27th Nov, 2008

Stock market investors keep hearing the warnings from time to time from financial experts and  investment advisors but not many pay heed to them. Equity Investors refelect on those pearls of wisdom only during times of stock market meltdown, when they lose their hard earned money in the stock markets.

Recently speaking at the HT Leadership Summit the SEBI chief Cautioned the retail investors as well as institutions to desist from greed. The stock market watchdog SEBI has advised them not to play in stock markets with borrowed money.

"Not just our markets, but in markets all over the world, leveraging (investing borrowed money) is a very dangerous thing. A retail investor should not leverage himself and come into the equity market," Sebi Chairman C B Bhave said while giving tips on prudent investment at the HT Leadership Summit.

Bhave said many investors tend to forget that in stock markets one cannot buy at the lowest and similarly cannot sell at the highest.

At times, he said, retail investors and institutions fall victim to greed and apart from losing their money, risk even borrowed funds.

Often, the Sebi Chairman said, stock markets moving consistently in the green are mistaken to be a one-way street.

Citing the example of the fall of Lehman Brothers Inc, he said there is a lesson to be learnt from what happened to markets in the West.

Bhave also advised investors not to invest all their savings in equity markets and must keep sufficient money for medical emergencies and loan repayments.

Following the global financial turmoil triggered by collapse of America's iconic investment banker Lehman Brothers Inc, stock markets world over went into a tailspin, culminating into huge losses for retail and institutional investors.

Stock markets in India have followed the global markets and the most stocks have lost 50 to 80 percent of their market cap.

Time to listen to the experts and follow their sane advise of investing in the stock markets through mutual funds and SIPs (systematic Investment Plan) still holds true.