Are investors con-prone?

Overwhelming greed seems to pip investment rationale, even to those who are better equipped with the fundamentals of investment

Each passing day, newspapers and TV channels report how some unscrupulous business house offering miraculous money multiplying  ‘opportunities’ to the public vanish into thin air, leaving investors licking deep wallet-wounds. Some retired senior citizen even report to have lost all their hard-earned life-time savings, which they had invested in various get-rich-quick schemes. Reading such reports, one wonders what is it that makes such ‘scheming’ business houses successful, although the press has been reporting Ponzi schemes which inevitably do the vanishing trick leaving investors in the lurch. Don’t such repeated acts of financial cheating make us investing folks all the more wary of tall promises and urge us to ask ourselves-how can these businesses offer such high returns in such a challenging business environment  and deteriorating domestic economic conditions? 
 

The success of such schemes can be attributed to several layers of urban and rural population which have been rising slowly but steadily from their hitherto hand-to-mouth existence, to reasonable earnings and living standards due to changing economic fortunes. They have investible surpluses (however meager), which they would want to put away for a better future, but do not have the basic knowledge of investment, let alone financial prudence!  This translates into thousands of lower middle class households, eking out a living in Tier-III towns, having small surpluses that are looking for a good return on their small savings.  Private finance firms promoted by business houses exploit these conditions and plant ideas of how their schemes could help them beat inflation, whereas bank fixed deposits (FDs) offer interest rates lower than inflation, eating away into their savings!
 

Every Indian faces challenge on account of inflation eating away into interest bearing, but relatively safe bank deposits. However, the fact remains that the more important aim of any investor - capital protection - is thrown to the winds, while attempting to beat inflation! Loss of capital is one aspect that every investor, big or small, needs to be concerned about.   Return on investment is not the only criteria – return of investment is paramount.  This is because while comparing investment options, a small investor takes this as given and does not even think of such tragic eventualities as loss of capital.  In reality, this question ought to prop up in the minds of small investors. Each time an offer with super-duper returns on their investment are offered to them!  Another question that investors do not ask is: How come these business houses can offer such high returns in a competitive business environment? Obviously, overwhelming greed seems to pip investment rationale, even to those who are better equipped with the fundamentals of investment.
 

There is one important aspect that unscrupulous scheme offers bank on - that investors would not mind investing a small portion of their investible surpluses in such schemes.  It is tempting to try it out with smaller amounts and then invest higher amounts in such schemes, if they taste success.   Invariably, this trick seems to work for conmen! Several small investors trying out their hand at such get-rich-quick schemes (offering as high as 5%-10% per month at times), translates into cash flows of several crores of rupees for such business houses!   Most of the investors barely recover their invested amount. Yet, what is more intriguing is that once they get returns for some months initially, their faith in the scheme soars sky high, prompting them to invest more!
 

A simple back-of-the-envelope calculation would tell us that even @10% per month, in three months, they have got only 30% of their investment back. Although it is too early to judge them on return of capital, there is a false sense of belief built around returning them 10% per month, when banks cannot offer that even in the whole year! What is more, they even rope in other relatives and friends to invest in the scheme citing their own ‘success’.  This is indeed a disastrous step-risking souring of relationships, in addition to the company defaulting on interest or principal repayments.
 

The basic problem is that most of us undergo education at schools and colleges, in which “investor education” is not taught-this is not part of the syllabus in any stream.  Fundamental aspects of investment such as return on investment, safety of invested amount, liquidity and capital appreciation, investor rights etc. are least understood subjects and are learnt only the hard way – by losing money! The one who puts all his savings into such schemes needs to learn about the adage of financial prudence- “Do not putting all your eggs into the same basket” – and remember it when it mattered most. 
 

Several such small investors make fly-by-night financial product offers hugely successful by ‘investing’ their small and big investments. Conmen regroup and form other financial syndicates to come back again to the public to raise monies, only to vanish again and reappear in different avatars.  How long will this conning activity continue? Both widespread investor education and strong regulatory controls on raising public moneys are the need of the hour.  Each and every one needs to know that ‘too-good-to-be-true’ schemes are just that – Scams!  One fervently wishes that enlightened members of the public ought to pledge not to support such schemes with even one rupee of their hard-earned money.   Instead, one could donate that rupee saved for a good cause, if one would like to kiss it goodbye anyway!
 

