|Loss and gain is common in the equity markets where risk is high. It is how you crisscross that makes the difference. Remember risk equals reward!|
|I thought that the market always come back. Being a new person in the market, it seems that my inexperience cost me some money as things stand now in the middle of the year 2008.
Let me explain. My holding in the market as of now (July 2008) stands close to half of my holding at the beginning of the year. That’s, loss of capital to the tune of 30% along with the fully deleted profit. The previous falls I have seen recuperated and reversed course in a maximum of six months.But this one is continuing almost unabated with no plan in sight for a stall. That’s because the negative news flow and matters that cause a downfall still exist. Let me take you through my assessment of what caused this fall.
The loss I incurred could have been avoided completely, if I acted in the month of January by selling all my holding as soon as the crash begun or slightly before that. It could have been at least partially erased even if I had sold it any time later after the crash started. As late I get to sell the holding, losses would have increased proportionately as the fall was incessant.
It is also true that the market will eventually erase my loss and put me back on a stable gain one or two years from now if I do nothing with my present equity portfolio except occasionally exiting unfavorable companies and entering new, hotter businesses. But as of now, my earnest attempt to get richer through the share market lies in tatters.
But my education of the Indian businesses, Indian and world economies, and financial markets movements etc have been of immense value. Also, my confidence in Indian economic story only remains further strengthened. Because, to a great extent, I now know why the Indian markets are behaving the way they are; factors more external than internal as you can see from the list above. Since I have that knowledge, I am not perturbed much.
However the sad fact remains that the money I could have had, in my hand, for verity of life’s needs, has gone with the wind.
Most of my friends who are into the markets had the same fate except one who is an elderly but new in the market. This elderly friend of mine correctly sold everything at the right time. I think he did it because his mind can take few risks mainly due to his age and age related insecurity feeling. The moment the fall started he started calling us worried. However, he turned out to be a perfect predictor who have seen the future, though he knew little about the markets and had hardly any experience in the market. Mere luck and his lack of appetite for taking any risk saved him.
Finally, I have friends and relatives who are full time into analyzing and trading stocks for close to ten years. None of them asked in clear terms to sell it all or at least those which I stand on profit. Many of them now say “I told you so”. But the truth is they never told anything and they never knew with conviction that trouble is brewing. If yes, why didn’t they send me an e-mail and told me “sell now or be dead in six months”. The fact is, they never understood it with any clarity. Same is the case with numerous analysts and experts we can see in the popular media.
But it is like blaming those who interpret the horoscope and predict the climate. You know, it is always a fifty fifty.
Let me repeat the golden rule in my Online Share Trading Guide again. In the equity marketplace, start early and stay with good companies. Years down the line, rewards will be remarkable, for sure. Understanding the potential of the market, starting early, moving systematically is ‘long term’ all about.