The one question that every investor must ask...
In this issue:
» India's food subsidy gap is spiralling
» Indian rupee still dances to FII tunes
» Climate change will intensify food crisis
» US headed towards another financial meltdown?
» ...and more!---------------------------------------------- Don't Miss! ----------------------------------------------
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To elaborate a bit, the problem is that most investors are obsessed with the upside. Moreover, with blue chip stocks, the valuations are often overlooked. In our greed, we blind ourselves with illusions of optimism. But while doing so, we recklessly undermine the several risks that may put our investments in jeopardy.
The next question is: Do you fully reckon what risks you are undertaking when you invest? In Mr Howards' own words, "Nothing is more risky than a widespread belief that there's no risk." This is very true, especially, if seen in the context of the problems brewing in the Indian economy right now. Had we thought well enough about the consequences of rising commodity and food prices, high interest rates, governance failures, etc?
The best place to look for probable risks is the past. Look at the past economic crises. You will definitely learn a lot about economics and business. More than that, you will learn about the follies of the mass mind. If history is to be believed, most of us are bad students. The way bubbles form and eventually bust clearly shows that the collective mind of the masses has a short term memory. It forgets quickly the consequences of excess greed and fear.
Stay away from all the noise and the hoopla! Visit the stocks markets like you visit a shopping store and not a carnival. Look at the products and their price tags. And think about what could probably go wrong with them. Exactly the way you buy a washing machine.
Do you evaluate the risks well before investing in stocks? Share your comments with us or post your views on our facebook page.
01:07 | Chart of the day | |
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(*Provisional; **Estimate)
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But the story is hardly inspiring on this front. FDI into India -the long term money that we referred to - actually decreased in 2010, giving us the ignominy of being the only nation amongst the BRIC to have met such a fate. And with scams and corruption scandals galore, India's reputation as an investment friendly destination is only taking a turn for the worse. Clearly, maintaining confidence in the rupee is yet another in a long list of serious hurdles the Government will have to overcome to keep the India growth story going.
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The World Meteorological Organisation is of the view that global food output may be hurt going forward as climate change brings more extreme weather over the next decade. In fact, extreme events are expected to intensify in the future and this combined with less rainfall in some regions will hamper crop production and agriculture. Not just that, population and incomes have been rising. This will put that much more pressure on land and water posing a big threat to food security.
Already, food prices reached a record high in February and pushed millions into poverty. One solution is to focus on agricultural research which would involve adapting farming to climate change. Whatever be the case, some strong measures will have to be taken to remedy the situation. Otherwise, consistently high food prices would generate breeding grounds for revolutions like the ones seen in the Middle East.
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Is there any way of fixing this mess? We doubt so. It looks like the Obama government will have to carry this albatross round its neck for a lot longer. The numbers are proof of failure of QE2 to stimulate housing. The poor housing data along with a dry job market leaves little hope for the troubled Americans. They also suggest that there is another financial crisis in the making. It won't take long before troubles in the housing market spill over into the economy creating serious ripple effects across the globe.
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04:50 | Today's investing mantra |
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9 Responses to "The one question that every investor must ask..."
NV SUBRAMANIAN
May 29, 2011Buy cheap and sell high is fundamental mantra. That apart patience is a necessary virtue. quick bucks are possible once a while but not always. Herd mentality,one day or other, will lead to stampede where the weak will be trampled.
Vinayak M Prabhu
May 28, 2011Dear Sir,
How we can identify particular stocks are cheap?
Thanking you,
Vinayak.
sharad agrawal
May 28, 201190 % investors are build to loose money , & in this ratio is not going to change in nxt 10 years.
subrata
May 27, 2011A very valuable piece of advice. Thank you for sharing.
I feel sometimes really lost in so called tips from experts....I also wonder why these experts does not follow their own advice and get rich!!!
Ganesh K
May 27, 2011I not only agree with Mark Howards but followed it for deceded too. My suggestion to all those who want to make decent money- Check if the stock has gone to a level when the BSE sensex was about 14000, if yes, then only buy it. Or wait till the market goes to that level and start buying in small quantities of good A group shares.
jagdish sanghvi
May 27, 2011In response to your above question whether it is cheap or not is really the question for you to answer for a lot of us who do not have the expertise to evaluate the stock or not have resources at their disposal. These people, the retail investors, who have blind faith in your guidance go out and act as advised by you.
So basically the question is for you to answer. Will you please answer it for the benefit of all the readers of 5 minute wrap?????
Thanks in advance.
Mr. D. D. Vora
May 27, 2011sir, i read yr article - not regularly but i understand the value of these article under the head. Upto say 1995IPO were offered at reasonable price , if at premium investments were paid its value, recently in present book building system, there is no reward of investment, if investor does not sell his investment in time, you have knowldge of such prestigious IPO and investors now weep. Even four star or five star ratings were given to those issues. Why SEBI, or BSE or NSE does not pay attention to these robbaries Ofcours promotors of the issues have minted money, but what about the small investors. I think we should not blame RAJA or Kalmadi only.
Yugandhar
May 27, 2011"One solution is to focus on agricultural research which would involve adapting farming to climate change. "
Our bookish knowledge and science will tell us only that. But it is the most foolish thing to adapt farming to climate change because that is simply impossible. Everyone must read the book "The one straw revolution" by Masanobu Fukuoka, a japanese plant scientist turned natural farmer and philosopher. His book will open anyone's eyes to the folly of human beings. The only solution is to move along with nature through "natural farming" and simple and natural living, and not fight against it with foolish and narrow science. When nature fights back it will be too painful to bear.
Jayant S.Patel
May 30, 2011This simple advise is valuable.
One should follow it
Jayant