Social entrepreneurs and activists have been educating the lay public through street skits. Magicians have been debunking fake religious heads for performing “miracles” that are nothing but a sleight of hand. They are spreading the word not to repose “blind faith” on those claiming supernatural powers. Similarly, some financial “wizards” seem to be offering “miracle financial products” to struggling masses and they too ought to be debunked in a similar manner.  More recently, ad campaigns on television channels on several social ills, for example, consumer protection body, has launched a series of successful “Jaago Grahak Jaago” ad campaigns on all TV channels. Investor protection campaigns need to be propagated on the same lines. 
 

On one hand, tighter regulations are needed to ensure that any firm raising money from public gets his proposed scheme approved from the Government before embarking on the offer. Also, the Government through the various branches of the Public Sector Banks could also take up this cause of investor education and spread prudent financial decision-making skills to small investors so that the savings can be brought into the mainstream economy instead of losing it all to scam operators.    Instead of promoting complex financial products like mutual funds, investment-cum-insurance products, which are all too confusing even to the financially savvy amongst us, investment programs should be structured by SEBI, RBI and other regulatory bodies jointly.
 

Jaago Niveshak Jaago!

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    COMMENTS

    sk singh

    6 years ago

    Can somebody explain : some body purchase share @X and same share is sold by somebody @X - both hopes they are doing good.....but somebody is loosing and somebody is gaining.......is it not speculation ?.......

    REPLY

    Nilesh KAMERKAR

    In Reply to sk singh 6 years ago

    Here is an attempt to explain, hope it is helpful

    1) Selling a stock that you own, for raising required cash for meeting expenses cannot be described as speculation, irrespective of the price at which you sell. Price in such cases may not matter.

    2) Selling a stock because looks overvalued as per your analysis or has reached your target price for selling is not speculation. Even though it keeps on climbing after you have sold. Every seller carries this risk of selling below the peak price.

    3) However, selling a stock 'short' or selling an owned stock with the sole intention of buying it back, because you expect a fall in the price of that stock / or fall in the market leading to a fall in the price of a stock - is most certainly speculation.

    Being forced to sell a stock for meeting margin calls are necessarily an outcome of speculation having gone wrong.

    Vaibhav Dhoka

    6 years ago

    When there is GREED there is in built HIGH risk.No investment avenue is risk free.But in many cases cone men get support from regulator or police.It serve their purpose and Investor is at receiving end.

    Vinayak Bhimarao Mudholkar

    6 years ago

    There is an increase in the rate of crime not only in finance but everywhere. Are we going the Egypt way?

    Nilesh KAMERKAR

    6 years ago

    Con-prone investors is an oxymoron.

    REPLY

    nagesh kini

    In Reply to Nilesh KAMERKAR 6 years ago

    Nilesh - figures of speech matter little.
    It is greed pure and simple whether in day trading,speculations or money multiplying ponzi schemes. Investor does it with his eyes open. The con-man is out to earn his living.
    "Duniya jhukti hai, jhukanewalla chaheye." The aam janaata is the duniya and the conman the jhukanewala. No oxymoran!

    Nilesh KAMERKAR

    In Reply to nagesh kini 6 years ago

    Dear Mr. Kini,

    Day trading, out right speculation and money multiplying ponzi schemes are not investments. And people indulging in such reckless ventures cannot be referred to as investors.

    Investors by definition are careful. Benjamin Graham, the father of Security Analysis has defined investing as: " An investment operation is one, which upon thorough analysis, promises safety of principal and an adequate return. Operations not meeting these requirements are speculative".

    Now, Mr Kini Please tell me if Con-prone investors is not an oxymororn . . .

    pravsemilo

    In Reply to Nilesh KAMERKAR 6 years ago

    To be frank, this definition was again discussed in his book "The Intelligent Investor". It was discussed that media has manipulated the definition of investors by using the terms like "reckless investor.... rushing in on the buy side". Even today when newspapers talk of ponzi schemes (or even stock markets), they use the word investor.

    If con-prone investor is an oxymoron, then careful investor should also be an oxymoron, because no matter how much skilled one is or how much research one does, there is still a risk.

    Nilesh KAMERKAR

    In Reply to pravsemilo 6 years ago

    Yes, this definition of investing appears in the book 'The Intelligent Investor'.

