After Harshad Metha, Ketan Parekh, Ramalinga Raju etc...
what should small time investors should look before investing there hard earn money?.
1. Most of the indian companies are linked to different political parties. Before investing into any company, check for political nexus between the founders or Company directors.
How would one check for the same?; Check for each and every individual director or promoter's profile. If you feel any political contact in terms of relatives,kith, kin and anybody directly or indirectly related then , be very careful.
Secondly, Check is that political party is in power ?; Is any elections coming up, it could be national, state or even by-elections. Because investor's money could be siphoned off for election campaining.
Thirdly, Check how is the company getting projects?; Do they have any unfair advantage?.
if so, then do not invest in these kind of companies, even if you have slighted amount of doubt. Some might argue that you could make good money with these tainted companies as well. my answer for those would be not to promote the evil over the good. finally, More you lower your standard more you will get into danger zone.
2. Track the investements of reputed big time inverstor companies
Investment companies like Morgan Stanley are good companies to track and decide the investement based upon their findings. Morgan Stanley had not invested any share in satyam. The comapnies's chief investor told he did not had any confidence with stayam's management,So Morgan had not bought satyam shares.
Interestingly, I would like to inform people in the share holding bussiness that Morgan-Stanley has not invested in ICICI Stocks as well. (i think it must be because of sub prime issue, so guys be careful if you have invested in ICICI)
3. Track Childrens of all the Founder Members
Some time founder might be very good, candid and clear, but their children,spouses might not be as capable or as good as the founders. Many times, kids of the founders will be the catalyst in changing the policies and reputation of the company thus resulting in the share value down fall of company stocks.
The Ambanis for example, Dirbubai was really good, but his kids Mukesh and Anil turned out to be killers in the Bombay stock exchange. who ever had invested money in the year 2003/04 had to wait for more than a year get back the returns from the stock market.
Why should a small time invester suffer because of cheap family affair?. Look into the Satyam issue, the Raju's Kids, in a way or the other were resposible for company's down fall.
There are numerous examples which i could quote that resulted in down fall of the company stocks and Indian investors suffered time and again without much help from government.
4. Look for the Banks with which Company deals
If the company is dealing with co-operative banks, or any small time bankers then do not invest your money in that company. Because many politicans create small time banks and close them before and after elections.
5. When in doubt sell of the shares
If you are in doubt for any reson simple encash your shares. Do not wait till the crisis hits you.
6. Do not ever be a Bull, always be Bears.
It is nice to be Bulls and aggresive, but for a small time investor being bulls is not good. You will loose money with out any clue. Just take Satyam's example when shares dropped from 240 to 160. If you had been Bull then you would have lost huge amount of money. Because now the value of Satyam is just 30.
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