Namaste!
Unitech was the stock which was going at a speed of >400 KMPH in a road, where many many real-estate companies already driving, to win the race.The people on-board enjoyed the ride. Many people became MTM (mark to market) millionaires, especially the fully exposed people who had only 2-3 companies in their portfolio. Some people get on-board feeling FOMO (fear of missing out).
Anyways, I am comparing the real life vehicle driving, with the stock market, especially performance of the stock prices.
You see, in real life, if you drive at a speed of <40 KMPH, you are safe. But, if you drive at such a high speed, accident is certain especially if the road is crowded. Sure, you don't encounter accident and drive happily until you meet with any unexpected scenario.
2008 was the time, when the people, even the regulators thought that real estate will keep going up and up. But, it's not possible. In life and business, downturns and slow-downs are crucial for further progress. "Mistake are important to learn from it".
In simple terms, the stock prices has to fall to rise again. Like in a natural hierarchy, nature compromises deer to feed tiger/lion. It's a zero-sum game, anyone has to lose money for making someone's profit/gain. The stock prices has to fall to look reasonable for savage investors.
Q: Why the stock crashed so hard?
A: I am not going to tell what exactly happened at the fundamental levels, promoters, mismanagement, debt, promises, etc., but I only want to explain one thing, when there is greed and unreasonable returns in a very short period of time, it's better to stay away. Greed always traps the unknowledgeable and emotional people, especially in the stock markets.
Q: What you can learn from it?
1. Diversification: The people who could have only 2-3 companies in their whole portfolio, or forgot to diversify, has been hit hard. Even if they could have bought it at ~Rs 500, have lost it fully (LTP Rs 1.65).
2. FOMO: It's the fact that the retail people enter at near the top. Of course it's because of FOMO (fear of missing out), and greed to be rich quick. I have often seen, the big-rich people and hedge fund managers are very happy with >20% average annual return. But as a retail person, we want to double our investment every year. That sound too greedy and eventually erodes our capital in the long run.
3. A plan: People don't have a plan. What to buy, when to buy, when to sell (of course you should not sell at a loss: read more on my previous articles).
Fun-fact: "Diversification over than 32 companies does not reduce your risk, even it increases as you add more and more companies".
Disclaimer: The analysis I have shared is based on my understanding and experience in the markets. Investment does not guarantee a fixed return due to volatile nature of markets and may result in a loss. Please do your analysis and/or consult your financial advisor before investing.
Unitech was the stock which was going at a speed of >400 KMPH in a road, where many many real-estate companies already driving, to win the race.The people on-board enjoyed the ride. Many people became MTM (mark to market) millionaires, especially the fully exposed people who had only 2-3 companies in their portfolio. Some people get on-board feeling FOMO (fear of missing out).
Anyways, I am comparing the real life vehicle driving, with the stock market, especially performance of the stock prices.
You see, in real life, if you drive at a speed of <40 KMPH, you are safe. But, if you drive at such a high speed, accident is certain especially if the road is crowded. Sure, you don't encounter accident and drive happily until you meet with any unexpected scenario.
2008 was the time, when the people, even the regulators thought that real estate will keep going up and up. But, it's not possible. In life and business, downturns and slow-downs are crucial for further progress. "Mistake are important to learn from it".
In simple terms, the stock prices has to fall to rise again. Like in a natural hierarchy, nature compromises deer to feed tiger/lion. It's a zero-sum game, anyone has to lose money for making someone's profit/gain. The stock prices has to fall to look reasonable for savage investors.
Q: Why the stock crashed so hard?
A: I am not going to tell what exactly happened at the fundamental levels, promoters, mismanagement, debt, promises, etc., but I only want to explain one thing, when there is greed and unreasonable returns in a very short period of time, it's better to stay away. Greed always traps the unknowledgeable and emotional people, especially in the stock markets.
Q: What you can learn from it?
1. Diversification: The people who could have only 2-3 companies in their whole portfolio, or forgot to diversify, has been hit hard. Even if they could have bought it at ~Rs 500, have lost it fully (LTP Rs 1.65).
2. FOMO: It's the fact that the retail people enter at near the top. Of course it's because of FOMO (fear of missing out), and greed to be rich quick. I have often seen, the big-rich people and hedge fund managers are very happy with >20% average annual return. But as a retail person, we want to double our investment every year. That sound too greedy and eventually erodes our capital in the long run.
3. A plan: People don't have a plan. What to buy, when to buy, when to sell (of course you should not sell at a loss: read more on my previous articles).
Fun-fact: "Diversification over than 32 companies does not reduce your risk, even it increases as you add more and more companies".
Disclaimer: The analysis I have shared is based on my understanding and experience in the markets. Investment does not guarantee a fixed return due to volatile nature of markets and may result in a loss. Please do your analysis and/or consult your financial advisor before investing.
Adani Group companies seems like same as the above case.