    Investing is about managing risks, not about avoiding them. And risk is defined as probability of a loss.

    When capital is deployed in a business enterprise, it entails risk. And this risk must be borne by someone. Whereas those who cannot be classified as investors undertake to play those odds which are mostly unnecessary and are created not because of any productive economic activity. (like in gambling)

    Investing is about underwriting /assuming risk at a favourable price on a group basis so as to mitigate the risk of loss of principal and earn an adequate return.

    Just because media classifies participants in ponzi schemes as investors. It doesn't make them investors.

    pravsemilo

    In Reply to Nilesh KAMERKAR 6 years ago

    I am sorry. I agree only partly to your definition. I don't agree with the "loss of principal" and "adequate return" aspect.

    Consider this - When the HUL buyback was announced at 600/share, it was trading at 470 something. Someone could have bought the share hoping that he could sell at 600. He is taking the risk of price not reaching 600. But in the end his principal is intact and he has earned adequate return. So is he an investor?

    Now consider this - Yes Bank was a good stock fundamentally, until the promoter tussle came out in public. It is still a good one. While it was quoting at 250-300 odd in 2011, one could have bought it hoping to earn adequate return. Now if for some unforeseen (personal) reason if he has to sell it and book losses (after the promoter tussle) would he not be classified as an investor just because he has lost principal despite he doing a fundamental check?

    Same thing can be said about Bank of Baroda, Dena Bank, BHEL which hit 52 week lows a month back and now are around 20-50% down from that price. If I would have bought the stock a month back would that not make me an investor just because my principal has eroded. Had I purchased them now will that make me an investor?

    It should be the intent and ideas behind investment rather than terms like loss of principal and adequate return to define an investor.

    Nilesh KAMERKAR

    In Reply to pravsemilo 6 years ago

    Your interpretation is different from what am trying to say.

    The limited point which am trying to make is, participants of ponzi schemes do not exercise due caution and hence can't be called investors.

    Because investors by definition have to be careful, they avoid being con-prone. And more importantly con-prone individuals driven by greed are most certainly not investors.




    Vinay Joshi

    In Reply to Nilesh KAMERKAR 6 years ago

    What do you say on G-Sec? Are YOU NOT CONNED? Will you admit to be an 'oxymoron', in your own words, i'm not stating anything!

    Regards,

    Nilesh KAMERKAR

    In Reply to Vinay Joshi 6 years ago

    About Govt bonds being a Con . . . I have nothing to say, I give up Mr. Joshi.

    Why traditional Indian investor is not interested in equities and other products

    Five business news channels, so many newspapers, magazines and websites would not be able motivate traditional Indian investor to invest in equity and other variable return products unless the investment climate in the country is not changed significantly

    He is not worried about his investments beating inflation. He abhors equity and believes it to be a gamble. Mutual funds are a strict no-no for him. He believes that investments in physical assets are as important as financial assets. He chases bank deposits and believes that insurance in an investment and not just a risk covering instruments. Media’s attempt to change his mind set towards investments has hardly worked. He continues to be the same over generations. There are no prizes for guessing it right. Welcome to the world of the traditional Indian investor, the investor who has existed for ages and has been successful as well. He has contributed significantly to the economic growth by generating one of the highest savings in the world. The recent events in the financial markets have brought focus back to this kind of investor. The turmoil in the market has shifted focus back to the strategy of this investor.
     

    Before moving ahead let us look at traditional Indian investor and his investments. Investors generally make investments in two kinds of assets- financial assets and physical assets. Financial assets are bank deposits, insurance and equity while physical assets are gold, real estate and some white goods used on a day-to-day basis. As per the data released by the Reserve Bank of India (RBI), investors in the country invested in financial assets as follows over years:
     


    From this, it can be safely concluded that the majority of Indian investors are extremely conventional in approach and have no out of the box thinking. The investor has stuck to the same investments over a period of time. It is very obvious that bank deposits and insurance have been the most preferred investment option for the traditional investors. Shares and debentures are hardly preferred by the investors. The highest savings in shares has been around 7% which has fallen substantially now. The RBI data related to projection of savings  during 12th five year plan gives a bigger picture of how savings are going to be in financial and physical assets over a period of five years ( Refer: table below). It is clearly evident that bank deposits will continue to be as high as 50% of total savings. The share of insurance in total savings is also going to remain strong while that of shares and debentures will once again be consistently low.
     


