As I was driving along a busy South Mumbai road recently, my attention was drawn to a huge flashing sign, which said “Hey you! Get off your phone!” (no, I wasn’t on my phone).
It then scrolled to another message which said – “Distractions cause collisions, give driving your full attention.”
I found it ironic that, in order for me to pay attention to their flashing sign-board, I had to stop paying attention to the traffic and the road in front of me.
To be able to read their very important scrolling safety message, I had to look across the opposite lane (that is where the sign-board was placed!) and spend 10-15 seconds trying to decipher some flashing words.
Amazingly, someone somewhere got paid for that idea.
You will find similar “dangerous safety messages” in the financial world every day – messages where people ask you to play it safe but then sell you stuff that can put your money and peace into danger.
Like this video – Save the Investor – where someone is asking you to “buy right and sit tight”…
(Click here if you can’t see the video above.)
Someone who would have to put shutters on his business if you were to “buy right and sit tight” is asking you to do so!
I mean, seriously?
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Movies are made for entertainment, the trouble starts when we take it seriously.
They say, the game is always the same, but the players are new every time.
I have an unrelated question though its an extension of the same theme i.e. taking the retail investor for a ride.
The current govt. realizes that fighting inflation is a long term battle and will not win this battle in the short term (1yr), which means they will not be able to effectively reduce interest rates. There is also a strong belief that corporate India needs cheaper capital to make investments and create jobs, ignoring the fact that many of them already have leveraged balance sheets.
So there seems to be strong policy momentum to drive the equity markets higher – mandating pension funds & PF to invest 30% of their corpus + roadshows & press meets to show India as an investment destination for FII+driving retail savings into equities by making other investment assets offer negative returns etc.
All of this so that corporates can then raise capital via the equity route or by mortgaging their overvalued equity (e.g. Tata Steel restructuring its debt & raising 14,000cr)
In this scenario, what do you think we should do? Sit on the bylines and wait for the correction/crash or also participate via index funds so that we can also ride the high tide/ride the tiger knowing its not sustainable? I have been waiting for +9 months on cash and feel though the principal is protected, it also hampers my long term goals if this wait continues to be much longer as it seems it might be…
I know as value investors we should be looking at companies and the micro picture but the macro environment does tend to effect the risk and return balance so would love your comments on the same.
Parvin Worliwalla says
A lot of companies were underpriced and available cheap around Aug 2013; from a value investor’s perspective. There is a dearth now though! But opportunities would keep coming…
Let us be clear what are your expectations/ what do you wish to achieve.
If I can earn 15% tax free year on year I would be delighted. I understand this is no mean task, but then we are talking share bazaar.
If you have a longer term perspective, have analysed and concluded a company or a set of companies will grow by say 15% year on year I personally would not mind investing at say a higher PE (ideally ofcourse I should at a discount) which will become reasonable given the expected growth a reasonable PE 2 to 3 years down the line, since quality companies at all points are typically expensive vs the market.
A systematic investment (say 2 shares of Infosys every month, just as an example) may be a reasonable idea.
Also only you can answer what works for you.
What such sites and forums and books tell me what to avoid and what to be careful of.
I hope this helps.
Parvin Worliwalla says
Bingo!!! You’re spot on! 🙂 😉
Tirthankar Banerjee says
I like this video… such a nice thrilling music. Raamdeo Agrawal is a great investor and may be he wants good for investors. But as you know its a zero sum game after all 🙂