can I sell my shares and I will have some profit. (I will not do anything with those shares until I get my expected price on share)

    Is that much easy the Stock Market is? To be honest, I do not want to be a trader but want to invest so that I will get profit after few years (as like above example)

    Please guide if any tricks or hidden stuff are there?

    Thanks in advance.

    1. Truly speaking its not that easy as it sounds .What you are thinking of doing is the actual challenge. When your prices move up and down, you then deviate from your original goal and take decisions like selling at wrong time. If you can sit tight, then you can make money in stock market. I think this is the time to jump and learn few things by trial and error .

      1. Happyinvest007 says:

        Thanks Manish for your response and Sorry for late.

        Meanwhile on your response:

        I’m confident enough to sit back tightly until I get good returns from my stock investment ๐Ÿ™‚

        Can you please suggest some good stock which are fundamentally good in all terms. I feel SBI is one of the good stock to invest.

        Kindly suggest

        Thanks.

        1. We dont track stocks at all and I am not the right person to give any guidance on this ๐Ÿ™‚ . Really !

          Manish

  7. K C Rana says:

    Hi Manish,

    A) I have the same kind of story ….I have invested in gold fund approx 2 months back …and now stucked in loss…. If I sell will have to face loss + exit charges as fund < 1 year.Don't know where to go….:(

    B) My Dad has some shares of Bank of Baroda(approx 1 lakh)……bought 10 yrs back and have share certificate in paper format. I have below queries:
    1)Can he transfer the same to me……if yes then how will the process take place as he holds the shares in paper format.Will my Demat account sufficient for this transfer or need to go through broker.
    2)As per my understanding it will be benificial if he sell the shares when the prices are high…and I will buy when the prices are low.But I think he has to go through broker in that case as he doesn't have the Demat account.Can you please express your views on the same.

    Regards,
    K C Rana

    1. First he will have to get it converted into Demat and only then he can transfer it to you

  8. Venkat says:

    I have a old stock Triplex Overseas which is no longer trading. What can I do with that. How do I get rid of the same from my DEMAT account. I am going to be an NRI soon and cannot close this DEMAT account without releasing all the holdings I have in the account.

    1. May be you need to liquidate it offline now .

  9. sachin says:

    dear manish
    please suggest 5 shares for long turm investment (10+ years & aprx 1lac.)

    1. We are not into stocks at all ๐Ÿ™‚ , please ask it on http://www.jagoinvestor.com/forum/

  10. BKM says:

    Hi
    I Have a question related to demat account. I have demat account with Icicidirect. In my account I have 1000 no of Monalisa Infotech whose trading is suspended for long. Rematerialisation request for the same is returned showing the reason of โ€œcompany address not found.โ€ Now I want to close the demat account. How to close it then? Somebody told me that there is sebi rule that any demat account has to be zero balance before closing. Now Icicidirect is not willing to help as I am going to close the account with them. Please help.
    Regards
    BKM

    1. This is a little strange .. You want to get rid of the account, but you are not able to get rid of the shares . Not of solution in my understanding , may be someone on forum might help you on this : https://www.jagoinvestor.com/forum

  11. Aarti says:

    Tks for sharing yr experience.

  12. Ajay says:

    Good blog Manish…I was totally a real estate invester till this point of time…now that the goal seems to be achived in real estate…looking forward for investing in stocks…
    First thing wanted to know is common mistakes…and found your blog and communications…after reading the entire content now in cross roads :)…
    Seems like Mastering emotions will take me anywhere (well I assumed up side)…Was reading Warren’s message to stock investers and he also mentioned about controlling your emotions…but temme how you can control your emotions…being human we are emotional in nature…decipline is one thing which we always ignor, even following the traffic signals…
    Making quick money is always a challenge to everyone…however if I understand it correctly no one can make quick money without hard work…eventhough we are prepared for hard work, but rarely know where to put it correctly which will give desired results…

  13. Mayank Gupta says:

    Greed & fear factors do work well in stocks. But when you are a investor in astock like Unitech @ 30, panic is bound to come. So proper Research is more important & hiring a financial planner like Manish himself

