Can financial crisis turn you into a better investor? Important money lessons that investors can learn from setbacks Some of these crises may have been caused by external events, so the individual cant be held responsible. ET Wealth reached out to industry experts and financial advisers to know what they learnt from the financial upheavals in their lives. The experts everyone looks up to for their financial wisdom and prudent planning have also grappled with the same mistakes that many of us make. They have also faced the same uncertainties, the same doubts and, yes, the same losses
They say a good education can change anyone, but a good teacher can change everything. On 5 September, we celebrate Teachers’ Day to honour the individuals who shaped our lives and destinies. However, some other teachers are quietly ignored by us. Our experiences are also great teachers, provided we are willing to learn from them. As Dhirendra Kumar, CEO of Value Research, says, “Some things in life one can learn only by experience, and managing money is definitely one of them.”#sr_widget.onDemand p, #stock_pro.onDemand p{font-size: 14px;line-height: 1.28;} .onDemand .live_stock{left:17px;padding:1px 3px 1px 5px;font-size:12px;font-weight:600;line-height:18px;top:9px} #sr_widget.onDemand .sr_desc{margin:0 auto 0;} #sr_widget.onDemand .sr_desc{color: #024d99;margin-top:10px;} #sr_widget.onDemand .crypto .live_stock .lb-icon{8px 6px 5px 3px !important} #sr_widget.crypto.onDemand a.text{border-bottom:1px solid #ccc;padding-bottom:5px;display:block;width:100%} #sr_widget.onDemand .sr_desc .text p, #stock_pro.onDemand .sr_desc .text p{font-size:12px;font-weight:400;} Almost everybody has faced some financial crisis in life. Some of these crises may have been caused by external events, so the individual can’t be held responsible. Others are quite clearly self goals in one’s investment journey. The point is, did your financial crisis turn you into a better investor? Have you ensured that your finances never face such a crisis again? Wise men say that even if you lose, don’t lose the lesson.
ET Wealth reached out to industry experts and financial advisers to know what they learnt from the financial upheavals in their lives. The experts everyone looks up to for their financial wisdom and prudent planning have also grappled with the same mistakes that many of us make. They have also faced the same uncertainties, the same doubts and, yes, the same losses.
Well-known stock investor Vijay Kedia racked up such huge losses in futures and options trading that his mother was about to sell her jewellery. Financial educator Mrin Agarwal lost 90% of her capital when she invested in penny stocks on the recommendation of stock manipulators masquerading as analysts. Turtlemint Co-founder and CEO Dhirendra Mahyavanshi’s family almost sold their house to repay debts due to a hospitalisation. TaxSpanner CEO Sudhir Kaushik was under pressure to shut down the company after a new product flopped in the market. ANAROCK Group Chairman Anuj Puri’s family was duped by a real estate developer and suffered huge losses.
What makes the stories of these individuals special is the manner in which they overcame difficulties, emerging stronger and wiser from their experiences. “I don’t regret anything that happened. It only helped me grow as an investor,” says Kedia. Agarwal now teaches others to be financially secure. Puri now heads a leading consultancy that advises investors on real estate. This Teachers’ Day is all about the lessons that experts have learnt from adversity and how it changed their financial situation.
Vijay Kedia, Founder & MD, Kedia Securities: Lost entire capital, and more, in F&O
When I started trading in the stock market, I had no knowledge and no mentor. I got lured into futures and options because it required low capital. I was successful intially—beginner’s luck, perhaps—but that luck quickly faded. Within a year, I was in losses, and eventually lost all the money I had accumulated. Given its fast pace, trading requires more discipline and experience than investing. Investing is like milking a cow, trading is like milking a bull.
I lost so much money that my family turned against me. It reached a point where my mother was about to sell her jewellery to pay for my losses. This was more than a financial crisis; it was a moral one. Miraculously, I was able to recover my losses, but I vowed never to dabble in this high-risk space. The experience taught me the importance of discipline, a lesson I carry with me to this day. I advise investors not to be drawn into futures and options. The success rate is just 1%. The profits you gain in years can easily vanish in a day; it’s a common outcome.
