Beware of your Broker when investing

When I visited Places like Surat / Baroda in Gujarat, I met with some investment guru’s whose portfolio in stock in millions but was just not performing.

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As I am originally from Gujarat I at times visit places like Surat and came across some people and I would classify them as follows:

1. Stock Investment Guru.
2. Mutual fund investors who have good mutual funds (That’s what they thought at least.)

Now talking about the investor GURU and what I found is they always try to catch the momentum and I was shocked to talked to such GURU who’s portfolio consisting of either some of the momentum stocks or stocks I have never heard of and nor the guy who have invested knows anything about the kind of business the company does or anything else about the company apart from the BSE/NSE code of the company. They always tend to catch the stock when the price starts running and then catch the stock at much higher prices and with some marginal profit had to come out of the stock but the January crash has almost reduced their portfolio to almost one third.

Now as I understood when having the conversation with the person he does not know about the stock / company and the advice is given to him by his broker to buy the stock at the price and he was happy before January because he use to gain 20-30% MoM but now after having seen his portfolio reduced to one third he is trying to educate himself and then he realized that he should not have invested all his money into momentum stock but could have given some percentage to some of the stable stock.

Now the second kind of people with whom I had a conversation seems to have all the good funds of the market in their portfolio and after going through the names of each of them what I realized is he was naming all the NFO’s of 2007 and so it clearly means his broker was only looking at selling him the funds which will make the broker rich and not the client.

Now after the crash everyone was trying to figure out what was wrong with their investments. However, both have been misled by broker who were in the profession of providing investment services. So before handling your money to other and relaxing try and get the assessment as to what is happening and WHY it is happening that way. Also you should know that he earns because of you and not the other way round is not going to continue for long.