The Hindu Business Line : Money Talk

Kamal Bafna, a chartered accountant, works in a multinational firm and specialises in the field of taxation. He shares his experience on investing with Business Line:

When did you start investing?

After three years of settling down in my career, I started investing. I was 24 when I made my first investment.

What asset did you acquire first - home, stocks or was it other investments?

My first investment, like many of my friends, was in the stock market.

Which was the first stock you picked, at what age and did you make money on it? Any learning from that experience?

Power Finance Corporation was my first investment. I put in about Rs 20,000 into the stock and it earned me a return of close to 50 per cent within six months. As long as the going was good, I didn't bother to learn much from my investment experience. So I don't recall any learning from my first investment. But it is during the January 2008 market crash that I learnt some of the most important lessons. Few lessons learnt are:

Do not borrow money to invest in stock market (especially if you're planning to take a dive into the derivative future segment).

Don't go blindly by what brokers and traders recommend.

None of the tips they give can guarantee how the stock will move.

The quicker a stock rises, the steeper it can fall!

Lastly, share valuation may turn out to be a very theoretical concept.

What asset allocation did you start with and how has it changed over the years?

When I started investing in 2005, my portfolio had more of equity in it. About 50 per cent of my money was put into stocks, 30 per cent into mutual funds, 20 per cent into PPF and the remaining into life insurance.

After having burnt by fingers a little, the portfolio structure has changed more in favour of guaranteed investments such as PPF, though their returns may not be very promising. PPF occupies 50 per cent of my investment basket. My exposure to stocks and mutual funds are now just about 40 per cent. 10 per cent of the money is set for life insurance.

Any books on investing that have impressed you? Intelligent Investor by Benjamin Graham. Finally, your advice on three things that budding youngsters should/should not do when they start off investing.

Invest within your means. Do not borrow to invest in the stock market until you gain perfect grip over the stock markets. Don't get carried away by beginners' fortune. If you think you are lucky, then may be you should think again.

Before investing ask yourself whether you are prepared to lose at least 50 per cent of your capital if things go wrong. This will help you in deciding asset allocation.

Don't get swayed by the experience people share with you.

Many generally share only their good experience in the stock market. The bad goes under the wraps.

Finally, be patient.

BL RESEARCH BUREAU

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