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You are here: Home / Archives for Investing Behaviour

Investing Behaviour

How to Stop Worrying and Start Investing

September 26, 2011 | 3 Comments

In the spring of 1871, a young man picked up a book and read twenty-one words that had a deep effect on his future.

He was a medical student at the Montreal General Hospital, and was worried about passing the final examination. He was also worried about what to do in the future, how to build up a medical practice, and how to make a living.

These twenty-one words helped him to become the most famous physician of his generation. That’s not all. He organized the world-famous John Hopkins School of Medicine.

He was knighted by the King of England. When he died, two huge volumes containing almost 1,500 pages were required to tell the story of his life.

This man was Sir William Osler, and the twenty-one words that helped him live a life free from worry were…
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We Are All Weird

September 24, 2011 | Leave a Comment

“We are all a little weird and life’s a little weird, and when we find someone whose weirdness is compatible with ours, we join up with them and fall in mutual weirdness and call it love.”

These words from the famous American writer, poet, and cartoonist Dr. Seuss rings a bell in my mind every time I hear someone complaining about how the stock market is like a casino that has robbed him of his wealth.

“Stock market is a weird place to be in. I’m better betting on race horses,” said my neighbour as I asked the reason for his sadness during our early morning walk.

“Seemingly he has lost some money as Indian markets have crashed this week,” I thought to myself.

What I thought was right, as he said, “You know what? The Sensex was down 700 points on Thursday and another 200 on Friday! Isn’t this madness?”

I am a good neighbour, so I wanted him to pour out his heart before I could have spoken anything in defense of the market.
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Stocks Crash! What Should Investors Do NOW?

September 23, 2011 | 4 Comments

The Sensex was down 700 points yesterday. It’s down 250 points as I write this today.

Whenever we get days like this — like when the Sensex is down 500 points or more — my phone begins ringing with inquiries from friends and relatives.

They always ask the same question: “What should I be doing now?”

Even my wife has this question every time she sees the markets fall like this.

“What are you doing now?” she asks me.

You see, this is ‘not’ the right question to ask in such times.
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Is Stock Market a Casino?

September 22, 2011 | 2 Comments

My eyes were caught by a headline in a business paper yesterday. It said, “Steady rise in shady deals, price rigging”.

At first I thought this was an article on the real estate sector in India. But then as I read it further, things really started to look ‘shady’.

The article talked about how data from the stock market regulator SEBI suggests that the cases of market manipulation and price rigging in stock markets have steadily increased over the past few years.

In fact, such cases now account for almost 50% of the cases taken up for investigation by the SEBI.

What this data simply means is that a growing number of people in the Indian stock markets are following the mantra ‘Greed is Good’ as was said by the character of Gordon Gekko in the Hollywood classic Wall Street.
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In Investing, Catch the Right Anchor to Avoid Sinking

September 21, 2011 | 5 Comments

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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The Greatest Market Timer in This World is…

September 17, 2011 | Leave a Comment

Markets are up, again. The BSE-Sensex is up almost 1,100 points over the past three weeks. Even other global markets have staged a comeback.


For now, the co-ordinated plan of international policymakers to lend cheap dollars to European banks to tame the credit crisis seems to be doing the trick.

In short, the bad news seems to be past us, at least for the time being.
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Kill That Idea Before It Kills Your Wealth

September 16, 2011 | Leave a Comment

“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

September 15, 2011 | 1 Comment

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

August 31, 2011 | 4 Comments

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

August 30, 2011 | 5 Comments

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.
[Read more…] about This Big Investing Mistake Can Cost You Heavy

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