    1. Mayank

      Some 1.5 yrs back I invest in Unitech at 20 , got out at 19 and guess what I was correct , because I was not investor , I was a trader and that time that decision was good when I see it from traders eye ๐Ÿ™‚

      Manish

  14. kulbhushan says:

    Hi Munish,
    I’m new to your site, but at first glance what you have have written is the gospal truth, right in front of our eyes: but even then we fail to read it. Over coming fear & greed is the first rule of learning how to trade. I’ve seen many of my accounts turn from positive to negative because i did not act, as i should have. Keep up the good work, hopefully we’ll learn from you.

    1. Kulbhushan

      Yes , controlling greed and fear in stock trading is the part which is rare to master , if you can do it , you can reach anywhere !

      Manish

  15. Kunal Shah says:

    Very, very well composed. You have gotten into the mindsets of all the young and hot blood folks who want to make money in the market….Kudos!!!

    1. Kunal

      Thanks for the comment ๐Ÿ™‚ . Looks like you have been a victim sometime ๐Ÿ™‚

      Manish

  16. Jagbir says:

    Good Article, Manish. I read and get opinion everywhere that almost 95% retail investors get assistance from media/brokers/so called experts to wipe out their money in markets. The challenge for me is to how I can put myself among those <5% who actually create/increase their wealth in stocks.

    I started with 3 things:
    1. Plan to put 30% savings in debt (PF,PPF) and 70% in Equity MF.
    2. Read, read and read good books on investment/stock/finance.
    3. Started investment in stocks without actually involving money in it. I created portfolio on Rediff site and keep updating it with imaginary purchasing/selling of shares of my choice. As no real money used, no stress when share go down or no such joy when it touch peaks but in both cases you learn something new. In mistake part, I entered in Sugar stocks at wrong time when sugar prices crashed after touching historical heights.

    Anyhow, I continued maintaining this imaginary portfolio for several months and compared my return with best of equity Mutual Funds. I decided earlier that If I can't beat good equity MF and Index in returns, then I will stick with MFs only but My stocks returned better than both Index and MFs. In these several months, I finished around 10 books on investment/stocks and with some confidence decided to dive into stock market. So at this moment, I'm having a concentrated portfolio of around 8 stocks and having an average return of 44% as of now. Though its more due of sort of luck because market is heading upwards only, real conviction will be tested when it start nose diving and before your eyes your hero stocks will become red… but I'm prepared for such thing as well.
    Few thoughts from my side:
    * First and foremost, read and learn, knowledge is vital requirement. If you are not able to do at least basic/fundamental research yourself and can't tell why you invested in this stock, you are just in a play. There's no difference whether you are in a casino or in stock market in this case.
    * Real investing is boring. Market/brokers makes money on activity, you make money on inactivity.
    * Always invest in good company which enjoys leadership in particular sector, have good/honest management and excellent business prospective. Remember Good businesses never come cheap, so don't stress heavily on price.
    * If you are invested in good company, the time to sell is NEVER. frequent profit booking/churning portfolio can not help you become rich.
    * Dont diworsify your portfolio by investing in all tom, dick and harry stocks. You will never be able to invest enough in one if you have many of them.
    * Take view of your portfolio every few weeks or months and only rebalance if situation demands, else remain seated.
    * A Person who have a constant stream of cashflow (like getting salary each month) should invest in stocks/MF regularly, buy in bull market and buy more in bear market.

    Desc: All are my personal opinions and I deserved to be wrong, so dont follow without your own thinking.


    Jagbir

    1. Jagbir

      Nice points from your side , Note that you might be getting fantastic returns because of the kind of market you have seen till now . Better judge your skills once you also see a bad market .
      As you said real investing is boring and profitable . Another point you should consider is that you should decide right now what you are ? an investor or a trader ? Because that would change the rules also together .

      Manish

      1. Jagbir says:

        Thanks Manish for your views. Definitely I’m aware that returns are due to current bull run and I’m mentally as well as financial prepared to sail on steep correction or face even long run bear phase.

