Investor behaviour

Good advice: "Buy right, sit tight" *

Investor behaviour: "Buy wrong, wait long"

*               (Courtesy: Motila Oswal AMC's YouTube advertisement)

                 http://www.youtube.com/watch?v=2rpp6iLD2sg&feature=youtu.be

Never? Always? What do these words mean, really?

English language has certain words that change the meaning when used in the financial markets. Take for example, two opposite words – “never” and “always”.

Over the years, one has come up with many experts and common men use these words while referring to the future. Let us look at some usages of these two words we often come up with:

·      This thing will always going to behave like this

·      Investors will never learn

·      India will always be full of opportunities or India will never be corruption-free

(The above are general statements used as examples. These are not the author’s views)

When you hear these (bulleted) statements, you start forming an impression. The mind starts to believe things in “black and white”. Psychologically, it is quite difficult to appreciate the grey areas for many.

However, real life is quite different. I can be confident about the past but not about the future. It is in this context that the meaning of the two words may be different from that in the English language.

Very often, we extrapolate the past events into the future. If something has never happened, we assume that it will never happen. If something has happened very often, we assume it has to be always like that.

It is important to remember the mutual fund tag line: “Past performance may or may not be sustained in future”.

Consider turning point events – or a unidirectional price movement. The recent example of Gold prices suggests that many had accepted that since gold prices had risen continuously for almost a decade, gold would never give negative returns. One has heard the same argument for real estate, too. One has heard the same argument for equity prices in the past – remember 1999-2000 and 2007-08. In fact, when the party is going on, the music is “never” supposed to stop. But, it stops, eventually. The date of the “eventuality” is not marked in our calendars.

My understanding of these two words is very simple:

·      When someone uses the word “never” referring to the future, it should be understood as a very low probability, higher than zero

·      When someone uses the word “always” referring to a future event, it should be understood as a very high probability, less than 100%

The above thinking keeps one’s mind balanced. One is able to absorb shocks better, when they occur. This ability to absorb shocks allows one to avoid acting in panic.

Happy investing. Happy thinking.

How safe is your personal data?

Recently, I read a news item in a leading newspaper. It said that Michelle Obama has been seen in a particular dress more than six times. My shock was not just about the quality of news, but also the state of affairs that there seem to be more news carriers than the news itself. Hence, someone has to come out with such news and sensationalise it. At the same time, is also talks about how much is one interested in private (however insignificant) news involving celebrities.

And then, I felt like even I was put in the same league as some of these celebrities. There are some marketers interested in my personal details – although for entirely different reasons.

I bought a car in June-2012. The car was insured for a year. In May-2013, I got a call from an insurance broker, who had all the details of my insurance and also my name and phone number. The call was to offer me best insurance option at the time of renewal of the insurance. On asking, I got to know that “they do not need my permission to get this data and it was provided to them by RTO, a Government Office.” I knew that data leakages are nothing new, but the audacity to disclose the source of information was really new in this case.

So let us talk about another case where the person tried hard to hide the source of information. There are some companies in NCR from where I received calls. These companies call themselves by different names – XYZ Marketing Company, Some Business Development Company – names sounding like they are serious players. They start with name of the company (somehow I have never been able to capture the exact names of the company in any of the cases – I must have received 5 to 6 such calls at different times) and then quickly add that this is a Government recognized company. I missed it the first time, but then asked what do they mean by this Government recognition – the answer was: the company is registered with Ministry of Corporate Affairs. So far, it is only about them. The scarier part comes when they start talking about the reason for the call.

These people have access to my credit card number, my payment track record, my location city, my name and my phone number. When I inquired about the source of information, I got vague replies like they conduct merchant surveys. Those of us who use a credit card know that we do not give details of our city of residence and phone number at the time of any credit card transaction. The only places where all these details are available together are: the bank that has issued the credit card and CIBIL. I shot mails to both the organisations, only to get the standard and expected replies that there has been no leakage of information from their respective sides and that they have sufficient checks and balances in place for data security.

I believed them and moved on.

If you are an Indian, please understand that none of your data is secured. If at all, your data security means that nobody is interested in it. Or you are simply lucky.

Your vehicle registration data, your income tax return, house property registration details, financial transactions, everything is up for sell.

Next time you get that unwanted call from a marketing firm, it means at least someone cares about you – see the positive side and be happy. I am sorry for giving this false hope to you. Nobody was interested in me - they were ONLY interested in whatever money they can extract from me.

Future

The future is under no obligation to prove the forecasters right.
Similarly, the markets are under no obligation to prove the analysts right.