Common Mistakes By Investors

In Wealth Creation Process

 Mistake 1

Not Having an Investment Plan

● ONLY Investment Plan in India is “TO SAVE TAX”
● Planning is very important
● Why are you investing?
● Understand & Define goals
– Child Education / Marriage
– Own Retirement
– Buying a house .. etc
● Define time frame
● Understand your RISK taking abilities
● Finalize your Asset Allocation
 Mistake 2

Not understanding RISK

● BIGGEST risk in Life is not taking risk
● Types of Risks
● Visible
● Invisible
● Human Mind ( Aam Aadmi) – Visible risks
● Human Mind ( Khas Aadmi) – Invisible risks
 Visible Risks...
● Equity Markets in short term
● Elections
● Global crisis
● Oil Prices
● Currency movement etc
● Capital risk
● Liquidity risk
 Invisible risks
● This is the most important
● 1 year Bank Deposit Risk Free?
Capital 100000 100000
Rate of Interest 8% 8%
Capital after 1 yr 108000 108000
Tax 20% 30%
Tax Outflow 1600 2400
Post tax 106400 105600
Inflation 7% 9%
7000 9000
Capital Post Inflation & Tax 99400 96600
Invisible but you must see this
Invisible but not blind..... We can see this
Goal 10000000
ROI 8.00% 15.00%
Time On hand (years) 15 15
Monthly Investment (SIP) 29431 14959

Goal 40000000
ROI 8.00% 15.00%
Time On hand (years) 25 25
Monthly Investment (SIP) 43724 14511
 Mistake 3

Looking for Instant Results

● Daily price movement – Don't check NAV daily

● Equities create wealth but investors don't

● Starting a business

● Growing a Child.
 Reliance Growth Fund
Period 1 year Period 2 year Period 3 year Period 4 year Period 5 year
Jan14-June14 36.79 2013-June 14 55 2012-June14 34.03 2011-June14 23.94 2010-June14 17.96
2013 17.21 2012-13 10.93 2011-13 7.91 2010-13 4.77 2009-13 8.19
2012 34.42 2011-12 15.39 2010-12 8.76 2009-12 13.40 2008-12 12.55
2011 -30.22 2010-11 -19.19 2009-11 -1.91 2008-11 1.00 2007-11 2.09
2010 15.92 2009-10 39.15 2008-10 27.89 2007-10 21.64 2006-10 20.88
2009 109.74 2008-09 40.32 2007-09 24.78 2006-9 22.70 2005-09 25.35
2008 -51.45 2007-08 -28.64 2006-08 -12.95 2005-08 0.59 2004-08 12.38
2007 117.13 2006-07 73.46 2005-07 66.02 2004-07 65.58 2003-07 70.27
2006 42.63 2005-06 51.33 2004-06 57.65 2003-06 66.94 2002-06 66.97
2005 77.17 2004-05 74.75 2003-05 82.89 2002-05 77.95 2001-05 70.07
2004 83.57 2003-04 95.40 2002-04 82.72 2001-04 70.39 2000-04 53.89
2003 240.95 2002-03 123.91 2001-03 87.17 2000-03 58.59 1999-03 48.52
2002 37.79 2001-02 32.90 2000-02 15.25 1999-02 15.11 1998-02 17.76
2001 -3.15 2000-01 -17.45 1999-01 -6.69 1998-01 2.79 1997-01 6.72
2000 -32.32 1999-00 4.95 1998-00 19.21 1997-00 21.03 1996-00 20.75
1999 268.63 1998-99 129.69 1997-99 84.04 1996-99 63.24
1998 6.67 1997-98 8.51 1996-98 9.57 Total Investment 22.8 lacs
1997 26.60 1996-97 19.37
1996 -7.38 Current Market value 4.01 crs
Every single opportunity counts in Equity

1 lac every year since 1995 in HDFC Taxsaver

PPF = 46 lacs

HDFC Taxsaver = 4.95 crs

 Mistake 4

Timing the Markets

● Peter Lynch
Too much money has been lost in preparing for the
correction rather than the correction itself

● Ramdeo Agrawal
I am not worried about the 20% - 30% downside I
am more worried about the 100% to 200% upside

● Prashant Kakkad
Fall in market is temporary and Rise is permanent
 People try to time the market

When declared PM Candidate When campaigning When Elected as PM

Sensex Sensex Sensex

19732 22343 24363
 What if you miss the best days..
● Water Bucket Story
 Mistake 5

Paying too much Attention to Media

● Best Business people

● Profits based on degree of sensitivity of news

 Mistake 6

Herd Mentality
● Equity – FD
● FD – Gold
● Gold – FD
● FD – Equity
● Equity – Real Estate.
Returns from Various Asset Classes
 Mistake 7

I have too much time on hand

 Mistake 8

Not protecting your Financial Plan

 Be Insured and Be Secured
● Premium vs Protection
● Term Plan - Pure Insurance

● 1 crore – Rs.36 per day – 30 yr old

● 1 crore – Rs. 50 per day – 35 yr old
● 1 crore – Rs. 75 per day – 40 yr old
 Mistake 9

Mein Hu Fund Manager

 L&T...
● Started in 1938
● More than 84000 employees (55k in 2013)
● Has more than 50 companies
● Interests in Construction, Heavy Equipments, Electrical
Equipments, Power, Ship building, Financial Services, IT
Services etc
● Total Assets US$ 26 billion
● Total Profit US$ 1 bilion
● Total Equity US$ 6.6 billion
● Total Revenue US$ 14.3 billion
 Mistake 10

I don't have money to invest right now

● You will never have money
● Previous Eg.
● Rs.4,00,00,000 in 25 years = monthly investment
Rs.14511
● Now Delay by 1 month = Loss of 477,687
● And Delay by 4 Months = Loss of 18,77,816
● Current Formula
● Income – Expenses = Savings
● Adopt this formula
● Income – Savings = Expenses
Thank You all for the Patient Listening