Learning that drives better investment decisions

Futures Investor Takes Eyes Off the Ball and Pays the Price

This post was originally published here.

Around 2013-2014, I had short-term market speculative position on the Thailand Futures Exchange (TFEX) using SET50 Futures contract. One day, the market slid around 10% because of political unrest, and I was on the losing side of the equation.    

Too busy to watch an investment

It was a busy day at work, and would generally not think too much about my position unless I received a call from my broker.  

I received a call. My broker told me that my position had to be forced closed. At the time, I was distracted and didnt think carefully because of the existing demands of my day job. told him to go ahead and close the position, but at the end of the day, the market had rebounded by around 7% to very near the previous day’s level.  

Price of distraction when playing with margins

I didnt think carefully that the slump was just a short-term effect and failed to ask my broker to wait for me to top up the money to the maintenance margin (the minimum amount of cash that must be maintained in a margin account) level.  

The size of loss was equivalent to that of my monthly salary at the time.  


Andrew’s takeaways – Avoid these mistakes to become a better investor

Write down your plan before you start

The first lesson from this story is that when we invest, we should set a plan. Most people go into an investment without a clear plan, particularly a plan about what to do when things go wrong. 

Make sure you have time to invest before you start

It’s amazing the number of financial professionals I have met who don’t have enough time to take care of their own investments. I have seen many cases like the above story where the investor gets excited about the idea but doesn’t realize that they just don’t have time to follow it up. It is a reason why I often ask people to ask themselves, “do I have time to set aside for investing?” If the answer is “no”, then be very careful about investing in individual stocks or complex derivatives.


Mistakes in this story

1. Failed to do their own research

  • Inadequately considered the market conventions concerning financial derivatives

2. Failed to properly assess and manage risk

  • Failed to match investments with risk appetite 

5. Failed to monitor their investment

  • Failed to review investment strategy regularly 

 

Learn about the six ways you will lose your money and how to avoid them here.

 


DISCLAIMER: This content is for information purposes only. It is not intended to be investment advice. Readers should not consider statements made by the author(s) as formal recommendations and should consult their financial advisor before making any investment decisions. While the information provided is believed to be accurate, it may include errors or inaccuracies. The author(s) cannot be held liable for any actions taken as a result of reading this article.