An Year Of Investing: What I learnt as a Robinhood Investor
Hello Friends,
Wish You a very Happy New Year 2021.Hope you and your families are doing great.
Today's post is about reflection and the lessons learnt from the year gone by.
2020 was a very challenging year for each one of us. The events that took place during the last year were life altering for many. My prayers are with the ones who lost their near and dear ones to the virus. Hope you get the strength to come over your grief.
Talking of money, there was a lot of damage on the economic front. A lot of businesses came crumbling down and many employees found themselves helpless and struggling to make their ends meet. I wish for the speedy recovery of those businesses and jobs.
On the contrary, for zero brokerage startups like Zerodha and Upstox, this pandemic turned out to be a perfect storm of sorts. A record number of Demat accounts were opened in the last year, owing to people switching to the work from home routine and finally getting the time to look at the performance of their investments. A lot of first time investors, who were confined till Mutual Funds and other passive investment strategies, were ready to get their hands dirty with direct investing.
Along with all these new investors, also came a barrage on content creators on social media channels giving all sorts of Gyaan to the unassuming and impressionable investors. Business News TV Channels like Zee Business and CNBC Awaaz, enjoyed high viewership rates during the lockdown. And one of them even managed a fraud in the name of giving profit making calls.
Me being one of the new investors, also decided to take a plunge with a small amount of 1 lakh rupees and made a profit of around 40k during the whole year. Now for some, it might be a small profit, but I would say the real profit lies in the learning that I got. And today I would like to share that learning with all of you, along with a few examples. So without further ado, let's get started.
Patience pays, slowly but definitely.
This one seems to be a bit obvious, but in practice it's the hardest to master.
In May, I bought IRCTC at the price of 1371, after the continuous UC streak was over the last month. After the purchase, it immediately started going down and I was in complete panic mode as it was one of my early trades. I also thought of getting out. But before that ,I did some fundamental research and decided to stick to this script for a longer time. Now it touched a few highs and lows and a lot of turmoil happened afterwards, but I stuck to it. And I finally sold it in December at around 1650, which is around 20% in 6 months. Not bad I would say.
This does not mean I have not made mistakes. I bought TATAMOTORS and around 100 and sold it for 96 after listening to some 'experts' on Youtube. As of now, its trading close to 300 on BSE.
Which bring me to the next point.
Its your money and you are responsible for it.
Do not believe everyone every time. You can take the advise some people sometime, but not every time. Most of the channels on Social Media are competing for the views. The quality of the content does not matter after a certain point. People will try to sell you winning strategies all the time and they will try to project themselves as know it all Gurus, but the reality is nobody is perfect and everybody makes mistakes.
Some calls do work based on the fundamental or technical analysis of these experts. But some of them are also sheer luck. We need to figure out what's good for us and should not blindly follow anybody.
After the whole Hemant Ghai episode, we should be very careful before taking unsolicited advice. We might make a good profit in the beginning, but in the long run it can burn you very badly.
Never compare with others
Everybody is different. The sooner you learn it the better. Never compare your results with your friends or peers. And don't be bothered with the people sharing humongous profits on social media. Everybody likes to present a rosy picture of themselves, but nobody likes to share their failures.
These comparisons can disturb your mental peace and will eventually affect your health, which is of utmost importance. Even to make good returns, you need to have a healthy mind and body. Calculate your risk appetite based on your income and take proportional risks. What works for others, might not be of help to you.
Read, learn and analyze your own emotions and reactions
Learning about your own personality and reactions can help you a lot in the long run, apart from the fundamental/technical knowledge.
If you do a lot of panic trades, it's best to meditate a little and calm your mind. Maybe take a break, if possible. And if you are one of those, who don't get sleep without trading, then make the bets small.
The only gain is what's in your pocket.
There's a famous saying in the stock markets:
You go up in steps, but come down in an elevator.
I invested in few shares which got in the UC streak for few days and it looked like I made some good returns, but the way it went up, it moved down even faster. So as and when you get the opportunity, do book your profits.
Start small and build it from there
Remember, if you are a beginner like me, SIP is your best friend. Invest in small amounts and never at once. Invest in multiple companies from the same sector. Preferably start with the leaders, as they have low risk. Do not venture into unknown territories and always proceed with caution. There may be huge losses waiting for you on the very next step. So always keep your stop losses.
If you don't know about derivatives, currencies or Bitcoin, its best to stay away till you gain the knowledge. And remember, it takes time to master. Very few people will become overnight sensations, but a lot more will burn their hands trying to be one. Try to read about the company business and past performance, if you have the time. But don't get too exhausted running behind your target returns.
Enjoying life is very important.
That's all folks. With that, I would like to conclude.
Happy Investing!
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