https://www.linkedin.com/in/pashin-katpitia/ (Pashin Katpitia) is the chief technical officer and a director at http://www.inspironinvestment.com/ (Inspiron) investment consultants, based in Mumbai, India. A third-generation entrepreneur, stock trader, and technocrat, Pashin is a highly disciplined trader who focusses on market realities at all times. He is committed to the growth of the investor and trading community and has trained thousands of novices and experts. Pashin has developed real-time trading systems and is a point of reference for many traders seeking support. He and the co-founders of Inspiron have recently developed a fully algorithm-driven rating and curation app for stocks and commodities that provide innovative features, such as a triple-layer market outlook for the short, medium and long term, as well as a star rating for each stock listed on the exchange. The app is called https://shazpha.com/ (Shazpha) (means success) and is available on App Store and Google Play, and currently offers coverage on all exchanges in India as well as the NYSE and NASDAQ in the United States.

“There are times when the market is not in your favor and there are times when the market is but … you need to be consistent in your approach to the market.”

Pashin Katpitia

Worst investment ever

Fund manager inherits poorly performing fund from predecessor

Pashin’s story starts when he first got involved in fund management in 2010. He had inherited a fund from a previous fund manager who hadn’t performed well and it was down 40%, so he was left with 60% of the initial capital. It was difficult, but because he had a system, he just followed that and was not affected by personal feelings.

Following a system, he regained losses and made a profit

It was a decent sized fund, small by global standards, but still had US$1 million and he invested in a total of four stocks. Those stocks helped him recover the losses and generate some profit in the first year so he and his investors were back to square one. The clients though had regained confidence and for Pashin it was a great feeling to have not only recovered clients’ losses made also them some money.

Fund in 2011 makes 40% profit that investors choose to re-invest

Now in 2011, the year starts off well, and Pashin moved in and out of a few investments. On the whole however he was riding on just three stocks for about eight months. By December, he and his team decided that since they had generated a good profit (about 40%), they would take those funds and spread them among the investors. The investors were on a high because just the previous year they had recorded losses and now in this year, they were looking at a 40% profit. So most of the investors said: “Let’s reinvest the money and just keep trading.” So they were all confident and started off 2012 with a program of re-investment of profit.

Now with a larger fund the investments fall foul as markets play up

So they all started off in January 2012 with the clients having re-invested their profits, and with a larger fund amounting to capital of around US$1.4 million. With that, they started larger positions in the same stocks because they had found that those stocks were still the best. Then the markets started to shift unpredictably, and by the end of March 2012, they had lost all the profits that were made in the previous year. That moment was a real wake-up call for Pashin that the markets can go wrong. It was only thanks to the system he was followed which included stop-loss points that he was left with the capital intact, and he had only lost the profits that were generated in the earlier years.

Realization that as markets can rise, they can also fall, without warning

He realized that markets can move in the absolute opposite direction to what you are expecting. And because he had increased his positions, his losses were magnified. While reinvesting returns is a good thing, he...