(image courtesy: www.delhitrainingcourses.com)
Most
shareholders have little if any control over the companies in which they own
stock, even if they own a million shares.
- Robert Kiyosaki
Large
corporations, of course, are blinded by greed. The laws under which they
operate require it - their shareholders would revolt at anything less.
-Aaron Swartz
Rule No. 1: Never lose money. Rule No. 2: Never forget rule No.1
- Warren Buffet
Someone will
always be getting richer faster than you. This is not a tragedy.
- Charllie Munger
What happens when a disgruntled shareholder pops up
with a gun in a TV studio?
This is the premise of the Hollywood movie 'Money Monster', starring Hollywood A-listers
George Clooney and Julia Roberts. This is about stock tips going awry and the
potential of the person who provides such stock tips. The movie also throws
light on the reality about high frequency trading and the way such a technical
program can still be used by human beings for their own benefit, though
seemingly no human intervention is possible. The unplanned investments of the
shareholders and their inability to understand the stock market is only too
well brought out in the movie.
As is the wont of an investor who is not aware of the
basics of investing, greed plays the calling card when it comes to
investment. In this case, the investor puts all the money earned from his
mother's pension funds to the stock market. It is another matter that the stock
is hit by the malpractices of the owner of the company. Around 800 million USD
of the market capitalization of the stock is wiped out and the stock continues
to fall. The investor loses money whereas the owner of the company is sitting
pretty with investments in South Africa. There is enough drama to ensure that
the viewer sits till the end.
Movies on stock market appeal to a niche audience
because not many people invest in the stock market. Moreover, one needs to
understand how people play in the stock market. For every buyer who wants to
buy a stock at a lower price, there is a seller who wants to sell it at a
higher price. Both these people coming together and bartering is a paradox in
itself.
Remember the famous phrase from the Hollywood movie 'Wall Street'? "Greed is good". Indeed, but greed should be backed with
caution, logic and patience. Then, in some way, it would even not be 'greed'
anymore!
The average investor is greedy, but at times does not exhibit these attributes. Neither is he willing to imbibe them. In the movie, at a
point, the owner of the company confronts the disgruntled shareholder, 'You never asked when the stock was going
up. Why are you now, when the stock price is down?'. This succinctly
explains the herd mentality of the average investor.
As long as the going is good, there is no problem. He
does not even bother to find out as to why a particular stock is going up. His
antenna catches signals only when the stock price is coming down. He invests in
products, the features of which he does not comprehend and indulges in complex
trading procedure. Sometimes, all this is done with just the advice of a
broker. Many a time, the investor is so impatient that he does not even want to
listen to the broker. The general perception of investing in stock market is to
grow rich fast, more so with stories abounding of investors who made it big. So
it is not unnatural if the guy on the street also feels the same way. But he
should monitor it more often and can perhaps even contemplate getting out after decent profits.
A word of advice is also given to the so called TV
experts and advisors who mouth just about anything about a stock without
knowing the ground realities of the company, industry and trends. They have an
explanation even for their predictions going awry - global trends and cues and
certain qualitative factors, mostly irrelevant and incomprehensible at times! Recommendations,
for or against, are not always with logic and many a time do have a personal
bias in them.
2 comments:
Ha ha, good one. Highlights the casino mentality with which most people put their money into the market thinking that it is some sort of a get-rich-quick lucky draw. As long as there are people who are willing to put their money into the game without understanding the rules of engagement, there will always be problems. But, who can bell the cat!!
:)
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