Financial Mistakes of my life (and what can you learn from them)

by Manikaran Singal on June 23, 2014 Total Views: (310)


Experience is simply the name we give to our mistakesOscar Wilde

It seemed to be a good idea at that time.

Yeah!! After all my last investment had made  good returns and my branch manager who’s more experienced and knowledgeable, also was going for it, then why shouldn’t I?

These were my thoughts when I was convincing myself to go for personal loan to invest in some penny stocks as advised to me by my then Branch head of ICICI Bank. This was 2004 when markets had just started showing some signs of recovery. Few months back only I had invested on his tip and made 20%, and this time I wanted to multiply more. Moreover being a bank employee I was eligible for concessional interest rates. So Math was looking quite exciting.

financial mistakes

Finally my emotions played their part and I went for it. I had zero idea on stock investments and was just following my Boss’s advice. Without realizing that his Rs 1lakh were just 1% of his entire portfolio and my investments were not even from my pocket.  I put my money at Rs 1.70 and stock was expected to reach at 10, that too in 6 months. That’s why, when it touched Rs 3 in 1 month I did not sell it.

After 6 months, I sold it at Rs o.40 i.e. at absolute loss of 76%….to save whatever I can.

Financial Mistake #1:

What went wrong? Was not selling at Rs 3/- my mistake which would have fetched me about 76% of Profit, or it was selling it so soon as stocks are meant for long term investments? Actually, the major mistake was taking personal loan at first place and that too for wrong reason i.e. to invest in stocks.  I still wonder when i used to say that I don’t earn enough to send money to my parents back home, from where did the money for EMIs came from.

These kinds of mistakes are common when you don’t have any goal targeted and are just running after money. Generating high returns can never be a goal for anyone and if it is, be ready for such mistakes time and time again. With no goal in mind you tend to take advise from any person who you feel knows more than you. Personal finance is a sensitive and important area so one should take advise from only expert .

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I took that incidence as a lesson and decided to invest wisely next time. As I understood that I won’t be able to analyse stocks, so I went for mutual funds and the first Mutual fund that I purchased was Magnum tax gain. The reason for buying this particular fund was one it was performing well and second it was supposed to give 100% dividend after 3 months, and I was told that this will return my complete investment back to me. (Read : Best mutual funds to invest in 2014)

You must be thinking that how dumb was I, but believe me story is no different with many bank employees even today.

Financial Mistakes #2:

I don’t consider investing for miscalculated dividend as my mistake. It happens, you learn with time. But the mistake was that I spent the dividend money on personal consumption like movies, clothing etc.  Total dividend amount that came that year was enough for me to pre close the personal loan or two wheeler loan, but EMIs were not bothering me, so I decided to spend the money on myself.  I could have even reinvested the money in the same fund to generate further returns but no.   Dividend was like easy money as you don’t have to work to earn it, so we don’t value it.

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By the time I resigned from bank in 2006, I was paying 3 EMIs and all 3 were of personal loans. 2 loans were taken under staff concessional rates so I had to take one more loan to clear off the staff loans before leaving the job. It was totally unplanned resignation and the only source of clearing off the loans was my wife’s salary. Fortunately my business of investment products distribution went off well and it started generating cash inflow from the first month itself. This result in overconfidence in me and I took one more loan, this time it was CAR loan. After all now I have entered “Show Off” business.

Everything was going well until Dec 2007, when due to international sub prime crises, my year and half old business under partnership went on the rocks. My other partners decided to move back to jobs as they felt that this is no longer a sustainable business. Since they also used to do some F&O transaction in their own account, and in that crises they personally had booked big losses. I survived that stage with my wife’s support and few of Mutual funds and stocks investments that I accumulated in that good phase.

Financial Mistakes #3

This phase was full of mistakes, starting with unplanned resigning from job and also getting into a business with no business plan, having no emergency fund, adequate insurances at place and with already 3 loans in my account, how could I take such decision? To make things worse, now I have one car loan also. (Read : Declutter your financial life)

When I look back at these mistakes, which after learning financial planning concepts sounds like a Blunder. Quantum wise it may look small, but mathematically has created a huge dent in the financial situation. I would say, I am into financial planning only because of these experiences.

Learnings from these experiences:

Manikaran Singal

Founder and Chief Financial Planner at Good Moneying Financial Solutions
He’s MBA ( Finance) gold medalist, a CERTIFIED FINANCIAL PLANNER and SEBI Registered Investment adviser. An ex banker , having a decade long experience in financial services industry he manages clients across the globe. He’s an active member of Financial Planners’ Guild India ( An association of practicing SEBI registered Investment advisers). He's very passionate in the financial planning space and with a view to spread financial literacy among masses he writes blog articles and also contributes and quoted in various media publications like Money control, Indian express, Business Bhaskar, Dainik Bhaskar, Money mantra magazine etc. He also delivers training on Various personal finance topics to various corporate houses. You may get in touch with him at info@goodmoneying.com

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{ 2 comments… read them below or add one }

Ravikumar June 24, 2014 at 6:29 am

Very nice Post Manikaran.
It takes courage to admit one’s mistakes. Though we can’t imagine that a financial planner like you can actually make mistakes like this, but actually this is what experience is all about.
We all are victim to our behaviors and your story is a perfect example of this.
I appreciate that you share your story and help us to learn from it.

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Manikaran Singal June 27, 2014 at 5:45 am

Thanks Ravi Kumar.

Reply

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