        I didn’t sold anything yet except getting rid of 2 sugar stocks which I entered in wrong time. IMO a trader is one who buy/sell frequently and on this definition, I don’t find myself fit. I know I’m still a very immature in this journey but I consider myself a long term investor and intended to build corpus this way.

        Jagbir

        1. Jagbir says:

          btw, just to add, I’m still having SIPs in equity funds and don’t want to stop that. The only change now is that the 70% of savings which are marked for equities are getting invested into direct stocks and MFs equally. and Yes, everyone can say fancy words in good times, its the bad time when we see the level of water the person is in ๐Ÿ™‚

          Jagbir

          1. ok nice to know that .. better let your financial goals get acheived by MF as of now , once you are pro in stocks you can take charge for it yourself .

            Manish

  17. martin says:

    Hi everyone,
    Stock markets are for those who invest for a long term. How long? Then ask your kids. I mean you take their view. Didn’t get it, you invest for there future. This way you got your time frame or rather they will reap the Benefit of what you do today. India is by far better than other economy’s and will be so because we are still growing and have faith in it. So what do we do here. Invest in company’s what you know the best, let say which is the best in cement,best in auto. what is your answer….. Just a bit of general knowledge. I am sure you would get many answer for different sectors. Allocate your portfolio, not more than 20. Once you have done this, keep a watch on those particular stocks/sectors. listen to the markets, what the industries are doing, are their competition growing. Thats it. Its so simple
    TRADERS:- There are people who are in the markets for more than 15 to 25 years of experience, so next time when you think of trading please keep in mind you are playing with these people. YOU CANT MAKE MONEY TRADING UNLESS YOU HAVE DEDICATED 24HRS OF YOUR TIME.
    TIME FRAME:- Once you have decided that you are not the benefiter but your kids(time frame) your problems are solved.
    So next time when you think of investing, invest on those months where the channels are saying its a bad month for the stock markets. Like May, October. Yes those months are bad, bad for the Traders not for the investor. So Happy investing Guys…………..

    1. Martin

      Good suggestions from you , if people really think it in easy way and common sense wise , it would turn out to be exactly same way as you suggested ๐Ÿ™‚

      Manish

  18. Hi Manish ,
    Excellent article..I enjoyed a lot.
    I didn’t have a dmat account and not started buying any shares.
    Can you please suggest me about a good dmat account and how to get knowledge on investing in stock markets?

    Thanks,
    Ravi Shankar

  19. Anindya says:

    Hi Manish,
    I read your site often and its awesome.
    This is my first post here.
    I have a query regarding Long Terms Capital Gains Tax.
    I placed buy order[Delivery] on Glenmark Pharma on 30-Nov-2009 and it got executed on the same day.Now the Pay out date is 1-Dec-2009 and everything settled on 2-Dec-2009 through my online broking account.
    Now i want to sell this stock saving STCG.
    When can i sell the stock?Is it 1st December 2010 or 1st january 2011?
    I tried google as well but no body explained it except saying LTCG is calculated from Date of Purchase:(

    1. Anindya

      Which I am not sure on the exact date , it would be from the date of purchase only , so better consider exactly 365 days after your purchase date , does it really matter which date it has to be , sell in Jan ๐Ÿ™‚

      Manish

      1. Anindya says:

        Hi Manish,
        I am not too sure but i think i have seen you or some reader of this site commented something like
        if i buy on december then 1 yr deduction will be calculated only in month of january..that is Purchase date is suppose 20th Dec 2009 then one year LTCG rebate will be applicable only from the next month i.e Jan 2011 and not 21st Dec 2010.
        And surely selling Glenmark on Jan or Dec does not matter as long as the sensex keeps moving up ๐Ÿ™‚
        I am a new investor in stocks since 2009 End and only seen the markets moving up ..but from your article i can definitely understand how careful i have to be
        with stocks ..
        Already i feel i m too greedy with couple of stocks :(For Glenmark My buy price is around 230, i wanted to sell at 280 but could not..then it came down to 250-260 levels and i started thinking i am a long term invstor :))
        now again the same happened at around 300-320 levels..:)
        Now in last 1-2 month it has gained like anything and reached 382 today ๐Ÿ™‚
        still not able to sell as the Brokerage houses are giving 450 Target :))
        may be i have to sell it at 180 in the end :((
        Cheers!!