Another key lesson is to always have a stop loss in trading, especially in futures and options. Without a stop loss, you can lose far beyond your capacity.
Tarun Chugh, MD & CEO, Bajaj Allianz Life Insurance: Sudden job loss upset his financial plan
In 2001, the bank I worked for suddenly shut down, leaving me without a job and income overnight. It disrupted my lifestyle and financial plans, forcing me to rethink my career trajectory. I moved to the UK to pursue a new opportunity. This unplanned transition came with its own challenges and reshaped my approach to financial security.
I revisited my financial plan and portfolio to make it more future-proof. I grasped the importance of diversification and, over the years, diversified my portfolio, reallocating assets across equities, bonds and real estate to build a more resilient financial base. I made sure to include life insurance, ensuring that my family would be financially secure even in my absence.
The most significant lesson was the importance of financial preparedness and resilience. Job security can be fleeting and relying on a single source of income is risky. I learnt that diversification is not just a buzzword, but a necessity, whether in income streams, skill sets, or investments. It taught me the importance of having a financial cushion. Since then, I’ve made it a priority to maintain an emergency fund.
The external environment is not in my control, but I try to remain prepared. After all, ‘you can’t control the winds, but you can adjust your sails’.
Vidya Bala, Co-founder, Primeinvestor.in: Lost heavily trying to average losing scrip
My lack of understanding of sector cycles led me to throw good money after the bad. I invested in a sugar stock at its peak in 2006, believing it was on an uptrend. The good returns it had given since 2005 made me overconfident. When it slipped, I assumed that a good company facing tough times should be averaged down. So, with every fall in the stock’s price, I added more money, trying to catch the bottom. Unfortunately, the stock’s value plummeted by 70-80%, and seven years later, I sold it at less than a fifth of its cost.
This experience, however, didn’t leave me with scars; it made me a better analyst. It taught me to understand commodity cycles in depth and, since then, I’ve avoided entering cyclical sectors that I don’t fully comprehend. I’ve also learnt the danger of trying to catch a falling knife. When a stock drops sharply, I no longer rush to average down unless I’m sure the decline is due to broader market conditions, not sector- or company-specific issues.
I now know when to cut my losses and move on. Not every fall is an opportunity to average down, and not every stock deserves a second chance.
Dhirendra Mahyavanshi, Co-Founder & CEO, Turtlemint: Hospitalisation pushed family into steep debt
When I was 27, my mom became critically ill and had to be admitted to the hospital. We didn’t have any health insurance and the coverage my employer provided was quickly exhausted. She had to be kept in the ICU for over 20 days and there were recurrences over the next few months. Unfortunately, she didn’t survive.
This had a significant financial impact because we came close to selling our house to pay the hospital bills. I had never imagined that a sudden illness could wipe out all our savings and jewellery, forcing us to consider selling our only remaining asset, our home. Though we ultimately did not sell it, the experience was both financially and emotionally devastating, and it was extremely challenging to recover from it.
We had to take loans and borrow from friends, family and relatives. Some of the loans were highinterest ‘shark loans’. In the next few months, I began restructuring the repayments, focusing on loans with the highest interest. I took low-interest loans to pay the highinterest ones, and it took me two years to become debt-free.
After this, I bought a comprehensive health policy and a life insurance plan to secure my dependants. The health policy has a very large sum insured because I realise that unforeseen events can occur anytime.
The key learning for me was that capital protection should be treated with the same importance as investment returns. It’s crucial to have a holistic perspective in your financial planning. If you don’t have it, seek expert guidance from someone who is not trying to sell you something. This will help you make informed decisions and purchase the right products.
