Jan 9, 2006|
Investing: The Mark Twain way!
In the world of finance, the Mark Twain effect is the phenomenon, observed in some markets, of stock returns in October being generally lower than in other months. Now, we have tried and calculated month-on-month Sensex returns for October each year starting October 1990. Phew! October had been a positive month on only four occasions in this 16 year period - 1991, 2001, 2003 and 2004. Well, the name comes from the following quote of Mark Twain, the popular American humorist, novelist, writer and lecturer:
OCTOBER: This is one of the peculiarly dangerous months to speculate in stocks. The other are July, January, September, April, November, May, March, June, December, August, and February.
But why to read this quote when we are well past October and are cruising through another month of strong gains in the Indian markets in January? Well, the quote holds true even if one were to substitute October with January and vice versa. All months of the year are dangerous for investing, if you ardently follow these 'principles':
- Sincerely relying on the 'hot' tip or the 'next' story from a friend/relative/broker.
- Not doing own research on the investment target (the company/stock)
- Investing for the short term
- Always giving heed to the above three principles
Instead of this, pick a stock that matches your risk-return profile and not the one of your broker and research well about the company's history, its business model and factors that will affect its future performance. Also, have a long-term (2 to 3 years) investment horizon. Following these mantras will not only help you realise adequate returns on your investments, but they will also help you rest in peace!
Finally, as Twain wittingly said, "There are two times in a man's life when he should not speculate. One, when he can't afford it and two, when he can." Well, the graph on the right shows that there are two months in a year when a man (or a woman) should not speculate - March and October! For your reference, these are the months that have shown the largest number of declines in our study of the BSE-Sensex since 1990. For other months, be cautious!
More Views on News
Jun 10, 2017
Forty Indian investing gurus, as worthy of imitation as the legendary Peter Lynch, can help you get rich in the stock market.
Aug 16, 2017
All across the country, the old gods become devils. New, gluten-free gods take their places...
Aug 16, 2017
And what it has in common with beating the stock market too.
Aug 16, 2017
Ensure your financial Independence, and pledge to start the journey towards financial freedom today!
Aug 14, 2017
Last week's correction is making a number of Super Investor stocks look a lot more attractive...
More Views on News
Aug 7, 2017
The data tells us quite a different story from the one the government is trying to project.
Aug 4, 2017
The small-cap space is full of small players that are clear proxies to great growth stories and Indian megatrends.
Aug 8, 2017
Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...
Aug 12, 2017
The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.
Aug 7, 2017
Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...
Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement. LEGAL DISCLAIMER:
Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here
. The performance data quoted represents past performance and does not guarantee future results.SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: firstname.lastname@example.org. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407