        1. Anindya

          A lot of things in life keep us away from “Action” . We just keep thinking we will do that and this and in all this we forget the most important thing which is taking action , so if you feel you will regret later , why not partially book the profit , sell 50% of shares now , its a good time to book profits considering markets are high . you have to decide which is bigger for you , joy of profits or regret of loss ๐Ÿ™‚

          Manish

  20. Sundar says:

    The most important principles which I follow is :
    1. Discipline – Easier said than done with so many friends and brokers influecing you based on their views and interests.
    2. Defining your Goal and Asset Allocation
    3. Don’t watch the NIFTY or SENSEX ticker nor get carried away by daily/minute by minute market movements.
    4. Periodic Rebalancing.

    1. Sundar

      Nice list ๐Ÿ™‚ . I like 4th most which would take care of discipline and timing the market ๐Ÿ™‚

      Manish

      1. Sundar says:

        I give you the most simple portfolio for a person about to retire or retired considering Indian Conditions and Indian Tax laws.

        1. Keep that amount of money in safe instruments which earns you regular income for minimum tax. (1,60,000 + 1,00,000 (80C)+20,000 (Infra Deduction) + Mediclaim. This will have Zero Tax implication.

        2. Rest of the money be kept in Balanced Funds like HDFC Prudence or Reliance Reg. Balanced Etc. This will have zero tax implication for Long term Cap. Gains.

        Nothing more to do. Just sleep and automatic rebalancing will be done without any tax implication.

  21. Raju Shinde says:

    Dear Manish,
    This post is made for me also. I have done same thing in my life. I have purchased Rcom from 300 to 800 level and holding till 75 shares hoping it will give me good return. My money is blocked and this article is eye opener for me. Great job !!!

    1. Raju

      You holded it from price 300 -> 800 -> 75 ? YOu should have booked half profit when it reached 700-800 ๐Ÿ™‚

      Manish

  22. Rakesh says:

    Manish,

    Excellent post. I have made all the above mistakes. Still Learning.

    Rakesh

    1. Rakesh

      This mistakes would be mostly common across different investors as these are mainly behavioural issues .Can you list some mistakes which I have not put here ?

      Manish

      1. Rakesh says:

        Another one could be a “Feeling of Left Out”. Given the sudden surge in Sensex in the last few months, many retail investors have a feeling that they have been left out in the rally and our waiting to get in to earn quick money. They invest when the market is at peak and then when market crashes they are left stranded.
        A good example is in the period Oct-Dec 2007 when the market was rising and I was waiting for correction but market kept rising and I finally entered in Dec, 07 and the rest is history.

        Rakesh

        1. Rakesh

          Yes .. but that also says that they are fearful , because they do not invest at right time , “feeling of left out” is bound to come if they really are left out because of their fear in investing .

          Manish

  23. Saurabh Aggarwal says:

    Hi , while investing i keep in mind only one thing by Warren Buffet ” Be fearful when everyone is greedy” , recently i sold alloted shares in coal india as soon as i realised profit @ 30% , after all it is not a small gain.

    1. Saurabh

      I guess thats a different thing , It was pure listing gain and shows just a single stock related behaviour of public, not sure how bad/good decision it was to sell the COAL INDIA stock in long run , you would only know in coming months/weeks ๐Ÿ™‚

      However 30% is a great return overall .

      Manish

  24. Sumant says:

    @Manish
    i admire your optimism and confidence.
    Are you saying that you can generate 20-25% returns irrespective of the overall market returns? If so, can i request you to be my fund manager? I am very serious. I can talk to a lawyer and draw up a contract. If you guarantee to generate above 20% returns every year, you can keep whatever returns you generate above 20%. In fact, if you guarantee even 15% returns, you can keep whatever you generate above 15%. Sounds fair?

    I am even willing to give it time.. say, 15% guaranteed annualized returns over a 10 year period.

