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How to know when you are dead wrong about an investment – Mint



Throughout this journey, you may encounter good as well as bad experiences. You will make mistakes and you may end up with bad investments. But don’t get disheartened by them.

Even the legendary Warren Buffett has made mistakes which he discusses quite openly in public.

In 1993, Buffet purchased Dexter Shoe Company for US$443 m. However, later he admitted buying the company was the worst deal he ever made. This mistake cost his investors more than US$9 bn.


So what’s important is to realise the mistakes and act upon it as early as possible.

Investors must monitor their portfolios periodically to weed out any bad investments.

In this article, we share some scenarios which could help you spot a bad investment.

When you don’t understand the business

You can’t be a doctor if you don’t understand the human body. You can’t be an engineer if you aren’t well versed with machines. Similarly, you can’t be a better investor if you don’t understand businesses.

Investing is not similar to betting your chips on a random number. Investing entails ownership. To invest is to own a part of a company.

And be honest here, would you invest in a company without understanding what it does? I’m sure you won’t. Therefore, it is imperative to understand a business before investing in it.

To have a clear understanding of how a business works, you need to read about it. You can find all this information in its annual reports. An annual report contains all the information you may need to understand a business.

However, the sad truth is many people don’t read this crucial report. Many have invested in companies about which they don’t know anything.

If you have ever invested in a company without understanding its business, then forget about right or wrong. It may be the worst investment you could have ever made.

Start reading annual reports if you don’t already. It’s certainly better than betting your savings blindly.

When balance sheets and cash flows don’t paint a similar story as the P&L

Three financial statements depict the financial profile of a company. These three statements are the profit and loss (P&L) statement, the balance sheet, and the cash flow statement.

These statements are to be analysed holistically. However, many investors don’t abide by this. They put a lot of emphasis on the P&L statement ignoring the other two completely.

Mind you, there are companies whose P&L statement looks all rosy. However, the balance sheet and the cash flow statement indicate caution.

Let me give you one such example.

Summaya Industries, a company unheard of, came into the limelight a year ago. In financial year ended March 2021, the company reported mind-boggling numbers. Revenue and profit shot up by 1,062% and 4,375%, respectively.

However, the cash flow statement painted a different story altogether. The company reported negative cash flow from operations. From a business perspective, this didn’t make any sense at all.

Post the announcement of its financial numbers, the company’s share price rallied 269% to its all-time high levels. However, since then it has lost 75%.

Therefore, focusing only on the P&L statement could give you a skewed image. And investing based on such a skewed interpretation could prove harmful for your capital.

So, if you ever find yourself invested in a company whose P&L statement looks all hunky-dory while other statements look scary, then that’s a strong sign of you being dead wrong about your investment.

When your investments aren’t in sync with your goals

What do you intend to achieve with your investments? What are your investment goals? These are perhaps the most important questions you should have answers to before you start to invest.

Having investment goals gives you a lot of clarity regarding your investment decisions. They help you decide which asset to invest in, how much to invest, how long to remain invested, how much risk to take, etc.

For example, suppose one of your goals is to save up for your child’s education. That requires you to stay invested for a period of above 10 years. As far as risk is concerned, I’m sure you would not want to take a high risk in this case.

So, that gives you investment options such as FDs, government bonds, bluechip stocks, gold, etc.

As you can see, your investments and your goals go hand in hand. They complement each other. Ideally, your investments should help you realise your goals.

Falling for a well-crafted narrative or a popular opinion

If you have been investing for a while, you might have heard “bubble” a few times.

In the finance world, a company is in a bubble when its market value exceeds its intrinsic value by a large margin.

What creates a bubble?

A bubble emerges when investors fall for a well-crafted narrative or a popular opinion and invest based on it. The story is so convenient that investors tend to ignore the facts.

This behavior puts the prices of securities on steroids resulting in a bubble. When the bubble bursts, these naive investors are found on the losing side.

