Safal Niveshak

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Investing Behaviour

In Investing, Catch the Right Anchor to Avoid Sinking

First, a quick question. Take the last three digits of your telephone number, and add 400 to it.

So if your telephone number ends in 146, adding 400 to it will give you the answer 546.

Now answer this question – In which year did Alexander invade India?

Think…think!

Even though your telephone number has nothing to do with ancient India’s battles, you will note that your answer to the above question would most likely revolve around the first number i.e., 546 in the above example.

Whatever number you come up with for the sum of the last three digits of your telephone number and 400, your guess for the year of Alexander’s invasion will be close to your sum.
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Kill That Idea Before It Kills Your Wealth

“The hardest virus to kill is an idea,” said the character of Leonardo DiCaprio in the movie Inception. This idea – of the difficulty of killing an idea – is widely prevalent.

We see this in businesses where once a management gets an idea that sounds wonderful, it is very difficult to ask it to change its plans even if the idea is destined to fail.

Things aren’t any different in stock market investing.

Investors seldom expect to be wrong, and thus hold on to bad ideas – bad stocks – even when it seems clear that their original idea was faulty.

But this is a typical behavioral attribute and you can’t blame anyone who shows this kind of a tendency – of not accepting that his idea is bad, and therefore must be killed.

In this post, we look at the relevance of killing bad ideas in stock market investing, and how you as an investor can do that.
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Investing in Your Company Stock? Look Before You Leap

We recently discussed why too much love for your company could be disastrous for your financial future.

We looked at lessons from Enron and our very own Satyam where employees who invested in their company stock saw their savings go down the drain.

We also studied why even when your company might not be the next Enron or Satyam, you must not go overboard with your investment in its stock.

But we also suggested that you may have 5-10% of your financial investments invested into your company stock.

Now the question you may have is this – “How do I know whether my company’s stock is worth buying?”
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The Easiest Way to Go Bankrupt

Dictionary defines bankruptcy as the state of being or becoming bankrupt. And you are bankrupt if you are unable to satisfy any just claims made upon you.

Some also define bankruptcy as a legal proceeding in which you put your money in your pants pocket and give your coat to your creditors.

These definitions apply to you once you are already bankrupt.

But the question is – How do you go bankrupt?
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This Big Investing Mistake Can Cost You Heavy

Do you remember the 2009 swine flu pandemic that caused worldwide panic? An estimated 14,300 people died of this virus.

If you think that’s a big number, you would be surprised to note that more people die every year due to seasonal flu.

But even then, swine flu caused much greater panic than the regular flu. What could be the reason for that?

Or consider the following example. In the months after the September 11 terrorist attacks in the US in 2001, travellers made the decision that travelling by car was a far safer way than by air.
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Want to Become a Better Investor? First Get Your Brain Damaged

“I hate it! It’s like the end of world for me!” said my friend Ravi hanging his head in desperation.

“What happened?” I asked. “You lost someone in your family? Oh, I’m so sorry!”

“Oh no, not that!” he said.

“Then what? Your dog died?”

“No, no!”

“Someone stole your Blackberry?”

“Vishal, will you let me speak?”

“Yeah, c’mon tell me what happened?” I smiled at him and asked.
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The Stock Market Nonsense Called ‘Consensus’

The spread of business channels and other financial media has had grave consequences for investors over the past few years.

One of them is the need to justify each and every move of the market.

The other is the tendency to buy or sell stocks first and think about the rationale of buying/selling later.

The third, and the worst, consequence for investors of watching business channels and reading financial media has been the nonsensical focus on the movement of the Sensex or the Nifty.
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Is This Market Going Up or Down?

After last week’s crash landing, this week wasn’t any better for stock markets around the world.

The Indian markets, represented by the BSE-Sensex, closed the week down by 466 points, or 2.7%. This took the Sensex to sub-17,000 levels for the first time since June 2010.


Source: Yahoo Finance
As we stand now, nobody knows anything.

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The Problem With a Rat Race is That Even If You Win…

When in doubt, follow. This is an apt quote on the behaviour of us humans.

We generally draw comfort in going with the majority, or the consensus.

The problem is that we have very less control on such behaviour, as evolution has equipped us with this tendency of running a rat race.

Yes, you read that right. We are all running several rat races, whether in our work lives or when it comes to investing our money.
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