    If you agree, send me an email to muggle.boy [at] gmail
    I have seen many guaranteed returns products in the market. But no one promises 15% or even anything close. So looks like i have hit a jackpot here.

    1. Sumant

      I never said that I can do it myself, all I am saying is there are serious traders which make that kind of returns for themselves and they are not portfolio managers . Fund Managers in mutual funds are doing exactly that , generating huge returns like 20-25% year on year but on CAGR basis , not every year …

      One can not guarantee that kind of return , otherwise that will become the benchmark just like FD’s ๐Ÿ™‚ . It will always be “with-confidence” and not “with-assurity” .

      Manish

  25. Meena Shivram says:

    Manish’s article and the subsequent comments have been very interesting. I have a few points to make based on my experience in equity investing:
    I find that it is easy to advise that you should not go by recommendations and you should do your own research before you go for any stock. But how many retail investors have the time and most important the skills to do a thorough analysis of the stocks before investing. Personally I do go by recommendations not necessarily by any one but from the knowledgeable people who have solid grounding in finance and markets and also reading some good web sites or blogs. Of course some of the recommendations have been good and a few are not.
    Also I totally agree with Rakesh Jhunjuhnwala (I also watched his TV interview on Diwali day) that retail investors should do the equity investing through the SIP of good diversified mutual funds and start investing small amounts in direct equity so that you don’t burn your fingers too much.

    1. Meena

      Its right when you say that not all have time and knowledge to directly invest, but if some one is good with 12-15% return, then they can avoid direct equity and go with mutual funds which would fit in his expectations , but if he needs more than average returns like 20-25% , then directly equity is the game. One can take some one else recommendations , but not from random tip-givers ๐Ÿ™‚

      Manish

      1. Meena Shivram says:

        I agree Manish. Listening to any random tip giver is injurious to your financial health.

        1. Meena

          yes ๐Ÿ™‚ and that random tip giver can be you yourself ๐Ÿ™‚

          manish

  26. Shinu says:

    Hi Manish

    Thanks for the wonderful blog. Though only recently i joined i did go back to archives and found many interesting learning. Keep going and God bless.

    I did trade for over 2 years with a minimum of 1-2 hrs daily reading and watching all the business channel and trade/invested about 90% of my total investment in direct shares and in the end found i made almost 10+% returns (doing all the things you mentioned and much more averaging in falling markets). Same time my 10% investment in mutual funds had grown almost 20%. So finally 2 months back i closed my trading a/c and converted everything into mutual fund. Saved 1+ hrs of my daily time for my little daughter and better sleep too :).

    Have a nice day.

    Shinu

    1. Shinu

      haha ๐Ÿ™‚ . Good one . Incase you are happy with 15% return , better go to mutual funds ๐Ÿ™‚

      Manish

      1. Rajendran says:

        Shinu,
        This is what even I am going to do… so far I am into stock market for more than 4 years. When I look back I have earned around 1L (net profit) so far (of course I have learned a bit) and paid almost 22K as just brokerage. If I could have just invested my money in FD I surely would have got more than 1L as returns by now.

        Whereas the money I have invested in TAX SAVING MF have given me around 15-17% returns PA.

        So This Diwali I have decided not to buy not even a single stock. I will only sell my holidings whenever I see profit in them and will apply for IPO. (Here I have to pay brokerage only when I sell).

        Will invest my money only thro’ mutual funds.

        I use to spend hell lot of time in reading and tracking my stocks. Now I will be releived and can concentrate on something else may be facebook/orkut.

        1. Rajendran

          Just like you trade in stocks, you can also trade in mutual funds, however unlike stocks you can trade in mutual funds by looking at a relatively easiar thing which is index movement , so your work would be less ๐Ÿ™‚ and easy . Does it sound appealing ?

          Manish

          1. Shinu says:

            Dear Manish

            The fact i experienced was i could beat the index with some stocks yielding 200+% at the same time though some did go as low as 20% of invested value. But overall i couldnt beat the good mutual fund returns CAGR for a long period.
            Our ego is the main constraint while investing directly as we speak long term and act short term or we speak investing and act trading. I really wonder is there anybody who makes 25% CAGR for a minimum 3-5 year… I really doubt.