Dhirendra Kumar, CEO, Value Research: Suffered heavy losses in 2008 financial crisis
When I started as an entrepreneur in 1990, it was a very different India. I had almost no capital and couldn’t afford to make big mistakes. Thankfully, while I made no major errors, there were plenty of smaller ones. For instance, very early on, I borrowed `1 lakh to buy a Xerox machine, a purchase I could have easily skipped. We often don’t spend wisely when credit is readily available. In hindsight, it was a good lesson to learn. All around us, we see entrepreneurs whose businesses have reached tens of thousands of crores, but who still haven’t learnt this basic lesson.
In 2008, I faced a setback. I had invested a couple of crores in equity, only to see the market crash. Unfortunately, I sold at the lowest point, locking in my losses. My situation was such that I needed the money, so there wasn’t too much of a choice, but that memory still hurts. The experience left a lasting scar, but it also taught me a crucial lesson: always prepare for the unexpected and wait for the unknown unknowns.
My advice is to keep your financial strategy simple. Don’t spread yourself too thin and avoid venturing into new investments without thorough understanding. Many investors who blindly speculate in the equity markets suffer from not having a first-hand feel for what a business is, how it operates, how it makes money and how it doesn’t. While everyone can’t be an entrepreneur, reading up on gurus like Peter Lynch certainly helps. His book, Learn to Earn, offers valuable lessons and is a great resource for understanding the way businesses work.
Anuj Puri, Chairman, ANAROCK Group: Family got duped by realtor
When I was in my early teens, my family was cheated by an unscrupulous property broker and a real estate developer in Delhi, who sold the same office space to several buyers.
The loss ran into several lakhs of rupees, which would be worth crores today. We could do nothing because nobody in my family had any experience in the field. There were no regulations in place, not even a proper consumer court we could approach. It was a complete write-off.
The incident changed my outlook and I decided to acquire knowledge about the real estate market and educate myself on matters of money and realty. This experience was the root cause of my first career choice—chartered accountancy—and, thereafter, real estate consultancy. I was determined to do all I could to ensure that none of us, or anybody else, would ever have such a bad experience.
I also learnt that the one thing that determines success or failure in all matters of finance is knowledge. We must know exactly what we’re getting into, be it stocks, real estate, or any other means of wealth creation. To venture into anything without understanding and actively managing your finances will, more often than not, lead to disastrous consequences.
Varun Gupta, CEO, Groww Mutual Fund: Blocked money in flat bought at market peak
In 2013, just three years into my career, I got swept up in the real estate wave and bought a Rs.1 crore house in Gurugram with a loan of Rs.60 lakh. It turned out to be a terrible investment because that was the peak of the real estate cycle. My liquidity was blocked for a few years, along with the heavy burden of an EMI of about Rs.60,000. This effectively restricted my ability to take risks and try out different investment options early in my career.
I was lucky that I had a decent exit from my first startup (Decision Point), which provided me with the capital for my second startup (FinoZen). FinoZen was eventually acquired by Groww, enabling me to pay the loan back in 2019. However, the process took six years, causing me a lot of financial stress.
The important lessons I learnt from the experience were to never do leveraged investing and never follow the herd while investing; always build your own conviction. Buy real estate only for personal use. Invest in assets that can be liquidated quickly. Thereafter, I have invested only in the markets and studied a lot to build my conviction. I diversified and invested only for the long term via mutual funds SIPs, instead of investing with a lump sum.
Tapan Singhel, MD & CEO, Bajaj Allianz General Insurance: Modest income left no surplus
At the beginning of my career, I was earning a modest salary, which often meant that by the end of the month, I was left with little or no money. It was an ongoing struggle to manage my finances in a way that these would last until the next paycheque.
The only way to improve my financial situation was to increase my earning potential. So I invested heavily in my professional development, acquired new skills, enhanced my expertise and consistently delivered more than what was expected of me at work. I believed that if I could bring more value to my role, the market would reward me with better opportunities and higher compensation.
These investments have paid off. As I grew in my career, my financial situation improved and I was able to move beyond the day-to-day worries of making ends meet. The most important lesson was the value of investing in oneself even when financial resources are tight. It can be tempting to cut back on non-essential expenses during difficult times, but spending money on experiences, education and personal development has a far greater long-term return.
