This article was written after reading the article by Kishlay Singh. The article titled How to retire Rich and Young? explains his thoughts on earning from stock markets.
First I would like to congratulate him for his great article. Secondly I would like to share my experience with stock markets so far before giving a conclusion.
My first interaction with Stock Markets
It was back in 2007, aged 17 started observing the markets. First time I opened a Demat account was in the year 2008. Like others even I wanted to earn huge money from stock markets.
The years 2008 and first half of 2009 were the worst period in stock market that our generation witnessed till date. Markets were bleeding red everyday; USA was in a deep trouble pulling whole world markets down.
My first purchase and romance with Penny Stocks
Like most of the people, I was not matured enough to understand markets. What other new comers do, I did the same thing.
I started hunting Penny Stocks. Before I come to my experience with penny stocks, let me tell you that closed my first Demat account and opened a new account with HDFC Securities. The big mistake I did, I was not a long term investor but I was playing as an opportunist.
I never took money parents to invest in stock market (I think that was a good thing, never play in stock market with money taken from others). I bought penny stocks from the money I earned from my CA internship.
I made many small purchases, some failed and some were hit. But, none of the scripts I bought gave big profits.
I was still learning and was not moving away from penny stocks. The major blow and reason I moved away from penny stocks was a deal in the year 2010.
I bought few penny stocks in the year 2010 around March-May. More than 50% of the investment was done in a penny stock I believed will give huge profit, and it was Avon Corporation Ltd. I did not study what company does and how the financial statements looked.
The total investment at that time was around 75,000, and 45,000 alone was in Avon Corporation Ltd. Below is the movement of share during the time. Luckily I did not buy the shares at one price and I kept averaging share whenever it fell.
During month of November my investment was reduced to 50% of what I invested. Loosing is a great experience, it teach you more.
I started studying my strategies and mistakes I did. I was maturing, reading CA books gave me more insights to understand the financial statements and how to analyze them.
I was totally broken after I read the financial reports of company. Avon Corporation Ltd was a waste of money. Increase in revenue and debtors were not correlated.
I was just hoping that some wonder happens and I could get out this penny script with my investment (Lost hopes of any profits).
During that year traders were very active in this script and they kept taking script high and low to make money.
To my luck, they took the script high during Diwali of 2010. My investment because of Avon Corporation Ltd turned into profit. I sold all my shares and had 92,000 in bank account.
Thereafter I totally avoided investing in penny stock. And bought some shares for long term, I invested around 80,000 in some good shares.
I understood that you can earn stock market either by investing in a good business for long term or by arbitrating the opportunities (trading).
The big Gamble (Modi effect)
I sidelined completely from stock market after this first experience. In Feb-March 2013 sold all shares to invest in my CA practice, with that money I could afford the office expenses for few months.
I closed all Demat accounts, totally sidelined from stock markets. To become a successful trader or investor you have to invest professionally. Understanding stock markets or investing is not rocket science.
Now, I was a CA and could read and understand the financial statements. Now I was able to differentiate between good, bad and ugly companies.
I was able to differentiate between the movements of share prices, whether it was due to increase in business of company or it was a trader’s move.
Meanwhile I started reading about options and futures and depravities in stock markets. It was clear that if you want to take risk or want to earn money in short time, derivatives are the only option, otherwise go long.
I was waiting for a chance, and it came.
I was ready to take benefit of this opportunity. The general election of 2014, were big hope for country. Everyone was sure of a change in government.
I invested in hopes of new government. I invested in Narendra Modi. The investment was Rs. 30,000.
Never analyzed any share, I was in front terminals to earn from DERIVATIVES. Options were my game.
Though, I was doing any trading from 2012-14 but always observed the stocks. I selected 3 stocks to play with.
Reliance Power, Indiabulls real estate and Andhra bank. For continuously 4 days, I set in front of terminal and at the end of week (one day was holiday) was able to convert my 30,000 Rs. into 1,70,000 Rs.
Bulls were ruling the market and managed to flow with trend and make first big profit. After those 4 days, I lost 20,000 Rs. by applying same strategy. Mistake I did was not able to give full time to observe the deals.
Stocks Market is a good option for investment. You don’t have to be a financial expert, all you need understand is that share prices in long term totally depend on the business of company.
Always invest in business and not company. Reliance Energy was part of Reliance group but it failed and sucked the money of poor investors. The company was competing with other companies in the group operating in same business.
Fix your strategy if you want to trade. Fix your limits and follow them, never go against trends in markets.
Emotions should never be a factor to influence you investing decision. Invest wisely, earn smartly.
Posted 3 years, 2 months ago by CA Pulkit Sharma
Posted 3 years, 2 months ago by Kishlay Singh
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