            Rajendran, you will have real quality time gain for your family by shifting to good mutual fund which will grow more effitiently than we can imagine without loosing your quality time. Just try and enjoy.

            Shinu

            1. Shinu

              While what you said is true for maximum people , there is a small number of people who are serious investors and there full time job is to invest and trade only and they are good at it . they have spend years to learn things and now their full time job is only to make money thorugh trading and investing , they make anywhere from 25%-50% per year on the amount invested , not their wealth ๐Ÿ™‚

              manish

            2. Sumant says:

              @Manish
              do you know these people? Are they reliable?
              My earlier offer is available to these serious investors too. If you know someone among these people, please convey my offer. If they really can generate 20-25% per year on the amount invested, what i am offering is essentially free money. I can’t see why they’d refuse.

            3. Sumant

              I dont know these people directly , I have heard about them at subramoney.com which I trust , and nothing shocking to hear that , because its very much possible . I dont think these people would be interested in handling couple of lacs , they are big ticket people dealing in crores and managing their own money .

              manish

  27. Jagadees says:

    nicely listed. “In investing, mental discipline is far more important than IQ quotient”.

    Jagadees

  28. Hemant B says:

    All smart readers of Jago Please listen to Rakesh Jhunjunwala(Diwali Interview):

    He begs retail investors not to trade in the equity market, “I think 98% of retail people lose money in trade. Whether correction – no correction, bull phase โ€“ bear phase. Everyone has a sad story. The proof is in the statistics and we know people will say, you trade yourself but stop others from trading, I say dad used to drink whisky and asked us to refrain from it.” Instead, he says, one should invest in mutual funds.

    Please Don’t trade – YOU WILL NEVER ACHIEVE YOUR GOALS!! ๐Ÿ™

    1. Hemant

      Agree with you .. retail investors should not trade seriously and if they want to do it then they have to be very very serious and do things other than common retail traders , which is not an easy task

      Manish

  29. Marshal says:

    Very good article manish, great job.. keep doing it…
    my mistake after selecting good company/stock and constantly buying on dips.. i sold it off too early.. didn’t know when to book profit..:)

    1. Marshal

      Just like we keep no holding a bad stock , we have a bad habit of selling a good stock very soon ๐Ÿ™‚ . Learn from your mistake , dont cut plants which have got hold of its roots very well ๐Ÿ™‚ . they will become trees one day

      Manish

  30. Krish says:

    This article also missed one key point. The boundary line is not discussed.

    On one of the recommendation, I bought a script and it achieved the target (50% profit). I was impressed with the profit and self congratulated. ‘3’ years down the lane, I checked the price and it appreciated to 3000%. I regret my decision of selling at 50% profit and even today rue constantly that I missed once in a life time opportunity. To tell you frankly, the story on either side (loss or profit) is the same.

    1. Krish

      Your situation was very rare ๐Ÿ™‚ . How many people get that kind of opportunity and if some one does like you , how many times ? It happens once in a while , but we should not generalise it to all the stocks , Next time when you get into a stock and it goes up 50% , will wait for next 3 yrs ? What if it goes down after that point and falls a lot , when did this 3000% increase happened ? Which stock was it ?

      Manish

  31. gvvy says:

    where is rss on this blog

  32. Sumant says:

    Honestly, i think this and such articles do more harm than good. Here’s why. The target community of JagoInvestor is the common man.. or the lay investor. Not the brokers, not financial whiz, hi-fi MBAs… it’s the common man who is unlikely to know even how to read a company account statement. The advice to such people should be – “don’t try direct stocks investment, stick to a diversified low cost mutual fund or index fund or Index ETF”.
    Asking lay investors to “book profits on time” is not only unhelpful, in fact it is dangerous. Reading such articles can make people over-confident and they will start believing that they can get above market returns.

    In the conclusion section, this article asks to manage emotions well. Well, if that was possible, we wouldn’t be human. It’s a futile pursuit to try and manage emotions.