    What is the DNA of traditional Indian Investor?
     

    Looking at the data and the nature of the financial savings made in India, the obvious question that comes to mind is why do Indian investors invest in traditional financial assets or to be more precise, ‘sarkari’ kind of assets? Why is bank deposit more important for this investor than investments in shares? Is the investor worried about volatility and is completely risk averse? The answers are both yes and no. Majority of Indian investors struggle to save because of low-income levels and hence do not want to risk their hard earned money, so they invest in traditional investment assets. It is not about financial education. In India five business news channels, so many newspapers and magazines and websites keep on bombarding investors with need for investment in equities for consistent wealth creation but this has somehow not worked. Therefore, this category of investors is fairly aware about investment options. The traditional Indian investor in keen on preserving his wealth as the ability to take risk is limited.
     

    There is another group of investors, which is affluent and can take risk, but has learnt over a period of time that investment in variable investment products can be rewarding but also killing many times. This investor has been investing in the equity market but gradually, he seems to be disillusioned. The bitter experience over a period has made this investor realize that it is better to keep away from equity. The proof of the pudding is in the eating and you cannot convince an investor to invest for long term, if the returns are not good.
     

    The traditional Indian investor is a very intelligent breed and knows his interest very well. The famous saying that ‘a bird in hand is worth two in the bush’ drives him. Is he doing harm to himself by not investing in equity and other variable return products? The answer is no, as long as he is meeting his financial goals. In the current market turmoil, he is sitting pretty and is not worried about what next.
     

    Is the traditional Indian investor good for Indian economy? 
     

    While some may argue that the traditional Indian investor is doing harm to himself, by not investing in risky, but potentially rewarding products, the fact remains that he is a boon to the Indian economy. He is a cheap source of capital and helps the economy channelize necessary savings for future investments. The deposits made by him help utilize the resources for investments in the economy. Debt is a comparatively cheaper source of capital compared to equity, and investors in India have contributed to this in a significant way, by making investments in debt products. The physical savings made by these investors sometimes become unproductive and needs to get channelized for more productive usage.
     

    Is the investment profile going to undergo changes in India in the days to come? It is difficult to answer this but the fact remains that investors cannot be motivated to invest in equity and other variable return products as long as the investment climate is not changed significantly. Volatility is a part of equity investment but manipulation needs to be controlled. Better corporate governance and confidence building measures can bring more investors into the fold. But it looks difficult in the near term. The ‘Traditional Indian investor’ is here to stay.

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    COMMENTS

    subbu

    6 years ago

    Iam a financial advisor, people tend to ask for good return on their investment, I used to tell that if they want to invest for not less than five years, I suggested them mutual funds investing in equities. Now mutual funds gives negative returns, if they had invested before five years.So,they have to invest only in FDs only for better capital return.

    anurag

    6 years ago

    The author is just another aam admi trying to prove he is not.
    Let me put some factual arguments why stock market does not find any takers in India

    1) Corporate Governance and Lack of faith in companies:
    Most of the 7000 stocks trading in India do not have proper accounting practice and they bump up some of the numbers.

    2)Dearth of quality:

    Nearly all the companies offer commodotised products and services which can be easily replicated. Investors need to approach Bottom-top thematic approach.

    3) Manipulation and speculations:

    It is no secret that practices like circular trading and black money of 1 trillion dollar are making their way onto trading. Gullible investors lose their money and prefer FD ,real estate and Gold

    4) Aam Admi never made any money in stock market as the market made strides from 4000 to 21000 just in 4 years of 2003-07. Rest of the period , stock market absolutely gave no returns for long investors in NIFTY.

    5) Most of the money made in market in India requies use of derivative and intra day/short term technical charts which are used by few specialised traders and common people cannot do it

    6) Mutual funds do offer real potential to common people but they are very selective and requires again lot of due deligence

    Panna Thakkar

    6 years ago

    To make the Tradational Investor to even think or dream of to come to the equity cult. The Govt, Stock brokers etc should work hard to be transparent.
    There is curroption everywhere there is cheating everywhere stocks lying in demat a/cs are used by brokers.
    Why then the tradational investor ever think beyond this safe comfort zone?

