Safal Niveshak

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What Do You Understand By ‘Risk’ in Investing?

“You must know your risk appetite before investing.”

“Markets are risky and can crash 30%. Invest later.”

“I am a risk-averse investor.”

“I can’t take risk with my money. This stock can fall 20%!”

“Investing is risky. And I don’t have the risk-taking ability.”

These are some common statements/advice I’ve heard from investors and financial advisors over the past few years, and especially when stocks prices are on a correction mode.
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Can Your Stocks Defeat the Inflation Demon?

“Americans are getting stronger. Twenty years ago, it took two people to carry ten dollars’ worth of groceries. Today, a five year old can do it.” – Henny Youngman

This is a telling statement on the menace that is inflation.

You must’ve heard stories from your grandmother how a few rupees used to buy a week of groceries when she was young.

We, the present generation, can only imagine such a situation. Now a few rupees would get you a snare from a beggar!
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Who Else Wants to Beat The Market?

When you invest your money with a mutual fund, you don’t normally think in terms of losing money.

All you want is to make money. And this must be your fund manager’s goal as well, or so you may think.

But if you read most mutual fund advertisements and what fund managers boast about on business channels and in newspaper interviews, their ultimate goal is to ‘beat the market’.

In fact, the entire mutual fund industry seems to have conspired against the small investor by pitching him nothing but this – “Give me your money, and I’ll help you beat the market!”
[Read more…] about Who Else Wants to Beat The Market?

Only One Thing Matters When Investing in a Company

That you must identify good businesses and invest in them for the long term to become a successful investor is what we discussed yesterday.

The most obvious question you might have now is – “How do I know which businesses are good?”

Well, there are several rules that successful investors like Warren Buffett follow to separate good businesses from the bad ones.

But the one rule that stands tall amongst them is… [Read more…] about Only One Thing Matters When Investing in a Company

Know Where to ‘Bang’ To Become a Successful Investor

A plumber was called to fix a pipe. After completing the task, he turned to the house-owner and said, “That’ll be a hundred rupees.”

“What?” the owner replied, “A hundred rupees for just banging on the pipe? That’s too much!”

“Banging on the pipe is only five rupees, sir. Knowing where to bang – that’s ninety-five.”

Well, in stock market investing, knowing where to ‘bang’ – finding the right stocks to invest – is the secret to your fortune.
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Safal Niveshak Weekly Wrap

The times are highly uncertain if you are a stock market investor. While global and Indian stock markets are showing occasional bouts of euphoria, we at Safal Niveshak believe these are going to be short-lived.

The western economies are not doing well. And the Indian economy isn’t showing positive signs as well. Inflation remains high and rising interest rates are choking the growth of businesses.

Amidst all this, there is a flurry of predictions from stock market experts – on topics ranging from depression in the west, inflation in India, movement of stock markets next week, and performance of derivatives market this coming Friday.
[Read more…] about Safal Niveshak Weekly Wrap

‘Sunk cost’ madness on a massive scale

We learnt yesterday how the sunk cost fallacy leads investors to throw good money after bad.

Well, here’s what I read in a leading business daily that talks about the impending financial crisis in the western world:

“An apocalyptic Lehman-style moment seems unlikely right now, because US legislators will likely come to some sort of a deal that will allow the federal government to resume borrowing, while Europe has invested too much in the integration project to let things collapse in the first episode of stress.”

Note the words – “invested too much…to let things collapse”.

Now, this is a case of ‘sunk cost fallacy’ on a massive scale.

Pity the poor taxpayer!

What’s Your 12-month Target for the Sensex?

Have you ever wondered why the anchors and the stock market experts on business channels make so many predictions day in and day out? And why they are so happy to make these predictions?

Or what gives you a natural high while predicting the future of the stock markets, or stocks you hold or are about to buy?

Neuroscientists lay the blame on ‘dopamine’ – a chemical in our brains that helps us figure out how to take actions that will result in rewards at the right time.

It’s the release of dopamine in our brains that gives us that high to make the next prediction, and the next one.

It gives us the pleasure of expecting our predictions to turn out true in the future. Like the pleasure you’d derive from predicting the Sensex over the next 12 months, and also expecting your call to turn out true!
[Read more…] about What’s Your 12-month Target for the Sensex?