Tuesday, October 20

A little market talk...

One of the craziest conundrums in the Stock market is our inability to know which scripts to buy or which scripts to sell or which scripts to keep for good. The frenzy in this is very evident when the market is going north. I have seen many people wasting their time, money and health dabbling around stocks. All of them are drifters in a wild wind. They are carried away by what others ‘recommend’ and do not actively form an opinion on their own.

The scope and the products of every business is analysed by different people in a different manner. That is why market works. Hence, forming an opinion can be tricky. I closely watch and listen to see how some of my friends navigate their path in the wild world of stocks. Generally, formation of an opinion is easy when a personal ‘life experience’ is a harbinger. When what we are looking at is not our ‘life experience’ then, we begin to search for the more information on the company at different locations using a hundred different methods. I have also seen that some of my friends are quantitative while others are qualitative. However, conclusions can be strikingly bright, though they have come to an opinion without a direct ‘life experience’ of their own.
I remember a friend of mine, an English Professor and an expert in his subject, phoning me up and telling me about the prospects of purchasing a few stocks of Exide (Exide an electric cell manufacturer). “Did you look into their results?” I asked. “Yes” he said, “I not only looked into their three-year results but also searched a dozen cars to find out if those cars were running with Exide under their bonnets!” I was surprised at his answer. My friend wanted a ‘life experience’ before plunging into Exide. However, this type of approach is not always possible. So, another friend of mine works only with trading charts and technical analysis.

One of the most interesting and thought provoking market statements that I heard recently was from the legendary investor Jim Rogers. Talking about his methodology, he spells out two truths: Stick to what you know and trust your own judgement. Well, these two statements looks like old hats fit for any application. However, there is lot of wisdom in it. Specialists in stock markets come out daily with their ‘buy-sell’ recommendations. Without reasoning at individual level, people rush into such recommendations. And, often it is true that they do achieve positive results. Nevertheless, how they will navigate further in their investments? “Will they wait to hear Specialists talk again on their favourite stocks and to take further call on the markets?” asks Jim Rogers. Often, those who follow ‘buy-sell’ calls of Specialists will lose their ability to create their own portfolio based on their own judgement. Soon, they become victims of the very people they believe in and are left with loads of scripts they cannot navigate further.

Like nature, Stock markets too never divulge there secrets to anyone fully. There are also occasional surprises. That is the real fun of it! And life keeps going....

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