Sunday, August 15, 2010

Should Investors get Bored?

For the mainstream media, what sells most? Fear and Drama.
What are you most likely to watch on the Media? stories of fear or high drama!

If the market were to fall by 300 points (Nifty), the business as well as news media will be flooded with the news and analysis. TRP's will go up, there will be no need to think of filling up air time, so much analysis can be put in. Fear sells.

Suppose an analyst were to suggest a doubling of price for a small cap and it actually doubles. Wow! Media can then begin linking some small/mid cap to sensational news event which can get high TRP's. Drama sells.

Now: Does this fear and drama make money for you? Ask yourself: Do you follow media to provide more audience (therefore higher TRP's and ad revenue) to the media companies? Which means, are you watching media as an act of charity to media companies? The anwer is No.

Investors watch media to get better informed. Fear and Drama do not help them in meeting their investment objectives of maximising risk adjusted returns.

Boring news makes money. Over a period of one month, the market moved nowhere while your portfolio moved up by 1%. So boring! After one year you realize that the Nifty moved up by 6% while your portfolio gained 14%, outperfoming bank interest rates by a wide margin. Even more boring!

Of course, traders who followed every twist and turn of Fear and Drama went out of the market, losing their capital. But they did get their two minutes of adventure.

What would you like to do? Bored or excited?

2 comments:

rajv malik said...

namaskar sukhani ji,

happy independence day to you and all blogmates !

on this independence day can you suggest a list of five stocks which one can buy at any price and then sleep over them forever.

amitkbaid1008 said...

Dear Sudarshan Sir,

Quote Of course, traders who followed every twist and turn of Fear and Drama went out of the market, losing their capital. But they did get their two minutes of adventure.

What would you like to do? Bored or excited?

So should we stop trading and invest only?????