    REPLY

    Gautam Haldipur

    In Reply to Panna Thakkar 6 years ago

    If as you say there is cheating in totality, the system ought to have collapsed long ago. The fact is it has not & the reason being it is vibrant, dynamic & reasonably strong. If you check your Demat A/c regularly & your Instruction stationery is with you, then you can opt to sue your DP & seek fair compensation. It is possible that it cud have happened, but the thought is honestly far fetched.

    I am glad to see you ask why beyond the Comfort Zone? Here is the answer:
    Comfort Zone, not just in investing but in every aspect of our life tends to bring in complacency & that is what is the beginning of a downfall.
    If people understand & can perceive the future with Interest Rate Risk, Systemic Risk & several other associated factors, they will automatically venture to think beyond the Comfort Zone

    Gautam Haldipur

    6 years ago

    Dr.Gautam Haldipur, Hubli, Karnataka

    Very interesting article indeed. Having invested & worked with different financial products across the spectrum, I would like to make the following observations:-
    1. The traditional Indian Investor largely looks for GUARANTEED RETURN PRODUCTS.
    2. As it stands today he is in a COMFORT ZONE which he obviously does not want to transgress.
    3. The tendency/willingness to take calculated risk is missing which becomes Crystal Clear from the Excel Charts above.
    4. His pristine love is for F.D.'s, Real Estate & Gold.
    5. Going forward as we integrate with the Global Economy (which I think is irreversible now)the traditional Fulcrum of Investment thinking is slowly but surely going to crumble; what with Deposit rates going down, Inflation perking up & the purchasing power of people going down. Real estate is artificially overvalued without justification & could burst sooner or later. Though Gold is likely to go up, its returns parameters are going to be subdued.
    6. The earlier the Investor comes to terms with this reality the better. This truth needs to be taken to him with proper qualified advisory. There is no reason why his mind set cannot change, the percentage though may not be great. With proper Risk Profiling done it is possible.

    REPLY

    Vinayak Bhimarao Mudholkar

    In Reply to Gautam Haldipur 6 years ago

    Sir,
    I am also invested in equities....I do love to take calculated risk; but your calculations go totally wrong when there are frauds &/or mis-goverance....Tell me few names of brokers who don't mis-use the POA....There is no basic safty !!!....India is full of frauds.

    Gautam Haldipur

    In Reply to Vinayak Bhimarao Mudholkar 6 years ago

    With utmost regards to Shri Vinayak Mudholkar, may I request that I be read correctly:-
    1.Calculated risk is a relative term. If you like to believe your broker with implicit unquestioned faith, then yes this definition changes. A POA would obviously be given in a PMS & yes it is open to abuse. There are other ways we can deal with this.
    2.Study the subject thoroughly & build your stock valuation parameters based on your individual risk profile; most likely you may not go wrong save for for a few blips here & there. You cannot be 100% right all the time. The learning curve in this never ends; it is an ongoing process. After 38 years of investing, yes! I am still learning a lot more of new things. Well! it has taken me close to 20 years to imbibe the art of investing with care.
    3. Put in simple terms if you can manage a 25% post tax return on your investment, that will be a great deal.
    4.As far as the name of a broker is concerned:- My personal experience with HDFC Securities Ltd.has been fairly good.This online platform is user friendly, fairly good & exhaustive. Most of all its security features are good.However it is marginally more expensive compared to your regular brokers.Good things rarely come cheap.As a Investment Planner I have recommended this to my Client Friends. Believe me, I am yet to hear any of them complain any wrong doing there.As a friend, may I suggest you try this?
    5.Last but not the least, please do not despair. There are good things that coexist with the bad things. Things are far better than they were about 20 years ago. To say that I have not had problems would be unfair. I continue to have my share of problems. The only way out is to fight your way out methodically & that is what I precisely do!

    Vinayak Bhimarao Mudholkar

    In Reply to Gautam Haldipur 6 years ago

    Thank you for the explanation & suggestions....Once again thanks.

    Gautam Haldipur

    In Reply to Vinayak Bhimarao Mudholkar 6 years ago

    Thank you Sir for your kind reply. I hope it was of use to you.

