Making Quick Money in Stock Market is a Mirage

I am sharing a story sent to me via email by one of the readers of TIPBlog. Here, this reader is narrating this experience about multiple attempts to make quick bucks from stock markets. After the story I will present my views and thoughts about it.

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Sometime in 2002, March/April, I was doing my engineering and started working for a call center in the night to take care of my extra spending. I never knew or thought about stock market or any kind of investment. I spent two years in call center and spend many hours in the night watching CNBC after coming back from work. I learned few things about banking, credit cards, insurance, investment, and so on. In two years, I watched markets go up. I always thought I should invest in IPO and make some money on listing. However, I could not do so because I didn’t have a Dmat account.

  • By 2004-2005, I go to learn about income tax, such as how to save tax, how to secure my future, and so on. In 2005, I was 25 years old and wanted to buy an insurance policy.
  • I bought Aviva life insurance (ULIP) for a annual premium of 12k. I still have this policy.
  • I came to realize that was not sufficient, so thought about buying another one. Even though my dad does not know anything about market, he suggested me not to buy ULIPs and all. But then, I bought Jeevan Anand for 10 lac sum assured. The premium is 68K/annum. The policy is still in force.
  • In 2006, I bought a retirement plan for 10K/annum from ICICI. It is still in force. Same year, I bought another plan from Birla Sunlife 100% equity with premium of 12k/annum. I sold it this year Feb with 12k loss on original capital.
  • In 2007, I opened a DMAT and my brother is using it. He made good money in some IPO and then lost some in trading. During 2007-2008, my brother bought 5 stocks for 5L cash for trading at life time high. Till date he hasten sold it cause the market crashed the day he bought it, now it’s worth 1.7L.


Anyways, 4 years went by with lot of money related mistakes in life but nothing to do with stocks. In 2009 I got married. After getting married, I wanted to have a secure life. November 2009 is when I found your website while searching stock investment. I found many other sites and read almost all of them, One thing was sure, I needed a huge insurance cause I smoke and drink.


Did all my research and bought a pure term plan from ICICI for 50L (annual premium 12K). I seemed everything is now set.


Meanwhile, I am reading your blog from starting and learned a lot of things (specially stay away from intraday and all, have 3 months salary as cash in hand for bad days and so on). Saw your previous picks and saw that all your picks have been doing exceptionally good. I know I was suppose to first have 3months salary in my bank account for bad times, but I could not stop investing when I saw some recommendation from you which were cheap and within your buy list. So I bought whenever I could, such as:

  • 150 shares of graphite at 86
  • 130 shares of ABCIL at 87
  • 16 shares of Tata Invest at 500,
  • 60 shares of Aegis at 178
  • Made a stupid mistake of buying 200 shares of Alok Text at 21


By this time, I have completed reading all your post and becoming very inquisitive to see what happens in intraday, especially after DS post.


So what did I do, I thought let me just see what is this intraday and started to play in intraday. Buy 100 shares and sell 100 shares on the same day. For two days, lost 200, then 400 then 2000. By the way, before I started intraday, I had spend 30 days watching two companies and saw a trend that it goes by when the market starts and comes down at 12:30pm and then again goes up.  I am thinking what am I doing I am losing money continuously, so I decided, ok, let me just get my money back and then I will quit.


I stopped, and then one day, I see that the stocks which I was playing with both of them have gone down by 2% to 3%. I had never seen that in last one month so went ahead and bought them in huge quantity 2000 each. After 20 minutes, the stock in down another few %. What should I do, I am gone, so I go ahead and now 100% that it will go up, so I buy 2000 more (each). Now what I see, 1 hour and the stock is 7% down.


You would be thinking where did I get the money to buy all these, I didn’t, I don’t have any money on me, it’s the margin which is available on my Dmat from my brothers holding on which I am playing. Anyways, I ended losing 32K and I don’t have any money to pay. So arranged some and then told my wife, she didn’t say anything and gave me the money. She had saved from January. I paid and decided it’s done, not anymore.


During the month of May 2010, I had to pay my LIC premium for 68K. I had 66K with me. At that time, I was also talking to the trader community in my office and told them I had lost 32k. They all told me, you should never play in intraday, you should play in futures. I then happen to talk to my RM and he too told me that I should play in futures. Because I get time to hold it for longer. I also learned that you can go short which I was not aware till now.


