/4 Reasons why Retail Investors will loose money in YES Bank

4 Reasons why Retail Investors will loose money in YES Bank

Yes you read the subject line right, retail investors will loose money in yes bank. Although this is not a thumb rule and may not be correct for 100% of retail investors, but majority of them have reflected quite a similar psyche in past and it is expected to be repeated in mayhem of yes bank fall.

Now when I write this, this can be taken as straight attack on your right of making profit my making smart trades or making a investment bet. But I say this after seeing more than thousands of portfolio in last 11 years, and it has been a clear observation that barring few smart traders, majority of traders got trapped and made losses. You can ask this question to yourself, or just scan your equity portfolio and check, number of stocks which you have hold for long period. Surprisingly, you will find they are the loss making ones. Traders have often displayed this behavior, they book nominal profits or the right way to say is they book profits early and stay in loss making trades for long time. More research based illustration of this investor behavior is explained here.

Although I am on a mission to help investors traders make decent money, have a boss free life, but historically data has proven again and again that retail investors loose money in markets and this time it is Yes Bank. After seeing through more than thousands of portfolio in last 11 years, and it has been a clear observation that barring few smart traders, majority of traders got trapped and made losses.

More so, you can do a quick exercise, this weekend. Download your trade book for last 3 years and do an assessment on stocks where you are holding in loss (your holding period will be long). At the same time you should also write down your profit making trades and take out the average percentage profit you make on them, Also cross check the average period for which you hold them (Duration will be short). you will validate what I am saying for yourself. If you don’t believe just check the trading behavior explained in the image below.

Although you can defy this behavior and trade like a pro, if you have a clear strategy, discipline and knowledge of structuring trades, throughout when you hold them. The pattern which I followed to keep making winning trades, It has been explained in detail and is still not closed.Guess what ! it is making unrealized profit of $3025 in Yes Bank and counting.

Investing or trading done without a strategy is bound to give losses, which is what is happening in current scenario with majority of the share Individual share holders of Yes Bank, and you will not believe Retail investors fall prey to bad reporting and are on verge of loosing around 85000 Crores. When I argue this, all this is backed by data, See for yourself. Its only retail investors who have bought yes bank at higher prices.

Let me explain my fear that high chances of retail investors loose money in yes bank trade.

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Technical Set up

It is no breaking news that Yes Bank has touched its 10 year low of Rs.29 recently. There has been a relentless fall from the highs of Rs.404, and guess who has bought in this decline and who has sold delivery.

If you closely take a look at the image, which has been prepared specially to make retail investors / traders understand their own behavior. Retail Investors have started chipping in from Dec’17 when price was around Rs.315. from there on, there has been relentless buying done by poor tribe of retailers who actually got fixed in trying to catch a falling knife.

Above image has clearly shown that, retail increases their participation at peaks and sell their deliveries for minor gains. Moreover, the sad thing is on declines they kept on adding.

It’s just in last qtr institutional investors saw deep value and discounting of poor governance and stressed loans given to some of the NBFC’s, where they started buying in bulk. Retail investors are sufferers from last 02 years and waiting for their price to come. Majority of retail investors almost 75% are stuck between the price range of Rs.404 – 275. Think of it 75% retail has lost 80 – 93% of their investment value, this is nothing but result of poor structuring and not having a sense of placing trade at the right time or even exiting after realization of wrong trade.

Opportunity lost in other stocks

This again has a strong bearing on investors psychology, as majority of retail investors who are stuck, have been seeing the likes of HDFC bank, HDFC ltd, Kotak Bank, Asian Paints, HUL etc touching their all time highs, giving 30-40% return yoy, when their darling Yes bank was falling and capital remained blocked.

Not only this you will find many retail investors doing extra ordinary research only after their stock goes down, and when they get to know about the problems or reasons for value erosion their attitude of being loss averse prevent them for booking loss.

The best part is retail investor in their hearts do calculate and says to themselve -” ISSE ACHCHA TO FD MEIN PAISA DAL DETA”.

In all, this limited capital and large waiting period for its recovery tests the patience of an retail investor and they book out as their purchase price comes, which is actually interest loss and an opportunity loss too.

Fear of delay in price recovery

Since the above table suggests exhaustion happening in accumulation at rock bottom levels, as a retail investor, who is actually after doing various rounds of bottom fishing is now frightened. Their all attempts of averaging out and expectation of a V- Shape recovery has gone for a big disappointment. Even those who entered at low prices starts expecting their portfolio going 5-10 times in a year or two, which practically is not possible.

When they see small upside and large frequent downside, their behavior again turn hostile towards money making, rationale stops prevailing and either they book out with whatever left with loss or immediately the moment their price recovers.

Poor discipline and trade management

I would really not blame a retail investor for bad trade management as it can happen but they have shown indiscipline in trading or investing at the highest order. Few positive trades, where some money has been made, do give confidence and to repeat the same phenomenon again and again, they easily fall in spiral of committing bad trades. which ultimately results in huge capital destruction, same thing happened here in case of yes bank.

Problem of not keeping stop losses and use of underlying to manage trade with the help of options is a less known phenomenon results in capital getting stuck and again results in losing out money.

How to handle the tough tide

After having a reasons known for loosing out money, there is no need to get disappointed. Me and my team is all set to devise strategies which we are going to adopt to keep making money periodically, even while you hold your shares in yes bank.

The best saying of warren buffet has to be remembered here, do not own some thing which you cannot keep for 7-10 years, and, not only this , if you were at helm of Yes Bank how you would handle this situation as a promoter. If you see all that fire fighting happening, it makes a case for buying. This video must lift your sentiment as an investor.

Many forums are crying out that big tech giant are coming, PE investor is buying,etc, but think of it you as a promoter would like to sell your company not at steep discount for sure if not at premium. I am sure Ravneet Gill and team must be waiting for right price points or recovery of sentiments to take up stake sale. Meanwhile, I will be keeping a close watch on quarterly shareholding pattern to find out which all strong hands have bought when retail got exhausted and frightened.

Do not forget to subscribe to keep getting the strategies in your email box, which we are going to adopt. If you have questions on any other stock too feel free to write and ask us. My next topic on which I am going to write is – Has YES Bank bottomed out?

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Moreover, be humble, do not fight with markets, accept if you commit mistakes, leave ego, all these are building blocks and step forward to start making superior wealth from stock markets. Having a boss free life and to start generating passive income for yourself.

Anvesh is committed to make life simpler for investors being SEBI registered IA(Investment Advisor), CIEL(Centre for Investment Education & Learning) Certified Level 1, AMFI Certifed, Capital Market & Derivatives Market Certifed from NISM & pursuing Ph.D. in Cloud Funding. He has a stint of more then 11 years in banking and investment industry at key leadership positions and professionally engaged at Investocafe.com