    Panna Thakkar

    In Reply to Vinayak Bhimarao Mudholkar 6 years ago

    Yes The brokers have misused Power of attorney and have used shares lying in demat a/c .
    Where is the saftey ? Why people will come to stock market.
    All big names are involved in this thing.
    Everywhere there is fraud cheating and lootmaar.
    and Govt. is silent because these brokers are funding them

    VGANESAN

    6 years ago

    i AM AGREEING WITH YOU.At the same time i like to mention the indian investor is willing to take and accept political risk currency risk country risk natural calamity like flood and drought and business risk all this put together 95 percent. But in india the 95 percent risk is from manipulation and speculation and
    above mentioned risks are only 5 percent.How one expect our savers to put money in equity

    REPLY

    Nilesh KAMERKAR

    In Reply to VGANESAN 6 years ago

    1) As employees, we are willing to risk our career and future on someone else's enterprise.

    2) As customer's will are willing to consume products and services offered by these businesses

    3) We will just stand and see foreigners own significant chunks of our businesses.

    4) We will also see foreigners set up their business operations in our own country. And some of us will risk our careers there.

    5) We will spend our entire lives in India as proud Indians.

    6) We will also boast of India's progress & prosperity over the past six decades.

    But when it comes to profit from India's growth we start imagining call sorts of excuses. We become the biggest prophets of doom and gloom.

    Invest in Indian Businesses and profit from India's growth. India will continue to grow. Have faith.




    Vinayak Bhimarao Mudholkar

    6 years ago

    If I am not wrong, during 2001 - 2003 bear market F & O was just introduced so there was a time correction as against a sharp price correction during 2012-2013. According to me during the next bull run the same F&O will lead to sharp price appreciation irrespective of fundamentals.....If you want to become wealthy grab the untouchables!!!....fundamentally sound but highly priced stocks won't make you wealthy.

    REPLY

    Vinay

    In Reply to Vinayak Bhimarao Mudholkar 6 years ago

    That's a pretty nasty suggestion.
    Would you buy a hotel that serves rotten food and should be closed down any time soon?

    Why would you recommend people to compromise on fundamentals?

    Shit like this is why people lose money. They think anything and everything will go up and keep buying until everything crumbles.

    Vinayak Bhimarao Mudholkar

    In Reply to Vinay 6 years ago

    I must explain what I mean by "untouchables". During the last bear market there were stocks like Pennar Industries, Diamines & chemicals. The Book Value of both stocks was negative for few years; so they got butchered but when they recovered; they became multibaggers....The eps growth of HUL from 2000 to 2012 is just 5%; but the P/E & P/B ratio is very high. When the tide turns the distressed equities outperform. That is why Tata Capital & Icici Ventures set up a distressed equities fund & expect 25% return!!!....I am not to say each & every distressed co. will turnaround....Do you know - Filelity Liveraged Equities Fund?....It is one of the successful of its kind.(S&P was beaten by it with a 17% average return)

    hasmukh

    6 years ago

    Very good Article to show that Investors are now (in last few years), shying away from Equities.
    I am investing in shares since last about 40 years and was quite satisfied (except during last 5/6 years or more). I am investing in IPOs, Rights and buying from market. But am a big looser from my fresh investments made in last few years. Reason? To me (i) Excessive speculation and manipulation. It appears all these F & O s have made very big damage and same must be stopped immediately (ii) Cunning Issue Managers & Advisors, who advise Cos. to price IPOs/Rights aggressively (and selling with Big Advertisements), leaving the investors to only cry. I will be interested to know experience and views of other Investors too.

    Pantulu

    6 years ago

    Right now common people have no interest because it is only speculators who are reaping benefits at the cost of gullible people. The share prices do not reflect the companies performance with only a couple of exceptions. There is a need to link the share prices with performance parameters so that ordinary people will know where to invest.If the market is left in the hands of speculators no improvement is possible.

    REPLY

    Vinayak Bhimarao Mudholkar

    In Reply to Pantulu 6 years ago

    "To link the share prices with performance parameters" is the best idea!....no doubt!....but we are to live in the world which we don't like.

    Nilesh KAMERKAR

    In Reply to Pantulu 6 years ago

    While investing in stocks, being gullible is a major handicap. Sceptics tend to survive and prosper; to be sceptical is a necessary precondition for becoming a better investor.

    Vinayak Bhimarao Mudholkar

    6 years ago

    If you look at the eps growth of HUL (one of the most defencives)since 2000 to 2012 it is roughly 5%(cagr) which is equal to the average after tax returns from bank F. D.(if you are in the 30% tax bracket.) If you want anything beyond that try to withstand volatility!....Though ideally speculation is untouchable; in practice it is not so!!!

