What’s your biggest investment miss?

As 2017 draws to a close, Portfolio sounded out investors on why they missed the bus in some cases





2017 has been a good year for the Indian stock market — with the Sensex rallying 25 per cent year-to-date. But not all investors have managed to rake in gains in this buoyant market. With the year drawing to a close, BusinessLine sounded a few investors to find out why they missed the bus or what were some of their biggest investment follies this year.

Missed opportunity

In hindsight, people always regret making little or no investment in a good year, either because they lacked the funds or they missed the opportune time to enter the market.

Aswin Kumaar PA, a chartered accountant running his own firm, regrets that all his money was locked into his business and he was not able to buy stocks. “All my money was put in my business. Though this is an investment, I still missed buying certain stocks like Infosys, when the prices corrected.”

Varun Devanathan, a software developer-entrepreneur keen on building his business, was also left with no surplus to cash in on the stock market. “I have not been investing in the last 1-2 years because I have been using the funds to develop my business,” he says.

While investing in the stock market this year could have fetched rich returns , it is important to remember that only surplus money, after meeting other commitments, should be considered for investment. Pumping money into one’s business is imperative and cannot be construed as a missed opportunity. For others like Mony Sachin K, a chartered accountant, little headroom to the existing portfolio cost them dear. “All my funds were locked in either one stock or in some specific stocks. So, when I wanted to invest in NBFCs, especially after demonetisation I knew that they would give good returns, I couldn’t do so because my money was locked in other stocks,” says Mony. Taking the direct route to equity investments come with these pitfalls as constant monitoring and taking the right decisions is not always possible for individuals. This problem can be circumvented by taking the mutual fund route as the fund managers keep a close watch on the sectors and make the right switches on time.

Vinay Murudi, an investor from Bengaluru, too feels he could have made a better allocation to equities if he had not invested in land, in Mysore. “Though the value of the land is good, I’m not sure how useful it will be for me in the future. If I had invested that money in equities, it would have given much better returns by now,” says Vinay.

Vinay needs to understand that investments should be spread across various asset classes such as equity, fixed income products and gold. Diversification across asset classes helps protect the portfolio from the cyclicality in asset prices. The decision to invest in land could depend upon the potential price appreciation in the particular locality, but it comes with inherent regulatory risks.

Timing the exit

Prem, an investor with a well-diversified portfolio, has 30 per cent of his investments in equities. Although he has 12 years of exposure to financial assets, he still regrets missing out on opportunities to book profit in some cases. “I missed booking profits in certain sectors, particularly pharma stocks. I could have booked profits when the stocks were rallying. But since I am invested for the long term, missing opportunities in the short term has not been that big a deal,” says Prem

Prabhakar Venkataraman, CA, also regrets holding on to some stocks and not exiting them when there was still a chance to rake in some gains.

“I have been holding RCom. I should have sold it earlier, when there was still some hope of a recovery in the company’s prospects.”

It is near impossible to time the market. Even institutional investors and corporates fail to get the timing right at all times. So, unless you have the time to keep an eagle-eye on your equity portfolio, it is best to take the mutual fund route to investing.

Penny stocks

Sachin purchased 30,000 shares in a penny stock at 40 paise per stock. The stock has not moved much and he is trapped as he is unable to find takers now. “I lost money with that stock, it really was a bad judgment call,” says Mony. Many investors still bet on penny stocks, hoping to make tidy returns on low investment. But these stocks are highly volatile, risky and lack liquidity. Information about penny stocks is limited. Though some penny stocks can give multi-fold returns, it is usually not advisable to invest in such stocks

Sachin made the mistake of trying to cut losses by averaging the purchase price of the stock.While price average works out well if the stock bounces back, it doesn’t work when prices continue to fall. It is best to exit a stock if its fundamentals undergo a drastic change, rather than trying to average it to optically reduce your cost.

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