    1. vidya says:

      Hi Manish

      Good article. These are very common mistakes most of us do I guess. I too had my share of them. I agree with you on all the points.

      Managing emotions well …. doesn’t mean eliminating them totally! So personally I don’t think it should be impossible.

      It’s just where you want to draw the line. It’s up to an individual to do that.
      For example, in case of greed … one needs to decide how much returns he/she is going to be satisfied with – 15%, 20% or more? When you decide your level of returns, things will be easy to manage and not get carried away easily. One may still get carried away at times, but it will be controlled to some extent at least.

      The idea is having some control is better than not having it at all.

      Vidya

      1. Vidya

        thanks for your views ๐Ÿ™‚ , I agree with them , control on our own expectations is very important ๐Ÿ™‚

        Manish

    2. Sumant

      thanks for your comment , however the article talks more about what are the common mistakes which common person does already ,there will be many readers who are doing exactly the same at the moment , so the article cautions them on not to do the same mistakes and not encourages them to try Trading , regarding the point of “Booking profits” , it was not an invitation for non-traders to start trading and then try “booking profits on time” , but it was mainly for people who are already into trading and encouraging them to get out of profits once they make them . There are many ways of making profits , but I was talking in a way which helps retail investors most .

      Manish

  33. Mani says:

    Hi Manish,

    Nice article!!!

    Infact this had happened with me also when I purchased DLF in the IPO and still keeping it at loss :-)…

    As Chetan Bhagat had written “3 mistakes of my life”, this is our “5 mistakes of my life in Stock Market”………..

    Well from that day onwards, I thought to myself that we should not be “greedy and envy on others profit”. We should aim for certain percentage (may be 15 or 20% – where other institutions don’t give) and if it touches then immediately exit from that stock…. that way we can keep control on the mistakes we do….

    What say…

    Rgds,
    Mani

    1. Mani

      thats a good strategy for retail investor ๐Ÿ™‚

      Manish

  34. him says:

    Hi Manish
    Whenever I visit your site I always find something very interesting. Now this article on mistakes commited in stock investing. You are bang on , I thing all of us have committed similar mistakes at some point or other but rarely have learnt right lessons, your post helps in giving right insight. I wanted ur advice on these sites which recommend stocks for a fee like 10paisa.com, equitymaster.com, poweryourtrade.com etc how correct or wrong are their recommendations for a stock. Has retail investors benefitted from them. How has been their track record and what are your comments/recommendations.

    1. him

      I cant comment on some one service specifically ๐Ÿ™‚ . However its not the tips which will make you money , its discipline , you can make the money though any tips provided you are ready to be disciplined in your strategy and rules , which is not easy . You can try their services for 1 month to test it

      Manish

  35. prabeesh says:

    Well I am very new to this business on Stock Trading and already made enough mistakes and more over i am still trying to get the grip of losses are common in stock market

    I have bought VLS Finance at the level of 30 on advice from friend who got advice from Calls. Bought around 200 at 30 and went to 32 in couple of days . Now it stands at 21.70 i.e -25% and i haven’t booked losses yet. Mind you its been only couple of months for me in stock market.

    I have couple of more stocks bought on without much advices and some of them even without recommendations :P.But most of them are doing well in this rally.Im analysing them now ๐Ÿ™‚

    1. Hemant B says:

      @ Prabeesh

      Stock trading is the most expensive Hobby ๐Ÿ™

    2. Prabeesh

      The problem is you bought these stocks before some months and it was in a BULL market, If you see last 1.5 yrs , the trend is up only , so in all chances 90% of stocks have gone up , Just make sure you do not confuse this bull behaviour with skill ๐Ÿ™‚

      Manish

    3. martin says:

      Your Stop loss for this trade is 20.00

      1. martin says:

        Agreed Totally with you Manish, this is what most of the retail investor thought prior to the 2008 fall, traders and investors thought they mastered the markets. But they were wrong.

  36. Hemant B says:

    Creating wealth from equity investing is not purely a number game – infact it is more of a mind game. Unless an investor considers psychological angle to investing, wealth creation will always remain an illusion.

