About WEALTH DESTRUCTION in Stock Market & How to avoid it:
Alert for Negative List (Wealth
Destroying) Stocks-
Majority of investors have had the
bitter experience of getting stuck into stocks that go down consistently and
considerably from their buy price and seldom recover, or recover above their
purchase price when it has been so many years that they have already lost on
inflation, and interest rates on their capital as well as the opportunity costs
that they would have earned out of other investments.
Our approach to investing has always given paramount importance to Warren
Buffets Philosophy of investing. He said: Rule no.1 is to Never lose money and
Rule no.2 is to Never forget rule no.1. Our version of this rule can be:
“Return of Capital is important than Return on Capital”.
Times and again we have always
Alerted our visitors about the stocks that destroy their wealth. From now we
have made this approach and part of our activity as –A Feature in our “Services
for Investors”
Thus from now on any one activating
any of our “Investor based Services” will get this Negative List of WEALTH
DESTROYING STOCKS probably with lower targets as well.
Why Do you at all Need “Alert for
Wealth Destroying stocks”?
o Some of you might say that this thing does
not need no ‘why’ explanation.
Any
way, we are giving some points,
o By most of the medias and analysts,
investors get buy recommendation but they rarely get the sell or even further
‘exit’ or completely screaming avoid alert. So in such scenario, the common
investors badly need such alerts that we intend to provide. Because the HNIs,
or institutional category gets some of such alert tip but the common investors
are sometimes purposefully and many other times un-purposefully kept devoid of
such a crucial part of stock market advice.
o One of the first and basic thing to
understand is that ‘stocks do destroy wealth’ and that ‘knowing WHAT NOT TO
BUY’ is many times more important than Knowing What To Buy. Because ‘Market
will always throw Excellent Investment opportunity in front of you from time to
time, but you need to have capital to grab this opportunity. But suppose you
are stuck in wrong stocks, then what? Then you will lose these opportunities
and INSTEAD as well lose on inflation, interest, opportunity cost and many times
with ‘wealth destroying stocks’..your capital as well!
·
This also goes
with general public’s attitude of ‘TAKING STOCK MARKET FOR GRANTED’. They
glibly think/believe that “It is easy and almost an ‘automatic’ task to earn
money in stock markets…and that Long-term investment of any type is always
profitable..” Many of these types of people invested in Reliance Communication
at Rs.800 and 600 and also may be holding India’s largest private company Rel
Ind for last 2 years…and eroding their capital by 80% in the first case (Rel
Comm) and standing with zero return in the 2nd case (Rel Ind) and loss of huge
opportunity cost during the same period’s smart run up in markets. (The 2
stocks are just examples and not particular cases) The point is that ‘IT IS A
MYTH SOLD TO COMMON INVESTORS BY ‘CAPITAL MARKET INDUSTRY’ THAT STOCK MAREKT IS
ALWAYS AND ALWAYS BENEFITIAL IN THE LONG-TERM’. It depend on the stock you are
invested in. And ALL THE stocks are definitely not the right stocks!!
Some tips for ‘not losing money in
investing in stocks’-
YOU WILL FIND
BUYING RECOMMENDATION ON HUNDREDS OF SITES…TRUE RECOMMENDATIONS ARE THOSE NOT
GIVEN NEW EVERY NOW AND THEN…BUT WHICH ARE GIVEN LESS AND LESS AND REPEATEDLY
WITH CONFIDENCE..
·
Wealth is not
destroyed in STOCK MARKETS, but wealth is destroyed in STOCKS.
·
It is
important to know which stock (read businesses/companies) to buy, but it is
equally important to know which stock NOT TO BUY...because in stocks, if you do
not EARN money, you LOSE money! There is no third scenario.
·
This NEGATIVE
LIST is something you have to build yourself. Because unfortunately no one out
in general/popular media will tell you to EXIT/AVOID stocks giving possible
downside and stating exaggerated valuations. Because may be at times such media
and industry participants are busy ‘selling’ them (in forms of story and the
actual stocks as well) to you..!!
