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.

Chitralekha BSE seminar - Amit Trivedi

Chitralekha and BSE Investor Protection Fund organised an investor seminar at five locations: Ahmedabad, Surat, Vadodara, Rajkot and Mumbai.

Here is the link to my presentation:

Chitralekha BSE seminar - Amit Trivedi

Skill or discipline – part 2

Skill or discipline – part 2

“Bhupathi and Bopanna axed from Davis Cup” – we wrote a blog starting with the above line. The story is yet fresh and another one breaks out. This one is very similar in spirit, but involving a winner. While Bhupathi and Bopanna carried the nation’s hopes and could not get us a medal, most of us had not heard of Unmukt Chand, the captain of the U-19 world cup winning Indian team. In fact, not many were following the U-19 world cup tournament till our boys reached the semi-finals. The space allotted by media to these cricketers before the world cup paled in comparison to the space allotted to the great Tennis tamasha played off court.

Now suddenly, Unmukt is in news for wrong reasons. He was not allowed to appear for his examination since his attendance was less than what is allowed for sportspersons – 33.33%. Well, for cricketing reasons, Unmukt could not (in fact, did not) attend even 1/3^rd of the classes.

Now the matter has been taken up very seriously and even the Union HRD Minister has jumped to help the young lad. Are we getting our priorities wrong?

While nobody can deny the feat achieved by this guy. His knock in the final was worth more than Dhoni’s 97 in ICC World Cup final in 2011. Unmukt single-handedly played an inning of his life. If we look at India’s victory against Sri Lanka in WC-2011 final, we had a collapse – both Sehwag and Tendulkar got out very early. Gambhir and Kohli’s partnership set a foundation for a late charge by Dhoni. In the junior world cup finals too, India lost two quick wickets. Then, with the help of Baba Aparajith, Unmukt set the foundation and after that in the company of Smit Patel, he charged like Dhoni.

Well, we can write in Chand’s praises, for what he did was an exhibition of focus, determination, execution of a plan … In the end, he lifted the trophy.

But, what has this to do with his studies? All these happened towards the fag end of his academic year. What was he doing for the rest of the year? Well, may be he was preparing hard for the World Cup and his efforts paid off. In that case, he should be conferred Bachelors of Cricket (Honors), but in order to get any other educational qualification, he must study that particular subject.

Allowing him to skip classes in one subject because he is very good at another is not the right thing to do. By the way, the sportspersons are already given a concession – the required attendance for them is only 33.33%.

What needs to be done

Mr. Sibal and other wise men should not press the DU much for allowing Chand to write the exams for any other subjects. Instead, there is a need to introduce courses that add the subject of sports in the curriculum. That will be a great service the sports. Also, there is need to ensure that after studying such courses there are enough employment opportunities to the sportspersons. Sports in our country does not get it’s due since the life of a sportsperson ends by 35 or 40 and then one wonders what to do. The jobs available currently are not glamorous at all. Parents are not comfortable (although the trend is changing) taking the risks of allowing their kids to build career in sports.

A certain Unmukt Chand must finish studying Engineering, Science, Commerce, Arts, Medicine, Architecture, etc. in order to survive after he is no longer able to play cricket – that is the problem that the HRD Minister should try solving. Without that India will not be able to produce world-class players in large numbers.

The other thing the HRD Minister needs to do is to enforce the rules that someone has already been framed. It is important to have sensible rules, but it is equally sensible to follow the rules that exist. Exceptions and discretionary powers lead to corruption. In case a rule is found to be incorrect, the rule may be revised, but not following an existing rule does not make any sense.

Third need is to review the overall system of education. We focus too much on marks in the exam and not so much in knowledge. I have met many friends who want to recruit freshers in their organisations. There are so many fresh graduates, who look for jobs. This gap will continue to exist as long as the employers do not find the fresh graduates employable. Employability and examination marks have no link, it seems. The education system seems to be looking for ways to fail a student. A regular evaluation, already adopted by few schools and colleges, allows the teachers to find out areas where the student is weak and where she is strong. This gives the educational institution an opportunity to work on both the strength and weakness of th student.

We will have a large number of kids in the employment age due to the demographic profile of the country. Ensuring they are employable is a huge responsibility.

These are some areas in which work needs to be done. The future of India is bright.

Skill or discipline?

“Bhupathi and Bopanna axed from Davis Cup” – read a newspaper story’s headline. The story ended with the following paragraph:

The national body left out veteran Bhupathi and big serving Bopanna from the squad to send out a message that any kind of indiscipline will not be tolerated.

What indiscipline is the reporter referring to? Is it the pre-Olympic Games controversy? If that is so, isn’t the AITA acting a little too late?

Is Davis Cup the time to penalize for what happened before the Olympics? The question is important considering the fact that the same “indiscipline” was accommodated for the Olympics medal hope. The AITA bent backwards to do anything for the players.

The current stance does not seem to be a penalty for the indiscipline, but more of a punishment for the disastrous performance at the Games.

And that brings an important question. Between indiscipline and underperformance, what is more acceptable? Sports, or for that matter any individual skill-based competitive activity, has many examples where just for the superior skills, indiscipline is tolerated. People have turned a blind eye.

In the desire to win, very often, the indiscipline is tolerated. However, let us look at the impact it makes on minds of young children. The winners are looked up to as role models. Kids, not able to differentiate between the efforts and skills required to reach the top and the indiscipline or arrogance, assume that such attitude is necessary and socially acceptable to be leaders in various fields.

Those, who are successful in their respective fields, have a greater responsibility to really be and act like role models. Else, the society may be full of brash, arrogant, inconsiderate winners.