Skip to Navigation Skip to Main Content Contact us
Skip to Navigation Skip to Main Content Contact us
  • 8 financial experts talk about their mistakes, lessons learnt from them

    Quote by Jayant Pai in The Economic Times Wealth, March 13, 2017

       read ( words)

    8 financial experts talk about their mistakes, lessons learnt from them
    Investing and trading in stocks require expert knowledge and understanding. Don’t try to get rich quick.
    We turn to them for financial advice. However, that does not mean experts cannot go wrong. Saurin Parikh spoke to eight financial experts about the errors they made early in their careers and the lessons they learnt from the outcome. The common investor could do well to imbibe these lessons.

    Nilesh Shetty, Associate Fund Manager-Equity, Quantum AMC
    BROKERAGE SHOULD NOT BE MORE THAN YOUR GAINS
    HIS MISTAKE

    Early in his career, Shetty bought stocks, only to sell them as prices appreciated 10-15%. However, his portfolio gains were not great as many of the stocks he had bought were making losses. When after a couple of years he tallied the amount of brokerage he had paid on his trades, he figured it was way more than the capital gains made. Thanks to his constant churning, the transaction costs had eaten up a chunk of his earnings.

    THE LESSONS LEARNT
    Constant churning of stocks equals high transaction costs. Make sure the brokerage doesn't eat away your capital gains. Buy a stock and hold it for the long-term for optimal gains.

    Suresh Soni, CEO, DHFL Pramerica AMC
    ACQUISITION COST IS JUST A DOT IN THE GRAPH
    HIS MISTAKE

    When Soni started out as a fund manager, his fund's portfolio statement had a column stating the cost at which he had bought his stocks. He referred to the column to determine if he was making a profit or not. However, soon realisation dawned that instead of looking at the cost, one should be looking at what happened to the company thereon. The acquisition cost has no bearing on the company's future. Using the cost as a reference point can lead to incorrect decisions because of cost bias. This bias leads us to sell winners and keep holding on to losers.

    THE LESSONS LEARNT
    Don't use acquisition cost as a reference point to sell or hold onto a stock. Understand what the future holds for the company. If cost has to be used, use it in context to the company's historical PE.

    Jayant Pai, CFP and Head-Marketing, PPFAS Mutual Fund
    KNOW WHAT YOU OWN BEFORE INSURING
    HIS MISTAKE

    Pai renewed his home insurance policy without factoring in the replacements and sales made during the year. It was only after he received the renewed policy that he realized that several pieces of furniture and appliances had been replaced. In effect he was insured for many things he didn't own and he had no cover for many things he did own. When he sought a refund for the extra premium that he paid for things not owned, all he got was a pro-rata amount.

    THE LESSONS LEARNT
    Before renewing your home insurance, check contents. Don't forget to include new items and delete those no longer there. Before getting anything repaired, check if the item is covered in the policy.


    Alok Agrawal, Senior Director, Deloitte Haskins & Sells
    START INVESTING EARLY
    HIS MISTAKE

    Initially, Agrawal let his earnings accumulate in fixed deposits. Heeding his banker's advice, he also opened a recurring deposit without realising the tax implications. He was happy with the fixed interest, not understanding that it dwindled after accounting for tax. It was later that he realized that equity was the way to go, especially when you are young.

    THE LESSONS LEARNT
    A proper post-tax comparison of returns should be made before investing. Start investing in equity funds from an early age when you've fewer responsibilities and more time. Benefit from the power of compounding by staying invested for long.

    Lakshmi Iyer, CIO (Debt) and Head-Products, Kotak Mutual Fund
    DON'T MIX INSURANCE WITH INVESTMENTS
    HER MISTAKE

    She invested in an Ulip because she wanted an insurance product in her portfolio. Her logic for choosing an Ulip over a pure insurance product was that she would get something in return for the money she had put in. When she replaced the Ulip with a term policy, her premium came down by a third.

    THE LESSONS LEARNT
    Insurance and investment decisions should be taken separately. For insurance, choose term cover and treat it as an expense. For investments, opt for mutual funds on the basis of your requirements.

    Sonu Iyer, Tax Partner & National Leader-People Advisory Services, EY India
    GO EASY ON GOLD
    HER MISTAKE

    Iyer treated gold the way most Indian women do—as a great investment. When she started working in the mid-1990s, she primarily invested in gold and government bonds. It was some time before she understood that her investment style was affecting her overall portfolio returns and that gold was best used only as jewellery.

    THE LESSONS LEARNT
    Gold is not an ideal investment, for the short-term or long-term.

    Saravana Kumar, CIO, LIC Mutual Fund
    SELL IN HASTE, REGRET AT LEISURE
    HIS MISTAKE

    Kumar's fault lay in being unmindful of the size of the opportunity. Often, he sold too early. He settled for good returns and missed out on meaningful participation. In 1998, he divested some IT stocks that ended up multiplying 5 times between 1999 and 2003.

    THE LESSONS LEARNT
    Resist the temptation to sell early. Don't just settle for decent returns. Investments in stocks are fruitful when they are held for the long-term.

    Seemant Shukla, Head of Sales and Marketing, Edelweiss Asset Management Limited
    DABBLE IN STOCKS ONLY IF YOU KNOW HOW
    HIS MISTAKE

    Keen to earn a quick buck, Shukla assumed that dabbling in stocks was a piece of cake. However, stocks require constant attention, something he couldn't give. Soon, a large portion of his investments went haywire. He lost time and money. It was then that he started investing in equity mutual funds and earned satisfying returns.

    THE LESSONS LEARNT
    Investing and trading in stocks require expert knowledge and understanding. Don't try to get rich quick. If you don't have the time or expertise, invest in equity mutual funds and let fund managers take the stock calls.

    The original article could be seen here.

    comments powered by Disqus

    Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
    © 2019 PPFAS Asset Management Private Limited. All rights reserved.
    Sponsor: Parag Parikh Financial Advisory Services Private Limited. [CIN: U67190MH1992PTC068970], Trustee: PPFAS Trustee Company Private Limited. [CIN: U65100MH2011PTC221203], Investment Manager (AMC): PPFAS Asset Management Private Limited. [CIN: U65100MH2011PTC220623]