    Nilesh KAMERKAR

    6 years ago

    Investing in market linked investment products is a matter of individual interest. But before everything else it is an act of faith. If done correctly it yields disproportionately higher rewards. Contrary to popular beliefs, investing like any other profession calls for putting in lot of hard work & continuous learning. – While most people would love to have superior returns, not many are keen to work towards it.

    REPLY

    Vinayak Bhimarao Mudholkar

    In Reply to Nilesh KAMERKAR 6 years ago

    Sir,....I always appreciate your views....In addition to hard work & continuous learning one needs lot of courage because stocks with good fundamentals & relative strength crashed by 50-60% from their respective 52 week high(eg. Yes Bank, Dena Bank)

    Nilesh KAMERKAR

    In Reply to Vinayak Bhimarao Mudholkar 6 years ago

    Agree. As Benjamin Graham said

    "Have the courage of your knowledge and experience. If you have formed a conclusion from the facts and if you know your judgment is sound, act on it - even though others may hesitate or differ."

    pravsemilo

    6 years ago

    I beg to differ. I think the averseness to equity is also due to financial education. It has been embossed into our minds that equities are risky.

    In the circle of people that I know, there is hardly anyone who invests in equities and is even aware of mutual funds. I have trouble explaining the concept of SIP to them. The generation above me never invested in equities and so didn't I in the early part of my career. Those who did coax me to invest in IPOs and do short term profit booking - don't bother about the short term capital gain. My colleagues have bought homes and invested their savings in it. In fact, you get criticized for taking a term plan.

    I do agree that Indian savers give importance to safety, but they are not aware of financial and economic jargon like inflation, asset allocation etc.

    Gray Cement

    Here is how Holcim, Ambuja and ACC have repeatedly short-changed investors. Those making a noise today abetted the previous cases of  malfeasance

    Ambuja Cement Limited (ACL) announced a layered deal to amalgamate Holcim (India) Pvt Ltd, with itself under which ACL will acquire a 24% stake in Holcim India by paying it Rs3,500 crore. This will give Holcim an additional 10.85% stake in ACL, while giving away a 19.42% beneficial interest in ACC Ltd. Then, when Holcim and ACL are amalgamated, Ambuja Holdings will end up with a 50.01% stake in ACC.

    Anil Singhvi, former chief of ACL, calls this a fraud on minority shareholders, because it amounts to taking out Rs3,500 crore of cash from ACL by paying a premium, while diluting its shareholding by 30%. The Securities & Exchange Board of India (SEBI) has chipped in saying it proposes to examine the deal closely from the minority shareholders’ perspective.
    If SEBI does step in, it will be for the first time in two decades of complex manoeuvres involving Gujarat Ambuja, ACC Ltd (once a Tata company), Holcim and their group companies, which invariably gypped minority shareholders. The only difference would be that Anil Singhvi, who used to be a part of those deals, now wears the hat of a good-governance pundit.

    In 2000, Gujarat Ambuja Cement acquired a 14.5% stake in the Tata-controlled ACC, with a Rs925-crore, two-stage ‘strategic alliance’ designed to give minority shareholders a raw deal. The shares were acquired at a 150% premium to market price without the mandatory open offer to retail investors, using a loophole in the takeover code. It caused such a furore that takeover regulations were rewritten, but the companies got away with the deal.

    Then, in 2005, another complex structuring saw Swiss cement major, Holcim acquire a 67% stake in Ambuja Cement India Ltd (ACIL) and the single largest shareholding in ACC. It was again touted as a ‘strategic alliance’ rather than a sale. Ironically, the transaction was also at Rs370 a share. Anil Singhvi presided over that deal. This was immediately followed by the sale of Everest India Ltd to the Adani group. At that time, I had speculated that the founders Narottam S Sekhsaria and Suresh Kumar Neotia were looking for a way out of management and an amicable separation of businesses. That happened in 2011 with the transfer of a small stake. For minority shareholders, there are three lessons. First, that they get a raw deal from Indian promoters as well as foreign acquirers. Second, multinationals can play a long game with overseas transactions that will never be known to the public, since Indian regulators are easily persuaded not to dig deep. Third, minority shareholders usually end up accepting that they are never co-owners and have to be satisfied with getting less, so long as they still make money; otherwise, they sell and go.

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