Trading and Investment for beginners: Finance Trading Times

Trading and Investment for beginners

Recently saw the movie “Om Shanti Om”. Not sure how many of you liked it, but to me it was a clear cut example of “How to make a complete mess of a classic movie called Karz”.

Interestingly, every single item of it was copied ditto from the Rishi Kapoor starrer KARZ. Yet, the producer of Karz, Subhash Ghai, appeared in this copied version. Right from Cricket Matches to TV Reality shows, the actor, actress, producer, director, everyone whole heartedly attempted to promote the movie at every stage.

Despite being a ditto copied version, the movie managed to reap profits. Even people like me who are critics and hate such copied attempts, watched the movies in costly multiplexes, spent a big amount of money on tickets, another big amount on costly pop-corns and parking fee at multiplexes, just to discover that the movie is too hopeless.

Even the ever repeated dialogue was copied from the famous book “The Alchemist” – “If you dream of something, the entire universe conspires to attempt to make it meet with you”

Now the producer, director, actor and all knew that the movie is copied – maybe they had the idea of improving the old classic. But the fact is that it was targeted towards the younger generation of audience, who may have not seen the original. People who have seen the original movie would know that the latest one would no where stand in front of the old classic.

The same thing goes on in the financial world. Every month, a new set of young guns start earning. After some time, when they get sufficient money and savings, they start pondering about what to do with it? Shop, Eat, Celebrate? The question finally leads them to the stock market. Everyone believes that they are there to make money, and it is only the risk taking ability that brave hearts like them need to develop, so that their profits keep on increasing.

The agents, like the film promoters, are there to (mis)guide them. They can open demat accounts for them, assist them with their valuable investment advice and keep collecting their brokerage.

If the person is lucky, he makes profit. It usually takes him a long time to discover what is good and if he is in real profit or not. By the time he discovers it, the broker has collected a big amount of profit from him. It is only then this person realizes that the best ways to invest in into index fund or Exchange Traded funds (ETFs), or an alternative is to be LUCKY with you stock picking skills.

Someone asked me in my previous post that if Index funds are the most efficient alternatives, then why is everyone not investing only in Index funds? To understand this, one should understand how the ETF’s and Index funds are brought into the market. Some details are covered in these articles: ETF and this article

The people who are issuing (selling) ETF shares are the ones who are actually buying the shares of the constituent companies. They do it in large numbers, so they get the shares for cheap. They then create the ETF or Index fund units and sell it in the open market for a bit higher price. Since they trade in huge volumes, they make decent profits.

Unfortunately, as long as the newcomers will keep entering the stock markets with their novice level of knowledge, they will continue to be living under the false impression of stock picking skills and money making strategies. In the long run, one can only be lucky or he will later discover that what he has been doing was not worth as compared to the indices.

Be it a movie, or a cricket match or a casino or even betting on horses and dogs (in western countries), the world is full of examples where newcomers join the stream with a hope to make money – but all meet the same fate in the long run. The sooner we realize our luck and limitations, the better!
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