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Stockmarkets: New Year, New Thoughts! - Views on News from Equitymaster
 
 
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  • Dec 26, 2005

    Stockmarkets: New Year, New Thoughts!

    As we enter the fifty-second week of 2005, the final one for this year, and when the Indian markets are nearly at their all time highs, there's one phrase that reminds us of the situation prevailing around. It goes like this - "Human nature is human nature and human nature would continue to remain human nature till human nature remains human nature." - (Late) Nani Palkhivala. Now, one would ask why this quote on a website dedicated to equities. Well, this phrase, when used in context of equity investing, holds true to a very high extent.

    History is replete with examples when greed and fear (key ingredients of human nature) have taken over discipline, resulting into windfall gains and, of course, 'windfall' losses for investors. And more sadly, small investors are the biggest losers in these phases of indiscipline (recollect the year 2000 stock market boom and bust, or in case of those with short memory, May 17 2004. While greed results into bulls taking the centre-stage and leading markets towards nauseatingly high levels, fear brings them back to ground zero. And small investors suffer in both these situations.

    As we are about to enter the year 2006, the second last year of the tenth five-year plan, Indian equity markets are at their all-time highs. While such a situation brings in factors that cause the 'greed' element to rear its face, investors need to practice utmost caution and not give in to temptations that rising markets like these bring with them. This calls for high levels of 'discipline' and, in these times, this should be like a resolution for the New Year.

    Now, while making a New Year resolution is quite easy, practicing the same is otherwise. And when that resolution demands high levels of discipline, the task becomes all the more burdensome. First of all, most of us generally fail to make reasonable resolution(s), and that is the major reason why most of us fail to keep the one(s) we make! Sure, all New Year resolutions do not make it past the 2nd of January, but wisdom would be in believing that this year is going to be 'different'. Right? Happy New Year!

     

     

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