Do you remember what happened in 2008?

Many investors believed that the housing market wouldn’t collapse ever. This belief led investors to invest in housing.

However, when the subprime crisis came to light, the housing market collapsed like a deck of cards sending shockwaves across the global financial markets. Investors experienced huge losses as many listed companies filed for bankruptcy.

Investors experienced the same when the dotcom bubble burst. In the 1990s, internet companies were the darlings of Wall Street. Everybody wanted to invest in these companies. These companies traded at unsustainable valuations even though they had poor financials.

Subsequently, the markets tanked, thereby hurting amateur investors.

Something similar is unfolding currently in the Indian markets. New-age tech companies are being touted as the next wealth creators.

However, their financials don’t support the growth thesis. So be very careful while investing in these companies. The growth narrative is too good to be true.

So if you have invested in a company based on a popular opinion instead of hard facts, you know you have a bad investment that needs to be dealt with immediately.

What to do when you’re dead wrong about your investment?

To err is human. If you made a mistake, that’s okay. Don’t punish yourself for that.

Instead, you should learn from your mistakes and try not to commit those mistakes again.

Here’s Warren Buffett’s take on investing mistakes:

There’s no way I’m going to make business and investment decisions without making some mistakes. I may try to minimise them. I don’t dwell on them. I don’t look back.

When you come to know of your bad investments, act upon them as quickly as possible.

You could ask an expert or an adviser to cross-check your thesis for selling a stock. Doing so, you would be sure about your decision.

Happy investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.

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Tense diplomatic relations may not impact trade, investment ties between India, Canada: Experts



NEW DELHI: The tense diplomatic relations between India and Canada are unlikely to impact trade and investments between the two countries as economic ties are driven by commercial considerations, according to experts. Both India and Canada trade in complementary products and do not compete on similar products.
“Hence, the trade relationship will continue to grow and not be affected by day-to-day events,” Global Trade Research Initiative (GTRI) Co-Founder Ajay Srivastava said.
Certain political developments have led to a pause in negotiations for a free trade agreement between the two countries.
On September 10, Prime Minister Narendra Modi conveyed to his Canadian counterpart Justin Trudeau India’s strong concerns about the continuing anti-India activities of extremist elements in Canada that were promoting secessionism, inciting violence against its diplomats and threatening the Indian community there.
India on Tuesday announced the expulsion of a Canadian diplomat hours after Canada asked an Indian official to leave that country, citing a “potential” Indian link to the killing of a Khalistani separatist leader in June.
Srivastava said these recent events are unlikely to affect the deep-rooted people-to-people connections, trade, and economic ties between the two nations.
Bilateral trade between India and Canada has grown significantly in recent years, reaching USD 8.16 billion in 2022-23.
India’s exports (USD 4.1 billion) to Canada include pharmaceuticals, gems and jewellery, textiles, and machinery, while Canada’s exports to India (USD 4.06 billion) include pulses, timber, pulp and paper, and mining products.
On investments, he said that Canadian pension funds will continue investing in India on grounds of India’s large market and good return on money invested.
Canadian pension funds, by the end of 2022, had invested over USD 45 billion in India, making it the fourth-largest recipient of Canadian FDI in the world.
The top sectors for Canadian pension fund investment in India include infrastructure, renewable energy, technology, and financial services.
Mumbai-based exporter and Chairman of Technocraft Industries Sharad Kumar Saraf said the present frosty relations between India and Canada are certainly a cause for concern.
“However, the bilateral trade is entirely driven by commercial considerations. Political turmoil is of a temporary nature and should not be a reason to affect trade relations,” Saraf said.
He added that even with China, India has acrimonious relations but bilateral trade continues to remain healthy.
“In fact, bilateral trade is an effective tool to improve political relations. India must make special efforts to increase our bilateral trade with Canada,” Saraf said.
India and Canada have a strong education partnership. There are over 200 educational partnerships between Indian and Canadian institutions.
In addition, over 3,19,000 Indian students are enrolled in Canadian institutions, making them the largest international student cohort in Canada, according to GTRI.
According to the Canadian Bureau for International Education (CBIE), Indian students contributed USD 4.9 billion to the Canadian economy in 2021.
Indian students are the largest international student group in Canada, accounting for 20 per cent of all international students in 2021.
Benefits of educational partnerships are mutual and hence the current situation may have no impact on the relationship, Srivastava said.



