Archives for February 2012

What! Are You Exiting the Stock Markets?

I was surprised to read a report in the India Today magazine yesterday which suggested that small investors are fast exiting the stock markets.

One reason for my surprise (and sadness) was to think about the future of Safal Niveshak.

After all, if small investors stop investing in stocks, who would read my daily rants on sensible, long-term investing?

But a bigger reason for the surprise came when I read this…

Most retail investors have lost faith in the capital market…Investors are exiting because there has been no capital protection in India.

Then I read this…

Investors are fast losing confidence in the capital market and unless Securities and Exchange Board of India (Sebi) brings in radical reforms, they would hardly return.

Now my question is – who was worried about “capital protection” during the heydays of 2004 to 2007 when everything they touched turned to gold?

30 Excuses That Prevent You from Investing Success

Be honest. How often do you sabotage yourself in your investing journey?

You trick yourself into thinking that keeping up with stock market news, and reading the latest “10 secrets to become a successful investor” post on Safal Niveshak is “working”.

You know better, but some part of you believes that simply reading the article will help you move forward.

That having a deep understanding of the stock markets and how humans behave when it comes to investing will position you better when the ‘right time to invest’ arrives.

But that ‘right’ time never comes.

My Observations on How North Indians Look at Money & Investing

I recently went on a trip to North India – Delhi and Rajasthan – where I observed some interesting habits people had with respect to handling their money and investing.

Of course, some of these habits/attitudes aren’t particular to the North Indians, but these still give interesting insights into the money behaviour of that lot (and I’m one of them myself).

So here are some of my observations on how North Indians generally look at money and investing…

Money has to be earned at all costs, because the need to spend on lavish parties, expensive clothes and cars, and impress others at family functions is on a rise.
Stock markets are considered some sort of a scam where you will ‘always’ lose money.
Despite the above belief, CNBC remains the first channel to be watched every morning.
Gold and property are considered safer investments than stocks.
People don’t invest with a plan. They ‘just’ invest whenever they have money.
People are more worried about what’s happening in politics than in the economy.
Like their driving, people are highly overconfident about their investing skills.
Not many are bothered about investing education, or blogs like Safal Niveshak. 🙁
Most believe that they ‘knew’ about the 2008 crisis (only that they did nothing about it).
Food occupies a greater mind share than money (the few centimeters I’ve added to my waistline is a proof). 🙂

One more important thing I noticed among people out there is, however rash they are in their driving and investing, they care a lot about the future of their dependents and thus save a lot of money (in gold, property, and stocks).

Anyways, I now invite all my North Indian readers to accept or negate these observations.

Also, all my readers from other parts of India and the world are welcome to add their observations about the way people in their regions treat money and investing. This will be an interesting exercise.

How to Avoid Your Worst Enemy as a Stock Market Investor

If you have been a member of the Safal Niveshak tribe for long, you know our hottest topic of discussion here. It is how various aspects of human behaviour influence investing.

As we have discussed at times, we are often our worst enemy when it comes to investing our hard-earned money.

An understanding of how vulnerable we are to our own psychology can help us avoid the stupid investor delusions that can screw up our financial security.

There is an old adage about the game of poker: If you sit down at the table and can’t figure out who the sucker is, get up and leave because it’s you.

These insights about investor psychology can keep you from being the easy prey.

Burton Malkiel, in his investing masterpiece, A Random Walk Down Wall Street, cites the study done by Charles Ellis, a longtime observer of stock markets and author of another brilliant investing book Winning The Loser’s Game.

The Art of Stock Picking, by Charlie Munger

Charlie Munger Some call him Warren Buffett’s alter ego. Some know him as Buffett’s quirky business partner.

But whatever you may call him, Charlie Munger is ‘the’ original thinker and the silent man behind the success of Buffett’s investment company Berkshire Hathaway.

Ask people about Berkshire Hathaway, and most will tell you that it’s Warren Buffett’s company, which is true as far as it goes.

But those in the know recognize that Berkshire’s success is actually the product of a tag-team effort by Buffett and Munger.

Munger’s book, Poor Charlie’s Almanack, is one of my most prized possessions.

It collects his speeches and musings, including his intriguing thoughts on the several tendencies that lead us humans to make really bad decisions.

Confirmation Bias: What’s Your Internal ‘Yes-Man’ Saying?

Confirmation Bias I remember the time when I bought my first car. I went to the showroom with my mind fully made.

I had in fact already imagined myself owning and using that car. When I reached the showroom, I was so much filled with a ‘confirmation’ towards that product that each of its features made me think that I was about to make the right decision.

The chosen car’s design seemed the best amongst all other cars displayed. Its seat covers looked the brightest and softest. Its power steering and power windows seemed the most powerful of all. And its price seemed reasonable.

I had already confirmed the purchase in my mind and was seeing everything fit into that mould now.

You see, the way I behaved while purchasing the car holds true with most other expensive things we buy in life. We first make an emotional decision to buy such things and then try to find rational reasons to justify the purchase.