We had a lot in common (including a crush on the same girl), but he had something I still do not: a daring, ruthless desire to get rich real soon.
By the time he was in college, he had just one desire: to be a crorepati by the time he turned 35.
And he planned to achieve it by investing in the stock market.
I want to be a bull, not a bear!
Ketan invested in stocks with immense focus. He never once wavered from his goal: to multiply his money, not just double it.
He called me in January 2004 and said he was 'entering the market' (a snazzy term given when someone buys shares).
By then, he already managed to amass Rs 30 lakh (Rs 3 million). Remember, he was not interested in being a millionaire, but a crorepati!
His target: Rs 1 crore (Rs 10 million) in two years.
I had to admire his enthusiasm and sense of adventure.
But his enthusiasm soon waned when the stock market came crashing down (along with his dreams) on May 17, 2004.
He cursed, kicked and blamed the voting populace. After all, the crash took place after the Bharatiya Janata Party-led National Democratic Alliance government lost the elections.
Allow me to refresh your memory on what happened that day.
As news of the BJP's defeat came in and Leftist leaders started shooting their mouths off, the stock market fell precipitously.
The BSE Sensex (the index of the Bombay Stock Exchange) fell 842 points during the day and recovered around 300 points. At the end of the day, when the stock market closed for trading, the Sensex had fallen 11.41% or 565 points -- the second biggest fall in the history of the BSE. The first was a drop of 570.42 points -- to close at 4,505.26.
Alas, the bullish market had turned bearish! Both are terms given to the stock market when sentiment (as well as prices of shares) are high and low respectively.
I spoke to a very despondent Ketan on the evening of May 17.
"What should I do?" he asked me a dozen times.
The answer was rather simple, really. If he withdrew from the market (sold his shares), he would incur a heavy loss.
The only option was to stay invested (not to sell). It was anyone's guess as to when the market would pick up and when share prices would rise.
At the end of the conversation, he had made up his mind. He would wait and not sell.
Fortune favours the brave!
All bad things come to an end!
Whichever of the above two platitudes you choose to quote, they are both apt. Ketan had to wait for less than a year before his fortunes changed (literally).
The Sensex began its steady climb upward and then became unstoppable as it began reaching highs it never did earlier.
Around February, Ketan's dreams finally materialised: he reached his target.
"I did it! I have made Rs 1 crore (Rs 10 million)," he screamed into my ears before I could even say, "Hello."
"It's party time!" was all I could muster while trying to figure out how many zeroes a crore had.
What goes down must come up!
In the last week of April, broke and desperate to be entertained, I called him to remind him of the promised treat.
"What treat?" was his reply. Before I could recover from my brief bout of speechlessness, he informed me the stocks has dropped in price and the value of his investments had dropped by quite a few million.
After I recovered from the realisation that there would be no free lunch this weekend, I asked him about his apparently stupid behaviour: Why did you not book profits when you could (another snazzy term when you sell your shares and make a profit)?
"If I had sold the shares, what would I do with the money?" he said, smartly. "I would have had to re-invest it. Where would I do it? In the stock market right?"
By now I was seeing red!
How about buying another home?
No way! It turned out he had already taken a loan to buy his home. He wanted the tax benefits on the loan so he did not want to pre-pay.
Also, his parents were leaving their property to him. Why would he need another home except for investment purposes?
And property prices, according to him, were too high at the moment to make for a good investment.
Maybe the bank?
No way was he going to let the bank enjoy such a large amount of money for such measly interest rates.
The post office?
Nothing that great about the interest rates. And it would be locked-in for way too long. And, yes, he already had some money stacked there.
The Public Provident Fund?
He had already touched his limit.
Stupid or smart?
I learnt a few important lessons from Ketan's escapades.
1. When you invest, do it with a goal. Not because you love money
Had he invested to retire, he would have been happy stashing it away in some fixed return investment to be accessed after a few years.
Had he thought of a holiday, he could have allocated the money. Or maybe even a holiday home.
But wanting more money for the sake of money is not a good roadmap.
2. Keep a target in mind
Granted, Ketan did have one. But once you reach it, pull out (this is where he messed up).
Put it in fixed return investments where it is guaranteed you will not lose it. Take a small portion of it and re-invest it into the market.
Stock markets are risky. And when you re-invest your entire savings in it, you are playing dangerously.
You risk capital erosion (where the principal amount invested is reduced). In such situations, you could lose all that you made earlier.
3. Invest, don't trade
Trading is for professionals, not individual investors. When you invest, be ready to stay in for the long haul. The value of your investments may go up and down in the short-term, but that is just part of the game.
If you have the patience, you will get well rewarded in the end.
4. Don't use just one investment route
Ketan was smart on this count. He had bought a home, as well as had some money in post office schemes and the PPF. All his money was not in the stock market (though a substantial bulk of it was).
No matter how lucrative it appears, never put all your money in the market. Keep a buffer elsewhere.
Oh yes, I learnt another lesson: next time someone offers to throw you a party, jump at it instantly.
You may not get it later!
Out of curiosity, dear reader, if you were in Ketan's place, what would you have done if your investments touched Rs 1 crore (Rs 10 million)? I would love to hear from you!
Image: Rajesh Karkera