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Apple supplier Foxconn aims to double India jobs and investment



Apple supplier Foxconn aims to double its workforce and investment in India by next year, a company executive said on Sunday.

Taiwan-based Foxconn, the world’s largest contract manufacturer of electronics, has rapidly expanded its presence in India by investing in manufacturing facilities in the south of the country as the company seeks to move away from China.

V Lee, Foxconn’s representative in India, in a LinkedIn post to mark Indian Prime Minister Narendra Modi’s 73rd birthday, said the company was “aiming for another doubling of employment, FDI (foreign direct investment), and business size in India” by this time next year.

He did not give more details.


Foxconn already has an iPhone factory employing 40,000 people in the state of Tamil Nadu.


Foxconn dangles incentives for workers as iPhone shortages plague holiday season

Foxconn dangles incentives for workers as iPhone shortages plague holiday season

In August, the state of Karnataka said the firm will invest US$600 million for two projects to make casing components for iPhones and chip-making equipment.


The company’s Chairman Liu Young-way said in an earnings briefing last month that he sees a lot of potential in India, adding: “several billion dollars in investment is only a beginning”.

Taiwan election: Foxconn’s Terry Gou taps star-powered running mate


Last month, Foxconn’s billionaire founder Terry Gou said he would run for the Taiwanese presidency in next year’s election, as an independent candidate.

He said the ruling and independence-leaning Democratic Progressive Party (DPP) was unable to offer a bright future for the island and left Foxconn’s board following his decision to run.

The firm operates the world’s largest iPhone plant, in the city of Zhengzhou in Henan province.



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Foxconn to double workforce, investment in India by ‘this time next year’



Foxconn, Taiwan-based Apple supplier, has said that they are planning to double their investment and workforce in India within the next twelve months, according to V Lee’s LinkedIn post on the occasion of Prime Minister Narendra Modi’s 73rd birthday.

Taiwan-based Foxconn, the world’s largest contract manufacturer of electronics, has rapidly expanded its presence in India by investing in manufacturing facilities in the south of the country as the company seeks to move away from China.

Notably, Foxconn already has an iPhone factory in the state of Tamil Nadu, which employs 40,000 people.

V Lee, Foxconn‘s representative in India, in a LinkedIn post to mark Indian Prime Minister Narendra Modi’s 73rd birthday, said the company was “aiming for another doubling of employment, FDI (foreign direct investment), and business size in India” by this time next year.


In August this year, Karnataka governments had said that Foxconn has planned to invest $600 million for two projects in the state to make casing components for iPhones and chip-making equipment.

Earlier this month, Young Liu, Chairman and CEO of Hon Hai Technology Group (Foxconn) had said, ‘India will be an important country in terms of manufacturing in future’.

In the past, it took 30 years to build the entire supply chain ecosystem in China, he noted, adding that while it will take an “appropriate amount of time in India” and the process will be shorter given the experience. The environment too is not quite the same, he said pointing to the advent of new technologies like AI and generative AI.

Meanwhile, Apple Inc. has announced plans to make the India-built iPhone 15 available in the South Asian country and some other regions on the global sales debut day, according to a Bloomberg report.

While the vast majority of iPhone 15s will come from China, that would be the first time a latest generation, India-assembled device is available on the first day of sale, they said, asking not to be identified as the matter is private.

Apple introduced the iPhone 15, updated watches and AirPods at a gala event at its US headquarters. Sales of new products begin typically around 10 days after the unveiling.



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