It's been a while since I have been investing in the Indian Stock Market. Along the way, I've come across a lot of people and this post is just an observation about the perspectives of different individuals about the stock market and their investing styles.
1) Category 1 : "Don't care"
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This category of people is not bothered about putting their money to work even though most of them end up working really hard for the money they earn. They either don't have the time or are too lazy to think about investments. They end up choosing whatever comes their way and are never bothered about choosing one form of investment over the other. This surprises me a
little bit because, they do care about money but still are not bothered about putting their money to work.
2) Category 2 : Eternal Pessimist
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Stock market is not to be trusted. "Share Bazaar nahi yeh toh 'Satta Bazaar' hai"(Stock market is a gambling den). No matter what, never put my money in the market. You will always end up losing money. Stock market is for rich people and not for middle class salaried people. Instead choose safer instruments such as Fixed Deposits. I don't know the reason for their paranoia but I guess these are the guys who have burnt there fingers in the market in the past or know of someone who has.
3) Category 3 : Safe Players
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These are the guys who want to invest in equities but don't want to do it themselves as they don't have enough understanding of the market. Instead they feel, choosing the investments is better left to the fund managers who have investment expertise.
Hence, they end up choosing Mutual Funds, ULIP's or other forms of investment instruments where the so called experts make decisions on their behalf.
4) Category 4 : Eternal Optimist
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These guys are knowledgeable about the market and want to invest on their own. They have a long term investment horizon and are not concerned too much with the short term market fluctuations. For them, buying into stocks is same as buying into businesses. They look at valuations and other fundamental aspects of a stock before buying into it.
5) Category 5 : The Opportunists
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These are the guys who don't invest on a regular basis but do keep track of the markets. They make an investment whenever they sense there is an opportunity in the market and exit when the prospects don't look very good. They don't have any specific time horizon for an investment. They hold there investments as long as they feel there is value in the stock and exit when they feel otherwise.
6) category 6 : The Trader
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These are the guys who don't look at the fundamentals of a stock before buying into it. They look at taking advantage of the short term fluctuations in the market and making money out of it. They are the ones who are most prevalent in the Stock market. Some of them use the technical indicators to make buy/sell decisions whereas most others use "TIPS" to make buy/sell decisions. Well, For Indian markets, Getting tips is really easy. Everyone is willing a give a free tip. The tip culture is so prevalent today that even the news channels have shows like Awaaz Kaarobar Stock 20:20 where analysts provide stock recommendations on 40 stocks on a daily basis.
I want to write more on the prevalent tip culture in the Indian markets but probably in an other blog post as it is a topic of discussion in itself. I personally feel tips are not bad as long as one uses them as hints to research more on the stock before making an investment decision. Tips can be dangerous when one blindly follows them without any knowledge about the stock.
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Trading according to me is not for everyone .... Trading is fundamentally against human nature... and generally what goes wrong with many of us is that we tend to mix emotions with trading which never works well. In my opionion, blindly following charts doesn't take one anywhere. Well charts are available to everyone. If it was just charts, then every analyst would have made tons of money. For making money in the market, it needs out of box thinking, a bent of mind to spot companies, catch the market transistions. There is no single thing that always works or one that doesn't. Well, its hard to describe what works in the market and what doesn't but blindly following the charts of just the balance sheet doesn't work for sure.
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