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Lessons from 2009

Lessons from 2009

An abundance of financial lessons got compressed in the 12 months of 2009. We look at what investors ought to have learnt from the year of mega surprises. Learn to keep the faith Patience always pays Staging a return to the basics

History repeats itself because the world doesn’t learn. How many more economic recessions can we take before the world goes bust? What can we, as individuals with pitifully small shares in the world economy, do to prevent a recurrence of the past two years? Sadly, very little. If there’s nothing we can do on the macro level, there’s a lot we can do to make sure we are not caught off-guard again. Many of the hard knocks we took this year were because we have been steadfast in ignoring the lessons of the past. Bernard Madoff in the US and our very own Ramalinga Raju did not invent large-scale scams; they too learnt from past frauds and Ponzi schemes. Why were we, their victims, unable or unwilling to learn?

As 2009 draws to an end, will we learn not to be taken in by statistics that show inflation at historic lows when we are paying princely and ever-increasing sums for basic commodities? Will we also finally learn that selling in panic just because the stock market has tanked is a bad idea? We should know by now that investing in property for the short term is not a profitable exercise, but the minute the real estate market shows signs of moving south, we start looking for buyers. Theoretically, we know that too much debt is a bad idea. Practically, how many of us take loans or credit because they promise low interest rates?

Over the next several pages, we take a look at what we ought to have learnt from the events of 2009. We consider events in the stock market, mutual funds, insurance, banking, real estate and careers, and try to understand where we went wrong as investors. Pulitzer Prize winner Robert Penn Warren once said that the past is always a rebuke to the present. Of what use is a rebuke if we learn nothing from it?