Sunder is my colleague in the workplace. I mean, we are co-workers.
We both share a passion for Stock Market investing. We like to talk about our stock market mistakes and experiences (of losing money, of course). Rather, I talk about losing money.
The other day, Sunder was telling me about his experience.
"I started investing in Stock Market in 2006," said Sunder, "at that time market was on a major bull run. I was always running after news and momentum. As soon as I hear that a stock is expected to go up, I will go and buy it. And immediately afterwards sell it. Since it was bull run almost everything that I bought went up."
"There was no method that I was following. In the morning train, I hear people discussing about a particular stock and I will go and buy it immediately. Most of the time, I had no idea about the companies. I had no clue about their business, no idea about their future potential and almost no information about their current performance. Graham will turn in his grave if he knew the way I was buying stocks"
"If people were talking about it in the train, I will buy it", said Sunder thoughtfully.
"Funny thing is that I was making money on the momentum. And BECAUSE I was making money, I thought I was a superior investor. The more money I made, the more I felt confident about my 'investment methodology', and more I followed the same method."
"Then the great correction started" said Sunder
"It took me some time to realize that I was losing money regularly. More stocks that I bought, more money I started losing. Having got into the habit of buying into news and 'train information', I found it difficult to give up the habit. The funny thing about following news is that you tend to be selective in the choice of news that you read. You somehow avoid news that goes against your beliefs."
"I ignored bad news, stayed longish in the market and lost some money."
"That is when I realized that I was not a 'super investor' after all." said Sunder.
"I realized that if you want to make money, and that too 'Serious Money' in the market, it is very important to identify the stocks that you buy, do your research on them and stay invested. It is also very important to have a clear target and sell when you meet your target. Just as a buying decision is important, a decision to sell is equally important."
"From a person who used to buy on every news, now I have become an investor who takes less risk, do my homework and follow clear rules to buy and sell. Of course I do punting a bit here and there. But most importantly, I have evolved to a more serious investor." concluded Sunder.