MY BIGGEST MISTAKE IN STOCK MARKETS

4)Parag Parikh
Chairman, Parag Parikh Financial
Advisory Services

I believe the key to any good investment is discipline and the ability
to control your emotions. Easier said than done. There have been times
when I have given in to my emotions–and paid the price.We do portfolio
management for clients. Once, we took money from investors when the
market was bullish. Obviously, since the market was on a roll, the risk
was higher–and so were the chances of going wrong. A disciplined
approach warrants that I take money from clients when there are ample
investment opportunities in the market, not when people are willing to
give me money. I should have had the guts to tell them, "no, don't give
me your money now, I'll tell you when to give it". But my emotions took
over, and I didn't.

Lessons:Don't get in at peaks. Stock markets are not always the
barometer of the economy, or even of a company. With globalisation and
hot fund flows, they have become glorified casinos and don't always
reflect the true worth of its constituents. Hence, always invest for the
long term and avoid short-term momentum plays. Bear in mind that
momentum works both ways: you could crash as easily as you soar.Don't
speculate.If you buy today and sell tomorrow, you're not
investing–you're trading. And that is one dangerous proposition. If you
don't understand technicals or are not clued in to the market grapevine,
the odds are stacked against you. Be flexible with your investment mix.
Don't hold stocks for the sake of holding equities. Sometimes, it's
better to hold cash or debt to maximise returns. Your investment mix
should reflect your perception of the market.


5)Rakesh Jhunjhunwala
Broker, Bombay Stock Exchange

When I am convinced about a story, I tend to go overboard–and
over-invest. At times, I have ended up investing a lot of money in
illiquid stocks, which is obviously difficult to manage. It's like
putting all your eggs in one basket.In the stock markets, both in India
and elsewhere, people tend to invest only when there is a wave of
euphoria sweeping the markets. It's a general tendency to act on the
belief that one should not be left behind in a booming market, which is
a flawed argument.

Lessons:Don't be overstretched in a stock. Even if you have hit on a
great idea, review your allocations in a particular stock periodically.
Ideally, you should not invest more than 15 per cent of your portfolio
in one stock. Overexposure can be counter-productive, more so if a stock
is illiquid.