Everyone is a winner in a Bullish market

Let us start with an example of an investor ‘R’ who is on cloud nine these days. He was lucky because having entered into the stocks market three years ago, he managed to multiply his wealth many tines. These days he is also planning of setting up a wealth management firm. His intention is to help people becoming richer or in short help new investors. Most people don’t have any investments in stocks. ‘R’s plan was to show the new and small investors the kind of money they can earn from stocks and how their investment appreciates. ‘R’ wants to devote his full time for which he plans to quit his job, and set up a financial advisory firm.

When ‘R’ tells his friends and acquaintances about his performance in the stock market in the last three years, they were all amazed. In fact ’R’ got the idea of turning into a full time investment advisor from couple of his friends who asked ‘R’ to take care of their investments. They were ready to part a few lakhs. His friends have to wait for a few months for ‘R’ has taken some time to finalize his plans to set up shop.

Let us take the case of ‘K” who was an insurance and mutual fund agent. Today, he offers his service as an investment advisor to his clients. ‘K’ also made huge amount from the stock market in the last four years. He started investing directly in stocks only four years ago which made him to realize that it is useless to invest in MF schemes. When you can beat a fund manager easily, why should you put money in mutual fund schemes? ‘K’ informs that though he is still selling mutual fund scheme, he intend to stop it soon. He wants to prove to his clients that it is better to invest directly in the stock market. ‘K’ has already managed convince some of them to take the plunge. He is sure he would succeed as he already has captive clients he has serviced for more than 10 years.

A seasoned stock market broker, who would remain anonymous, says such new gurus materialize in Stock Exchange market after every prolonged Bull Run. What they conveniently forget is that they haven’t weathered a bear phase, he says. For example the last four years everybody made money on stocks. It is no investment acumen that when the market is performing spectacularly for a long period even wrong stocks give good returns. ‘R’ counters whether a bull run or a bear phase smart people would make money. He is confident of his friend who gives tips and has been around for the last ten years. ‘K’ is also certain about his fortunes in a bear market. They say they have to wait a little longer. That is the only difference. He doesn’t know how long but he knows for sure that lot of people make money even in bear market. At least, that is what all his friends in the market also told him.

That sounds impressive. Talk to anyone in Stock Market and one can hear impressive stories about how someone identified a stock much ahead of the market and made huge amount of money. But ask about their failures and nobody has any story to tell. The answer is simple. They are lying. If they tell that they also made mistake, nobody asks for any tips. If potential investors are dealing or intend to deal with such characters, they would be doomed. Their intentions may be honorable, but they are ignorant about the market. In their euphoria of making money from stocks for the first time, they are forgetting that investing in stocks is not that simple. A professional Stock market investor analyses the companies’ balance sheet, P&L a/c and determines the stock where investments can be made.

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  • We at Bangalore Investors Club meet quite a few such folk like K & R on a regular basis. If one knows the questions to ask them, one will very quickly find out how much they really know !

    It is said that unless one has seen at least 3 Bull AND Bear phases, one really doesn’t know what one is talking about. Most people in the market today have no clue what a Bear looks like. God help them when the hoard comes! There are too many charlatans around. Caveat Emptor!

    It is also true that the really good fellows, who know the stuff, they are really tough to find, they like to keep a low profile and don’t like to waste their time dealing with the far too many fools in the markets.

    Education, Caution and going by ones own counsel are best favours one can do for oneself.