Sunday, October 28, 2012

My adventures with Indian stock market

Long long ago (re: around 5 years ago) in my early days of share trading adventures (...it's not an excuse but really those are the days when I started trading and pretty naive), I bought this company's stock and learned a lot (re: lost a lot of money). Narrating the sad story here hoping some of you would pick a bone or two from my experiences.

1. Bought a penny stock blindly because it's of low value. 
My thought process was something like this... "Since each stock is worth only 2 rupees, how bad a loss can be? It won't be more than 2 rupees, right?"

I wonder how I did not realize that this loss multiplied with huge number of stocks would essentially be the whole amount I invested in it!!!

On the other hand, I thought, "since I get a huge number of stocks even if a single rupee raise in the price would fetch me a lot of rupees ;-)". You can clearly see how I failed in this reasoning too.

2. Did not research much about the company
I browsed a little bit about the company, details of which I do not remember even on that evening. As I look back since I was so determined to buy that stock, I might have overlooked all negative signs and looked at only the positive decisions which I *wanted* to see for helping my buying decision.

3. Squared off by doubling the number of stocks I had without retrospecting what I did wrong.
At the time of panic, I did not retrospect and investigate more. Instead I invested more to square-off my investments. That's unlike me, but may be I am destined to learn a lot from this. It's written.

4. Bought 6000 stocks by mistake, instead of selling them.
I placed a BUY order instead of SELL order again by mistake. Hmm... so many mistakes all happening with a single stock. Is it a co-incidence???

5. Did not knew about special brokerage on penny stocks
On top of the losses by above mentioned reasons, I can to know that a minimum of 10 np brokerage is charged on stocks worth < Rs.50/- in my DMAT account. This is a huge percentage considering the fact that this a stock worth two rupees.

6. Company restructured the portfolio and I didn't even know about it
I still don't understand completely why 'x' number of stocks priced @ 'y' in my DMAT account were replaced by 'x/10' number of stocks priced @ '10y'.

7. Sold for huge losses and got a surprise gift (re:blow) from brokerage firm
Satisfied with all the learning I got from this whole episode, recently I decided to sell ALL (and NOT buy more ;-) ) of the stocks on one fine day. My brokerage firm with-held around 20% of the earnings (after all the losses, I can't really call them earnings, can I?), as "Exchange Margin for the day" probably because mine was the only transaction of that stock on that "fine day". Need to find more about it after publishing this post.

Morale: Half cooked knowledge is dangerous, so don't invest money in share market if you can't invest time in it.

2 comments:

sarath said...

By the way which stock is it?

Ravi Kumar Mandala said...

I don't remember but it was some penny stock