Man and the market

Ever wondered what the similarity is between a human and a stock market? Well, I think both are similar in many aspects. Stock markets are very sensitive. Probably more sensitive than a human being. The market movement is like your moods. Your mood rises on hearing good news and falls on hearing bad news. Markets react the same way. Any small piece of info could tickle the market. It could be about a price hike, tax cut, interest rates, government decisions and what not. It reacts even to the weather changes!!

Humans love gossiping. So does the market. Not always you have genuine news. And in today’s world with media so much entwined with our lives, the news spread real fast, like a wild fire. Be it genuine or fake, there will always be people who are ready to spread it. Some having ulterior motives, some unknowingly and some just for the sake of it.

If there is a fake good news and more people are fooled (or fool enough) to believe it, they create a bubble, making the markets go bullish. And when there is a bad news, it is the reverse. As an individual investor your success partially depends on how you react to the news. Why partially? Because you don’t have full control on the market. If the market goes down, your net value might go down as well.

Investing in stock is like gambling. It depends on what cards you have and how well you play your cards. If you have a dealer like Harshad Mehta or Ketan Parekh, you have more chances of losing. So, don’t get carried away by rumours. Exit on a rally, enter when the market is stable. Use your head and not your heart. This philosophy leaves you unscathed in a volatile environment.

Here is a small story on how stock markets work. Thanks to the author and to the person who forwarded the mail (long live mail forwards!!)

A cold winter!

It was autumn, and the Red Indians asked their New Chief if the winter was going to be cold or mild.

Since he was a Red Indian chief in a modern society, he couldn't tell what the weather was going to be.

Nevertheless, to be on the safe side, he replied to his Tribe that the winter was indeed going to be cold and that the members of the village should collect wood to be prepared. But also being a practical leader, after several days he got an idea. He went to the phone booth, called the National Weather Service and asked 'Is the coming winter going to be cold?'

'It looks like this winter is Going to be quite cold indeed,' the weather man Responded. So the Chief went back to his people and told them to collect even more Wood.

A week later, he called the National Weather Service again. 'Is it going to be a very cold winter?'

'Yes,' the man at National Weather Service again replied, 'It's definitely going to be a very cold winter.'

The Chief again went back to his people and ordered them to collect every scrap of wood they could find. Two weeks later, he called the National Weather Service again.

'Are you absolutely sure that the winter is going to be very cold?'

'Absolutely,' The Man replied. 'It's going to be one of the coldest winters ever.'

'How can you be so sure?' the Chief asked.

The weatherman replied, 'The Red Indians are collecting wood like Crazy.'

Now you know how stock markets work!!!