Pipat Luengnaruemitchai – Learn the Value of Diversification Early

Pipat Luengnaruemitchai is an assistant managing director, the co-head and chief investment officer of the office of wealth management, and the chief economist at Phatra Securities. He leads a team of analysts responsible for giving clients investment advice on global asset allocation and product selection. Previously, he was a research analyst covering the Thai financial sector at the same company. Prior to joining Phatra Securities, he was an economist at the International Monetary Fund in Washington DC, where he worked on several policy and market issues, including monetary policy and financial markets. Subsequently, he was a senior research analyst at Mellon Capital Management (now Mellon Investments Corporation) in San Francisco, where he worked on a global macro fund strategy. Pipat received a PhD in economics from the University of California, Berkeley and a BA in economics from Thammasat University, Thailand.   “We have to at least understand exactly what we are getting ourselves into when it comes to investments.” – Pipat Luengnaruemitchai   Worst investment ever Pipat’s story starts during the rally before the global financial crisis in 2008. Around 2006-2007, “nothing” could stop the very bullish market. Pipat was already invested in equities but had little time to focus on individual stocks, and instead had holdings in passive, managed equity funds. Buoyed by optimism from successes with those funds, he felt adventurous enough to try investing in individual stocks, but he didn’t know which stock to buy. His very first stock was Apple, which actually became his best investment ever. Later on, however, he was consulting with some engineering friends working in the San Francisco Bay area at technology companies, so he asked for a tip. One suggested OmniVision Technologies (OVTI), which Pipat had never heard of. He was informed that the company produced and designed advanced digital imaging for mobile devices. As not many mobile phones had cameras back then and that he was told every mobile phone would need such tech from now on, and that this friend worked for one of the biggest chip producers in the area, it sounded like the stock had a great story. The next day Pipat came home and bought about US$3,000 of OVIT. It went up considerably at the outset, but when he looked at it a year and a half later, his holding had crashed down to total value of around $500. So he felt a loss of about 80% from his original investment within a year and a half. Part of the loss can be blamed on the global financial crisis, because the market was cut in half anyway, but his more diversified equity fund lost around 30-40% on the value of the funds invested. So this was one of his biggest losses in percentage terms.He went on to explain that close to the bottom of the market, he sold his holdings for around $600. But after, that it bounced back again. Some lessons A good company, a good story, doesn’t necessarily make a good investment. This is a classic lesson, but it is sadly one that many people have to figure out for themselves through pain. When you hear a good story about excellent past return that someone has made, it is human nature to think that this upward story will continue. But it doesn’t guarantee that it’s going to be good investment for the next investor. Many things must be considered, such as the valuation, the growth, the momentum and much more. Investigate any tips. Do not believe in or rely solely on a friend’ advice. You have to do your own study, your own work and be convinced by your own analysis. Then if you make a mistake, you can take responsibility for it rather than...