·
The general
notion in the back of the mind of average investor that-When main indices goes
up everything goes up and main indices go down everything goes down, IS A MYTH.
·
Have courage
to EXIT/SELL when you have somehow made a mistake by entering into such stocks
and you get reliable advice from reliable/timetested advise/sources such as our
team. It is better to lose some money than to lose all the money..!!
SKS MICROFINANCE DEBACLE AND MORE
LESSONS ON AVOIDING WEALTH DESTRUCTION IN STOCKS:
What
happened with sks microfinance stock debacle and investors losing money is
nothing new in stock markets.
The
basis of such disasters lies in the craze of investors for their constant
striving of ‘new’ and ‘fancy’ (so-called) investment ideas.
Always
remember, investors who simply jump to grab every ‘new thing’ on markets,
WITHOUT UNDERSTANDING THE ECONOMICS OF THE BUSINESS AND LONG-TERM
SUSTAINABILITY OF ITS MODEL are bound to lose money. Long term sustainability
is very crucial; even for short term performance of the stocks. Because you
never know when a smart investor start exiting and a smart trader start
shorting. Its just a matter of time. And you can never figure out when.
This
has happened with dot coms companies. You can take example of praj which made
short term wealth for investors but since has eroded more than similar amount
of wealth. We have many similar examples.
“In
fact I would go forward and say common investors (including HNIs), to leave
this area of investment to ‘hi-fi’ speculators/investors like the VC funds, PE
funds, FIIs and such other sophisticated hard-core professional investors and
traders.”
This
also goes with our approach to stay clear of almost all initial public
offerings.
This
will not only save investors from losing their hard earned capital, but save
them from loss of moral towards investment into stocks; which is even more
important.
This
might seem harsh but it is a reality that the company promoters, the funds that
invested in this venture have stolen money of those who subscribed in its ipo
and after listing.
The
point to take home is that the venture capital, PE funds and such other exists
to make money. They invest so that one day they can come out with IPO and shell
their shares to gullible investors. They don’t want to hurt others. Because its
what they do. This is their business. If I would have been one, I would do the
same. There is nothing personal about this for them. But yes, it hurts a lot to
small common investors…personally.
WEALTH DESTRUCTION IN AIRLINES
STOCKS:
…......we have also mentioned
same caution on dotcom website and education stocks.
...you might want to know whay we
are a no-no to certain sectors such as aviation. There are particular reasons
to that. We follow Warren Buffett’s philosophy, and in that also aviation is
a no-no, so our attitude
regarding airlines stocks goes with this also,
The retail investor are
deceived/misguided/ill-guided by tv analysts etc.(usually serving vested
interest of the broking/fund industry’, some of them who know (most other
completely ignorant regarding this) that aviation sector will take away
your money still recommend in tv and articles and other media etc.) for
investing in aviation stocks, which has proven to be a lousy and losing investment
all over the world.
We have continuously alerted
investors to remain away from airlines stocks, below is an example from our old
article how investors saved their money from sinking in airlines stocks by our
advice.
HORRIBLE WEALTH DESTRUCTION BY airlines stocks (our investors exited or/and avoided these stocks and saved their capital) -
|
1
|
2
|
3
|
4
|
5
|
6
|
7
|
8
|
|
AIRLINE STOCK NAME
|
Open price as on-20 sept 2010
|
lifetime high
|
high made since our msg
|
close price on-20 sept 2011
|
lifetime low price
|
low price made since our msg
|
% crash from (4) in stk price
|
|
Jet Air
|
768.80
|
1383
|
925.65
|
281.40
|
115.20
|
250.15
|
87.64%
|
|
KFA
|
65.25
|
334.45
|
90.15
|
25.80
|
22.10
|
23.35
|
74.09%
|
|
Spicejet
|
73.90
|
98
|
98
|
24.50
|
19.30 (19 aug 2011)
|
19.30
|
80.30%%
|