As the new financial year starts I could also see it has been a year since I started a brokerage account with Zerodha. I created my account during March 2020 just before the lockdown. Most of my investments have been only through ELSS which I had done in the previous 2 years for claiming 80C during tax filing. Before ELSS I had a tax saver FD and PPF which mostly consumed my 80C allocation for those years. So opening a demat account during March was a pretty unique experience given that even indices fell to almost half of their all-time high values. Looking back this is a post on all the silly things I did in 2020.

Motivation

I had been only using mutual funds to have some exposure to the markets. I thought to try stocks for a long time but never really had the emotional maturity to handle such volatility. My marriage was scheduled towards May end, so I had money saved mostly in FD and savings account for the expenses. Little did I know there would be lockdown and other changes that will impact the whole world. So as a blessing in disguise I got work from home during my marriage, and it also happened in a simple manner saving me more expenses. Now that the things became a little more certain in terms of marriage expenses and given the current state of economy I added a little more into my emergency fund. With work from home also giving me more savings per month with the primary component of rent was taken care. So given the volatility and being down almost 40% in my portfolio I thought this is a good opportunity. With a gulp of greed towards lucrative returns I bought my first stock INFY.

First trade

Stock market seemed more complicated in terms of Jargon compared to Mutual funds where you buy a fund and hold. So it took me sometime to get through the kite app from Zerodha towards buying, selling, adding funds, etc. I bought my first stock INFY around the beginning of March at 650 levels. I kept accumulating at the levels as it made dips towards 610 and I thought to buy most as it gets to below 500 levels waiting to time it. It never went down below 500 but on buying at regular intervals I kept holding it. Given that my career was in software development I had some faith in tech stocks to bounce back. So I kept holding and as it approached 750 levels I thought it had bounced back enough, and it’s a good time to sell. So I made around 15% profit on the position in a few months.

Buy and hold

Given that I was a beginner I thought bouncing back to pre-covid levels was itself the whole recovery and I just realized gains though I never really had any need to cash out the profit. I never really had the patience and discipline to hold it long term like mutual funds. I was under the notion that if FD gives 6% return for a 1-year deposit then we just made more than 6% and we can sell. Then INFY just kept climbing, and it went to 900 levels. I thought this was too high but still saw some potential of 10% gains and bought some at 900 and sold them at 1000 with the same 10% profit.

The volatility part was also so high during these times that once things go red I kick myself for not realizing gains. Once things gained and I sold them for 10% I kicked myself for selling when there isn’t a need to cash it out, and I could have just let it be there. Once I zoom out the graph for INFY then in the long term I get to know growth over long term holds and also got to know that companies announce dividends, stock splits, stock buyback etc. Since this was all new I had to admit I had no clue and the 10% carrot felt shinier in the short term. So it taught me the first lesson that when you believe in the company fundamentals and unless there is an emergency need like paying a credit card bill, loan etc I can just buy and hold accumulating more money instead of realizing profits and letting it ride.

Chasing penny stock returns

Every now and then I can see some stocks hitting the upper circuit like 5% to 20% jump in a day over some news. So as usual the devil works in its own way that if I can make a pick and invest a lump sum I get the same return as I get from an FD in a day. So I noticed some stocks that are mostly on the upwards trajectory. That way I invested in Adani Green when it was at 800 or so. I started with 5 stocks or so just to take a dip in the waters. Soon with a week of good returns it was up 20% or so. I said to myself great let’s put in more money though I know past returns are not an indication of future returns. I kept adding more and more thinking it will go only up and the average cost kept increasing to a point the stock I don’t know anything about was 20% of my portfolio, and it made a strong correction.

Panic set in and with the average cost increasing which subsequently reduced the return percentage overall it just kept jumping between -5% and 5% which used to be +25% early. I did it with some other stocks too but in small amounts. Finally, I got to a point where I was breakeven with Adani green and sold it at 2% profit excluding taxes and other parts. This taught me the second lesson that there is always a push from greed to make more returns and subsequently making me invest in things I have no clue about some of the penny stocks I bought.

Timing the market

Along with investing in stocks I also started putting some money in equity mutual funds. I just wanted to create a SIP of 25,000 per month over a 10-year-old goal. Instead of creating a SIP I thought to do it manually and just to buy it whenever I felt like there was a dip but in a given month I should have put in 25,000. I started with this approach to buy in what I thought was a dip. But when I look at the transactions I would make 10,000 buy at first of a month then it might rise by X% in a week then in the next few days it will just come back down X% or so to the original amount which I perceive as a dip and make the same buy.

The fund was parag parikh flexi cap fund these days when I continue to stay invested but when I go on to do a backtest of my transactions vs doing a SIP of 25,000 in a given date of the month I see very negligible difference compared to my approach that it’s not worth the time and energy. So given the quote “Time in the market beats timing in the market” over a really long term unless there is a significant crash like March 2020 the difference over manually buying given units and automating it as a SIP is very much small to notice.

Conclusion

So that brings to the end of my post around writing what I did with my account for a year. These days I just buy and hold the companies I like where my average hold period increased from a few months to more than 6 months for most of the units. I just buy and hold. Though it goes to 10% and reduces to 2% if I feel the original point over which I bought it in first place holds I just hold it since it’s not a loss until I sell it. It also helps in reducing the emotional part though it’s still there. This also made me realize that a stable 6% return is better than a volatile 20% return I have no clue about.

Though there are good lessons learned there are still things that can be better like the constant obsession of checking for prices end of the day, NAV end of the night. I still need a good definition over what is long term and what is short term so that I can plan accordingly instead of buying something and selling it after 10 days realizing there is something that needs money that I could have planned better. As much I chase penny stock returns I also need to be more disciplined over IPO listing gains. So there it goes as I enter financial year for 2021 hoping to do less silly things with money.

  • Current portfolio in the order of weightage : Axis bank, Dmart, Infosys, HCL, Indusind bank, ITC, Reliance.
  • 2020-21 new Mutual fund investments in the order of weightage : Parag Parikh Flexi Cap fund, Motilal Oswal NASDAQ 100, Nippon arbitrage fund.

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