Here is the first half of ‘my personal biography of investing’. It is totally exempt from any specific country, money or stock market. But, intend to energize people through sharing the important investment moments from my personal experience.
I have divided this article into two parts. In the first half, I am sharing my experiences as a beginner investor and in the second half, I will share the investment practices I have followed and kept my own for valuating companies to invest.
My first huge lose and workarounds to get those money back
After signing to my first job on 1993, I thought, I will buy some stocks. As a beginner investor, I was not aware about the stock market and how it is working. I was totally blank on the stock selection criteria. When decided to buy, I was following those who was investing in stocks at that time and blindly believing the words of brokers from my native city. On 1994, I have purchased 20 shares of a well known company in India, it became the most valuable company in India today, and received the paper format
certificate .At the time of 1994, I have even not heard on the demat form and not introduced online trading facilities because, internet was very rare in my city. The only possibility to buy stocks are to contact the brokers and use the off line trading platform. I have even not bother to visit the broker office after he recommended the above stock to buy. I was also not aware about that company or its business and investing possibilities.I am happy to say that, I am still have the first certificates of 20 shares, I have got as my first purchase, and it merely given a profit of 2000% along with lots of bonus shares of its sister establishments. The value of my first 20 stocks grown to 20 times till today, excluding the value of any bonus shares I have received. Including the value of bonus shares, the profit will rise to a clear 30 to times if I sell the stock with today’s price.
Even I have invested without any plan or study, this experience teach me a lesson of doubling profits multiple times when investing on right company with long term focus.
After my first purchase of 20 shares, I have not done any activity for next 2 years. As I was working for overseas, I have not got any chance to contact the broker to put buying order. After back to my native, the time index was booming up, I have again got an advise to invest on a technology company with price was booming fast. As a total beginner, I have purchased 25 stocks of this broker suggested company with the price of 1700 per share.When the next bear phase started, I had a look at the price of this company and really shocked by seeing the price per share is only 43. I had met a clear lose of 1657 per share and that vanished my major chunk of savings. There was no reason for crying. I had made multiple mistakes. First, I believed a broker word to select a stock to invest. Second, I never studied about the company or the stock market to identify the better stocks and time to invest. Third, I have invested total money to a single stock and finally, I invested on a stock that was from a hot sector.
I am sure, if it had happened to any beginner investor other than me, he could never have a look into the stock market again. Yes, my experience was enough for me to say goodbye to investing for ever. All over this, I have got benefited by learning a classic truth, never enter to any contract without study or research.
Following several years, I was roaming without a job. I was thus not able to invest to get my money back. When I got the first job, the salary was not enough to meet my monthly budget and there was no money to invest. I went back.
At the time of internet facility introduced to the company where I was working, I got an opportunity to access internet from my own desk. While browsing, my eyes stuck with the name of Warren Buffett and his teacher Benjamin Graham. I have got thrilled with the investment principles of Benjamin Graham and Warren Buffet and thus start finding any books written by them. Unfortunately, I was not able to find the first book named “The Intelligent Investor” by Benjamin Graham, anywhere in the local book stores. After next two years, I have started my career as Systems Engineer in Mumbai. I have received a copy of “The Intelligent Investor” from there and start reading the same.
The principle and advices of great value investor Benjamin Graham attracted me a lot. As Mumbai was the place where Bombay Stock Exchange is, I again attracted to stock investing. Even though, my previous investment lose was their in my mind as a black mark. After lots of thinking about a re-entrance, I finally decided to start investing with little money to test the value investing steps described by Benjamin Graham within his book “The Intelligent Investor”. To get additional information about value investing, I had referred the national bestseller, “The Warren Buffett Way”. Through reading this book, I have got ideas on Buffett investing style and the qualities he was looking on a company, business, management and financial.
I have finally reached to the ever best investment classic from Philip Phisher, “The Common Stock and Uncommon Profits”. After reading it several times, I have got very clear picture on the most important areas an investor need to give maximum focus to valuate a company. My next step was to build my own investing principles by following the practices and advices from these three investing legends and which later lead me to creating my own valuation methods, I still following. As I was very weak with numerical calculations, I was not able to interpret financial reports of the companies. But, I studied the necessary formulas to fetch the most required informations like per share earnings, debt ratios, rate of returns etc..
My basic preparation to select and invest on a company started from this point. With increased confidence from enough references on valuating companies and find right investing candidates, I reentered to capital market with an intention to get back my money, that I lost years ago.
Here is the end point for the first half. You can visit the second half to read all the interesting steps I have followed to get back my previous investment lose through investing again.