11 Commandments of Investment Failures – time to scan yourself

30^th June 2020

11 Commandments of Investment Failures – time to scan yourself

Dear Fellow Travellers,

Namaste from Hitesh! Total June Month was dedicated to learning about investing. We dealt with a book - BUFFETT INVESTS LIKE A GIRL to start with. Then we took various issues faced by investors in their journey to the top in the area of investments. Today we will deal with one such top guy Mr. Donald Keough, who is on the board of BERKSHIRE.

Mr. Donald Keough is a neighbour of WARREN BUFFETT for 50 years, most respected and most sought-after guy for his business advice. He was also at the top of COCA-COLA in his illustrated career. He is also on the BORAD of BERKSHIRE. He has written his most read and appreciated book – 10 Commandments of Business Failures. I have applied the same rules for INVESTMENT Failures. Just go through them and make your own assessment this weekend.

1.    Quit Taking Risk: - This is the easiest step to understand investment failure. Today many guys must be feeling they should have invested when SENSEX was at 9000 levels rather than 40000 levels. In March Sensex was at 25000 and we gave a bold call to invest. But very few would have listened to our FREE advice. The main reason was not that they did not have the money. They were NOT READY to take the RISK. They were looking for SURETY. Not taking RISK is also a RISK in life, business, and investment. Just scan yourself with this factor first.

2.    Be Inflexible: - This is one of the most important factors for losses in the share market. When the guy buys the share expecting it to go up and if the shares go down, poor guy blames the MARKET for the same rather than changing his investment strategy. Remember MARKET is always RIGHT, but investors are often wrong. Being inflexible will take you for a ride. Many guys were holding RELIANCE since 2008. The share has come down from Rs.3000 to Rs.675. It took 10 years and 2 bonuses and a lot of new investors and the right issue to bring the price to Rs.1700 now. If you factor the 2 bonuses – your 100 shares would have become 400 now. It means at today’s price of Rs.1700/- your market value is Rs.6800/- for your original share. From 2008 to 2020 – 12 years and your money are just doubled - just 7% per annum return. The point is to become FLEXIBLE.

3.    Isolate Yourself: - This is a typical trait of a failed investor. Many times, by a stroke of a LUCK or right strategy at the right time – investor makes good money in the first deal. Now, he believes that this is the way to play in the market. He keeps on following the same. He assumes that he has got the SECRET of the market. He isolates from all other ideas and education and becomes blind to the market also.

In May 2017 and October 2017, I gave a call that the market will come down. I gave the time also. But since most guys follow the MEDIA EXPERT and FUND MANAGER's opinions, they were not ready to listen to me. They think what they are doing is the right and see the RESULTS in 2018.

On 2^nd May 2020, I said Nifty will see TEJI up to 12400 and above. Today nifty is at 10300.  

4.    Assume Infallibility: - In an investment cycle, if the investor makes good money, he assumes he is all set. Now, no new challenges can come to him. He is a fail-proof. When silver touched 65000-70000 per kg some years back, RAKESH was long and silver came down to 35000 per kg in a short time. He lost heavily. But since he was humble, he booked losses fast and reinvented himself. Today he is again at the top.  

5.    Play the Game Close to Foul Line: - Many guys don’t want to invest in consultant fees. They want to REINVENT THE WHEEL themselves. Now, they do the investment buy TRIAL and ERROR Method. When they do trial and error, they don’t invest with conviction and then they will conclude that it is difficult to make money in the STOCK MARKET. Last week only we had written that BIG money can come only and only when you invest with CONVICTION.

Many guys will do DABBA trading to save on the STT and income tax. Many guys would do some esoteric things like Futures and Options or BITCOIN for fast returns. In 2017 January, I had said BITCOIN will BLAST but I will not invest. In 2018, FM declared that BITCOINS are not legal in India and many sellers were not able to deposit their bitcoin sales proceeds to their bank account as BANKS have blocked the EXCHANGES. What’s more, investors faced IT notices. Remember, there are no RIGHT ways to do the WRONG things.

6.    Don’t take time to Think: - Most investors have a simple investing technique. Ask for a TIP, Call the BROKER, buy a share, hold it, and sell it when prices go up. The minimum time is invested in thinking about the company fundamentals, thinking about his own financial goals, thinking about the losses, in case they go wrong, thinking about its effects on his main business or job. In fact, they only get the time to think when they face a major loss or misses the major opportunity.

 

7.    Put All Your Faith in Experts and OUTSIDE CONSULTANT: - Most guys follow this. I often hear many normal guys talk - So and so has said SENSEX will touch 1 lakh or so and so said this company will be 10X or 20X in a short time. Somehow, they have faith in these guys and they follow them blindly. The result is in front of you. It is the JOB of media analysts to talk about the market and shares they like. They give their disclaimer also. The next day they have new ideas. The point is you will not have stability if you keep on listening to them and change your investments based on their calls.

8.    Love your Bureaucracy: - Many guys have an obsession to do a thing in a particular way only. They are not ready to change their way. They always face problems with their employees and near and dear. Now, when these guys come to the market, they assume they can dictate the market also. But the market does not listen to anybody.

9.    Send Mix Messages: - In the past posts, we had shared a beautiful example of MORGAN STANLEY's way of communications. One guy was talking about 1 lakh Sensex in long term (without, specifying what is the meaning of the long term), Another guy from the same company said he will invest in BRAZIL over India and the third guy said he sees challenging time for Indian Market. One company, three different guys, and three different communications. The same happens to a NORMAL investor when he invests the money in the stock market. His Father tells SHARE MARKET is not for us, his wife says DIAMOND is BEST and this guy wants to invest in the share market. You know the results.

10.                  Be AFRAID of the Future: - Those who missed 2009, were the guys who were afraid of the future. Those who invested post-July 2017, were the same guys who were afraid that they will miss the opportunities of the FUTURE. The bottom line was FEAR. FEAR leads to GREED and GREED leads to FEAR. This circle goes on and normal investors remain in this cycle for the long term. They end up losing major opportunities and money.

11.                  Lose your PASSION for WORK and LIFE: - This is the JUICE which can keep you alive in all the situations. In India, we have been told after 60, life is over. Most guys go on retirement. They lose a PASSION for Work or life. Now, a major source of success is this passion only. If you lose PASSION, you lose all. Many guys get the setbacks in personal life and they lose the interest to do new things. They are the sure-shot target for failures. I love the JEFF BEZOS DAY 1 philosophy of tackling this syndrome.

What NEXT?

All the above commandments are interlinked. The major foundation can be seen in the first factor only. You are not ready to take risks. The other 10 reasons are the extensions of the same in different words. Frankly, Mr. Donald Keough has gone deeper into the reasons for not taking risks with the other 10 reasons.

However, all of them will help you SCAN yourself internally and if you think about them, I am sure you will find out the secrets of your own failures.

Have a GREAT INVESTMENT SUCCESS.

Follow me on Twitter @hiteshmparikh /  WhatsApp - +91-9869425399.

Live With Passion…Invest With Passion.

Hitesh Parikh.