MY BIGGEST MISTAKE IN STOCK MARKETS

It's not as if they were born with their stock-picking skills. They
learned–and are still learning–the hard way. Says BSE (Bombay Stock
Exchange) member Rakesh Jhunjhunwala: "You learn the stock market by
trial and error. Without making mistakes in the market, you will never
be able to progress in it." What's important is to spot the mistakes,
learn from them, and move on.Five veterans of the Indian stock markets
talk about their worst blunders, and the lessons they learned the hard
way.There are great lessons and many little nuggets of investment
wisdom–on market behaviour, valuation methods, portfolio management,
investor mindsets–in their stories. Over to the gurus in their own words.

1)Motilal Oswal
Chairman and managing director, Motilal Oswal Securities

In 1992-93,I bought shares of a glass company at Rs 1,600. The price
crashed, and I exited when it was Rs 60. Why did I buy the stock? The
outcry system was in vogue, and everyone on the floor used to share
information, which was our idea of research. If I liked an idea,I just
bought the scrip.

We never invested with a time horizon. If the share price went up, we
booked profits. We followed no investment strategy and did not bother
with research. At one point, I had 125 scrips in my portfolio.
Eventually, at the end of the year, I sold those that made a profit and
held on to those that showed a loss. Obviously, the total return on my
portfolio was not worth the effort put in.After that, I decided to prune
my portfolio to 30 stocks–and booked more losses in the process. I
decided to invest the money left with me wisely, balancing my portfolio
with a long-term outlook. Now, I hold every stock for at least one year,
and then, depending on the market situation, decide what to do with each.

Lessons:Do your homework well.While choosing a stock, you could use
either the top-down approach or the bottom-up approach.Don't follow the
herd.Don't buy (or sell) just because everybody and his dog is buying
(or selling). Research the com-pany as thoroughly as possible before
deciding to buy or sell. Don't buy in an overheated market and don't
sell when there is panic.