It also taught me the importance of financial literacy and planning. Even during tough times, it’s essential to plan for a rainy day and have a robust financial safety net. From day one, I made sure to have solid coverage—health, personal accident, and home insurance.
Naveen Kukreja, Co-Founder & CEO, Paisabazaar: Caught on wrong foot in margin trading
One of my biggest mistakes happened early in my career while I was in the UK. I had just started investing in global stocks during a period of consistent market growth before the global financial crisis. After seeing some initial gains, I used margin money to invest in blue-chip stocks, hoping for higher returns than the margin costs.
Unfortunately, the 2008 global banking crisis hit, leading to a severe market downturn. As stocks plummeted, margin calls were triggered at the worst possible time, forcing me to sell at significant losses. Despite believing in the fundamentals, the auto-triggered sales left me with substantial financial setbacks.
Since then, I’ve adhered to a key principle: no matter how strong your conviction, only invest your own funds, the money you’re comfortable tying up for the long term, especially in market-linked instruments.
Today, I’m concerned about young investors in India, many of whom have only experienced rising markets since 2021. Their exuberance, coupled with a lack of understanding of the fundamentals, might lead them to use borrowed money not just for equities, but for riskier instruments like F&O. This trend is dangerous and could result in significant losses.
Mrin Agarwal, Director, Finsafe: Lost almost 90% of capital invested in penny stocks
I invested in penny stocks in 2007, relying on the recommendations of a brokerage house. The brokerage pushed me into short-term trades, promising high returns. Their business model focused on generating commissions through frequent buy-and-sell transactions. I fell for it and put my money in penny stocks. When the market crashed in 2008, I lost almost 90% of my investment.
This experience taught me that chasing trending stocks and short-term gains is a dangerous game. Trading might work for a few stocks, but it doesn’t hold up over the long term.
I learnt two critical lessons. Never blindly follow external advice without doing your own research, and second, always consider the business model of whoever you’re working with. Make sure your investment goals align with theirs.
I sold off those stocks and moved on, learning from that mistake. Today, as a financial educator, I emphasise on the importance of longterm investments like mutual funds, over trying to pick and manage individual stocks. Good things take time, and the path to building wealth is slow and steady, not through high-risk trades.
Sudhir Kaushik, CEO, TaxSpanner: Business suffered when a new product flopped
After working as a chartered accountant for several years, I launched TaxSpanner.com in 2007, along with three other founders. The tax filing portal became an instant hit and in no time we were the top e-filing platform in the country. Within three years, we also got angel funding. TaxSpanner’s valuation had hit the sky and venture capitalist firms were flocking to us.
Encouraged by the response, we decided to branch out and develop a GST accounting software. The four founders sacrificed their salaries and took loans of nearly Rs.3 crore to fund the new venture. But the market response to our product was less than lukewarm. A more established player had already captured the space. Our nightmare deepened when a leading accounting firm, which had shown an interest in investing in TaxSpanner, backed out. Strapped with loans and falling revenues, TaxSpanner was facing an uncertain future. The three other partners had decided to leave. Around the same time, my children were ready for higher education. There was pressure to shut the business.
However, I didn’t give up, inspired as I was by the indomitable courage of a school teacher who raised her four children on a modest salary after her husband passed away—my mother. Unfazed by the circumstances,
I reached out to lenders and convinced them to give me some time. They could see that I was genuinely interested in repaying their money. I even offered to share my company’s bank statements to show how the money was being used. We agreed on a structured repayment plan and all debts were gradually paid off.
I can proudly say that TaxSpanner not only survived, but thrived. Last year, the company was acquired by ZikZuk and is now associated with a listed company, Zaggle, for its financial wellness programme. The lesson for me was that tough times don’t last, but tough people do.
—With Niti Singh and Babar Zaidi
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This story originally appeared on: India Times - Author:Faqs of Insurances