Now, the markets were down at 4800, everyone is telling go short the market, it will go down, market will go down. At that time, I needed 2K. I forgot about all the losses, as futures looked very promising. I had no idea that if it goes in –ve then I would need to pump in money. I thought I can hold it till the expiry date without paying anything.


I went short on nifty, 3 lots at 4822, it never came back to that level. I am at loss of 69K and just few days back the broker squared off all my positions including ones that I had bought using your recommendations and few of my brothers holding as well. I have bought all my brothers holding back now. I haven’t still told my wife about it, I don’t have the guts to tell her. Somehow, I was able to pay my LIC premium with the help of one of my friend (borrowing 2k). I should have done this earlier.


I have to start all over again. But, yes, I do realize all the mistakes I did.  And, won’t do it again. Yes you are free to screw my happiness or ask any questions if you have.

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My thoughts:

The title reflects the moral of the story. That’s a one line description of what I have to say.










Facebook User Comments:


30 Responses to “Making Quick Money in Stock Market is a Mirage”

  1. Phani says:

    This was sad sad way to mess with your finances… Plan properly… There is not a PPF/NSC/NPS or any such tax savings instruments in his portfolio.

    First
    1. Insure yourself and your near and dear ones (Life and Health)
    2. Tax savings to the max by saving in New Pension schemes
    3. Submit HRA and Medical bills properly to save on tax
    4. Nest at least 1 year salary in a recurring deposit or Fixed Deposits, no one can predict the job markets and uncertainties in life

    Now any excess money you are saving after all the contributions can be invested in stocks depending on your risk appetite. Money that you are investing in stocks should not be loaned to you by a person/firm or a brokerage. It should your money which you might not need for next say 3,4 years.

    Dont short sell, Dont do futures and options, No Intraday trading. Only Delivery Trades. Buy good dividend yield PSU stocks in the beginning. buy in small lots on dips. Learn more about market. First 1 year should be mostly as a passive observer, keep buying small amounts only. Then start buying private firm shares. Dont believe in every analysts comments. They dont have 2-3 yrs perspective when they make their prediction. Always buy a stock with 2-3 yrs in mind.

    I can go on and on about this…

  2. DS says:

    probably his person needs a kick on rear end. a strong one. making mistake one time is understandable.

    But again and again making similar mistakes is called an idiot

    • Idiot says:

      Yes DS you are correct, I was one, I cant change it and or repair what i have done, But yes i have learned out of it (Very costly and idiotic). The only reason i gave this story to Tip guy is to make sure that no one else does the mistakes which i have done. Many readers of this blog like you are quite mature and have been in the market for years together, But not all the readers are like you guys, So this story is for all the new bees like me who are venturing into market and might do mistakes which i did. Even if one person learns something from this post i think its worth sharing the story.

      • Young@Market says:

        Thanks for sharing. It is only that you took a bit longer to get out of the addiction. I would say trading is more like an addiction….

      • Shikha Bhagat says:

        Hi,

        I appreciate that you shared your unsuccessful attempts. It takes guts and willingness to accept mistakes and share it with others. Otherwise, all we hear about is boasting about how much they made!!

        Even though it is anonymous to readers. The authencity of this blog makes me believe it is true to every word you say here.

        One question: what made you write down and share it on this blog? what was the motivation?

        Best Regards,
        Shikha B.

        • Idiot says:

          Tip Guy and Tip Blog, I happen to say to tip guy that i had done some blunders and he asked me

          is your blunder related to investment decision…. yes? can you write a small note or a stroy (may be three fourth page). I would like to publish

          and so i did.

          • TIP Guy says:

            Hi,

            Appreciate you readily accepting to sharing your experiences.

            Accepting a mistake was first step. The positive aspect about it is, you learned quickly when you are still in 20s. Hopefully you learn from it, and move on. You still have significant time to grow your financial wealth. Imagine you making such mistakes in late 30s or early 40s.

            Good Luck and Best Wishes,

        • TIP Guy says:

          Hello Shikha,

          Yeah, I do make sure the stories are from real people. I accept such write-ups only after I have interacted with them for a while. My objective here is not to focus on individuals but on their experiences.

