These financial planners goofed up, learned from mistakes

THEY advice us, tell us how to manage our money and give us product recommendations.

And we follow their advice, trust them with our money and act on those recommendations.

Whatever you choose to call them -- advisors, planners or managers -- they remain a trustworthy guide to our finances.

But they are human. And can also make mistakes.

wealth experts spill the beans on their biggest money mistakes, and what they learned from them.

was a victim of financial fraud!

My first investment mistake is very hard to forget. Early on in my career, I invested some money in Suman Motels Private Limited. At that time, Suman Motels was popular for time-share holidays (like the ones offered by Club Mahindra, these days).

They had good club facilities, hotel tie-ups and vacation offers. I had visited their site before paying the money and discovered that the work was progressing well. Yes, I was taken in by the huge office in a reputed business complex.

I invested Rs 30,000 in the scheme and I could use the club facilities and a seven-day vacation package every year, for the next five years.

After a year or so, I heard that the company had shut down! I inquired at their office, their club site and with their agents. But no one responded!

I also tried to contact their registered office and filed a consumer case. But in vain. Later, I discovered that they had committed fraud across the nation.

And even though, I was a victim of organised public fraud, the experience stills haunts.

What I learned: There was not much I could do, because my case was part of a larger organised crime. Yet, the next time I will think twice before I opt for schemes that seem too good to be true.

A victim of impatience.

I am usually pretty good at picking stocks, and I book profits at frequent intervals. Yet, I made a mistake: I sold shares of a potential company, in a hurry.

When Big Bazaar began operations, I visited an outlet out of curiosity. I liked what I saw and when I came back to my office, I went ahead and bought it's shares (Pantaloon Retail). This was in the middle of 2003, when the shares being traded at Rs 25.

When the price touched Rs 75, I thought I had made a good profit and I sold. Now, despite the recent market slump, the share is being traded at around Rs 380!

I repeated this with other companies such as PRAJ and Rajesh Exports. I shopped when the discounts where on, but failed to capitalise!

What I learned: Analyse a company not only when you buy, but also when you sell. If there is potential, don't sell.

Free advice can prove costly!

The first time I invested in an equity mutual fund, I chose a technology fund. The technology boom was at its peak (circa 1999) and most people I knew had benefited from investing in technology stocks or technology oriented mutual funds.

I did not want to be left out. So, I invested in a scheme at a Net Asset Value (NAV) of over Rs 15. When the boom went bust, the NAV plunged. It fell to less than Rs 3 after the 9/11 attack.

With some judicious short-term buy-and-sell strategy, I was able to finally exit this investment at no-profit no-loss, after two years.

What I learned: Never get swayed by the profits, someone else is making. I also got some free advice advice, which proved costly!

This chairman lied through his teeth!

As a research analyst, I had produced many reports and would do a good job (or so I thought) for my clients. However, when one company chairman gave me an assignment as a 'turnaround consultant' for his company, I goofed up.

My mistake: I believed the chairman!

He was a partner with one of the big four audit firms, had a good reputation. But he lied through his teeth!

My regret: I invested time, a lot of money and a lot of friends' money. It cost me at least four to five years of my life and postponed my retirement. Overall, it was a bitter, terrible experience.

What I learned: It's your backside; you need to know how to protect it!

Sandeep Shanbhag: I sold too fast.

My first investment as a professional: buying 100 shares of a particular company.

The memory still brings tears to my eyes and is not on account of nostalgia but because, as a novice investor, I made the mistake of selling the stock just as soon as I had made a few bucks.

Had I held on to it, perhaps, Donald Trump would have looked over his shoulders!

What I learned: Investing (whether in debt or equity instruments) is all about the long-term because that is when the power of compounding really works. Coming in and getting out, frequently, hampers the journey. Yes, when it comes to investments, it's the journey that is more enjoyable than the final destination.

About Sandeep Shanbhag
He's a chartered accountant and Director of Wonderland Investments.

I did not look at company fundementals.

In 1990, I invested in a company @ Rs 120 per share. The Harshad Mehta scam happened and within a year the share price dropped to Rs 15. It remained at those levels for almost 10 years.

Meanwhile, in 2003, with the Indian economy showing signs of revival, the price of this share touched Rs 60. I sold it off, thinking it was a good price and that I had at least recovered 50 per cent of my investment. Those 10 to 12 years had really tested my patience.

Today, the share price is Rs 1,200!

What I learned: I looked at the share price and not the company's fundamental strengths. It had good management, good products and a good market. But it was a victim of the economic circumstances. When the circumstances improved, the company’s profitability jumped year after year.