    1. Radhey says:

      Hemant,
      Why do you say that “Creating wealth from equity investing is not purely a number game โ€“ infact it is more of a mind game. Unless an investor considers psychological angle to investing, wealth creation will always remain an illusion”.
      Are you talking about trading here or long term investing ?

      1. Hemant B says:

        Hi Radhey

        I am talking about both:

        Trading is a Zero Sum game – where 90%(read 99% in case of retail participants) of the participants will lose every penny & 10% will gain it(including brokers). Gambling is also a Zero Sum Game ๐Ÿ™

        Do you think investments make money/profit(even in long term)?

        If someone says yes, he is terribly wrong.

        โ€œInvestors who cannot master their emotions are ill-suited to profit from the investment process.โ€ Benjamin Graham

        From 1988 to 2007(Long Term) Mutual Funds in US gave average return of 11.6% but investor got just 4.5%. (This difference is penalty of Investor Behavior)

  37. Arch says:

    Good one Manish! ๐Ÿ™‚
    I have one question regarding Profit Booking, in case of MFs similar to stocks is it advisable to book profits at regular intervals even for longterm investments like 10+ years? Or the churning done by the Fund Manager will ensure that I need not worry of it?

    1. Arch

      More than profit booking , I would call do something called as “Portfolio rebalancing” , which means booking profits and putting it in debt or cash and then putting the money back in equity when markets are bad

      Manish

  38. Rajendran says:

    Manish,
    Nice article… I could see myself explaining about my experience with the stock KOUTONS retail. Quarter after quarter it was going down and instead of selling it I was accumulating (telling myself that I am taking contrarian view). Finally at a very huge loss I exited that stock…

    one thing I am finding common with lot of investor is that they are more than happy to book profit of even 5% but they don’t want to book loss even at 70% loss.. Every one talk about stop loss and not sure how many are really using it.

    1. Rajendran

      Yea .. its not about what all terms one knows but how they apply it . Its more of psychological thing . Once a person controls their actions , they can succeed , What loss did you take in your case ? What there a time when it was in good profits ?

      Manish

      1. Rajendran says:

        I was never in more than 2-3% profit. Actually ICICI DIRECT gave storng buy on this stock quarter after quarter and the TP was amlost more that 100% of that time stock price.

        I compared the PE of this stock to that of Pantaloon and this looks very cheap and appealing.

        Actually I exited around 240 I guess. I thinks just days after I existed the stock, it went into Lower Circuit consistently and now it’s trading around 100 ruppes.

        1. Hmm.. thats explains the situation ๐Ÿ™‚ . Prodit booking is crucial , not sure how much of your profit booking was based on research and study or was it pure random call ? ๐Ÿ™‚

          Manish

  39. Khalid says:

    Hi dude
    HAPPY DIWALI to you

  40. Manish Chauhan says:

    @Anonymous

    Thanks ๐Ÿ™‚

    Manish

  41. Anonymous says:

    Nice article. Stocks and emotions well explained with example. Keep it up. God Bless you.

  42. Swathi says:

    Manish..i am swathi .. ..Thanks for your response..

  43. Manish Chauhan says:

    Hi Anonymous , i will try to put an article on these topics for sure …

    Check in a day or two .

    Note : Please put your name at last after you comment , that helps me to know the readers by name . Thanks

    Manish

  44. Anonymous says:

    hey manish good work but i am new to stocks. can u write something explaining what is
    ->NIFTY,BSE
    ->what is index in stock maket,comparing diff indicies
    -> how to begin trading
    ->how to research about a share

    Thanks in advance !

  45. Manish Chauhan says:

    Thanks Arun

    Thanks for the appreciation and feedback , i hope to hear more of what people need from this blog .

    Manish

  46. Arun Prashanth says:

    Great Post Manish ! Hope this helps other people avoid these kind of mistakes . At least I am more informed and would try my best to avoid these mistakes . Great Post ! Keep ’em coming buddy ! Much Appreciated !

    1. aniruddha says:

      thanks for share your expirience with us.thanks a lot.

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