          The messages these experiences convey is (1) Everybody makes mistakes, you are not alone; (2) It is OK to make mistakes. But you need to realize it, accept it, and correct it; and (3) it is important to document for future reference.

          I hope your were able to convince your better half on ‘exacting the buy price’.

          Best Wishes,

  3. sunsevvur says:

    A nice lesson. New comers and those who are not able to control their emotions should read this without fail.

  4. Aditya says:

    Thanks for sharing. Not every failure or mistake is shared. Though I don’t call this a failure, it’s a lesson learnt and shared with all the readers.
    I am not wise enough to give any suggestions but I believe a lot in the title of the post.
    Thanks once again.

    • TIP Guy says:

      Hello Aditya,

      You got it right!. It is a lesson learnt. But only if you correct the mistakes, right? Otherwise it was not a lesson.

      Best Wishes,

  5. Young@Market says:

    well said Aditya…most of the people would say only about the stocks which they made profit of.. not the one which they sold in loss…. and say that made handsome returns

    • TIP Guy says:

      Hello Young,

      Isn’t it surprising that we all seem to have similar experiences? And very few seem to accept that “they were idiots to make mistakes”?

      Best Wishes,

      • Young@Market says:

        I would say.. No…. they were not idiots to make mistakes…. No one is born with all knowledge… so unless one try.. one cant make mistake…. and learning from that mistake would be much useful than learning from text book perhaps….. May be we should say that one who wants to watch it from the shore saying that I might make mistake better deserves the name idiot (related to stocks)…. Sorry, No offence to anyone…. just 4 fun…

  6. Marshal says:

    thanks for sharing! it really need guts to share this type of stories!

  7. Manshu says:

    Great story and it takes real courage to share such things.

    I think a lot of people make similar mistakes but only a rare few have the wisdom to realize their folly, and then the courage to share it with others.

    • TIP Guy says:

      Hello Manshu,

      I agree with your observations. Almost all of us have such experiences, some have big losses, some have small losses. Bottom line everybody has it.

      My applause goes to these two folks who were strong enough to share their experiences. Kudos to them.

      My sincere thanks to “this reader” for contributing on TIPBlog. One brownie point.

      Best Wishes,

  8. chetan s. raut says:

    hi ,

    have you posted ant article or any analysis on Crompton Greaves.what is your openion about this counter….for long term

    • chetan s. raut says:

      continue to above comment..but crompton greaves is running at 26 P/E ratio which is costly for me….is crompton greaves is Subsidary of any non-indian mnc like ABB?i dont prefer to invest in such kind of company which belong to Forgien parent company..any comment from you?

      • TIP Guy says:

        Hello Chetan,

        I did screen this a while back and shortlisted Crompton Greaves. I did not post any analysis, but it does fit into my long term buy and hold portfolio. But the pricing is high for me to jump in. It is on my watch list. I think I should post a discussion on this.

        It is a subsidiary of foreign company and is doing business in India for a long long time.

        Why you do not prefer foreign subsidiary?

        Best Wishes,

  9. chetan S. Raut says:

    i feel foreign company really dont need money from indian market..so if they list themself in india this is just because of rules that indian government follow….if they get any opportunity they will try to delist from indian market…what you say..

  10. chetan S. Raut says:

    continue to above comment foregin company have less liquidity and very low floating shares in market……..so price of share can easily control by pramotors….

  11. ramesh says:

    Dont blame any instrument for your loss.
    Instruments are harmless but person cannot handle them properly and then blame instrument.
    Look at RJ, he speculate options but problem with retail investors is that they blindly follow others even without properly assessing the risk before entering into particular trade. I have lost huge amounts of money in F&O but I wont blame F&O Its mistake of mine becauze I was not able to handle F&O

    • TIP Guy says:

      Hello Ramesh,

      I don’t think anybody here is blaming the instruments. The point being made here is, these instruments are not devised for DIY retails investors. These instruments are not that simple and they need a different type of mindset (different than buying/selling company stocks). They are beyond the skill set of individual investors. They are for large institutional merchants/financiers.

      Best Wishes,

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