Repair Your Investment Mistakes

In the heady days of bull runs, we tend to make far more investment mistakes than in normal times. Sure, most of us make money when the markets are going up, but when the bull run gets over, we all have stocks and funds which we should not have bought. It is an established piece of investing wisdom that to make money over the long-term, all you have to do is to make sure that you don't lose it. Or, to put it in a different way, you don't so much as have to do the right thing as you have to simply avoid doing the wrong things. Makes it sound simple, doesn't it? After all, avoiding the wrong things must be easier than finding the right things to do, no? Actually, if one looks at the real investing stories of real investors, it turns out that avoiding mistakes is just as hard, if not harder than doing the correct things. And as it turns out, the kind of investing environment we have had in India over the last few years is tailor-made to induce mistakes. We had a deep slump in the stock markets, followed by a long and spectacular rise, interrupted by severe bouts of volatility. And encouraged by this, all kinds of salesmen have been trying to hawk all kinds of investments. Every broker has tried to make his clients buy dubious stocks and fund companies have taken the opportunity to unleash a flood of intensively-marketed new funds. As a result, a lot of investments have been added and many have been exited by investors. Such reshuffling of portfolios is bound to change the complexion of investors' portfolios significantly. In the process, the macro view of the portfolio tends to get lost, leaving scope for errors to creep in. From the ever-growing number of portfolios that Value Research gets for evaluation, we have identified the most co

This article was originally published on November 10, 2006.