Knowledge and Awareness


A few tips gleaned from books:

1) Investing is not a zero-sum game. People tend to think that money is sloshing around the market - when one buys, another sells. Therefore, it seems as though the net amount of money in the system is a constant. But at every transaction, money is bleed off as taxes and brokerage fees. The system, in chemistry terms, is open, not closed. Money is lost every time one invests - but who's money will it be?

2) Whenever one buys shares, one is proactively supporting the company, with a belief in its future endeavours. So it is contradictory to buy with an intention to sell quickly - flipping/ trading - as one assumes that the company shares will rise then drop i.e. no confidence in the company's prospects, why buy in the first place?

3) Research - by who? - had shown that long-term investing beats short-term speculation hands-down. The former will always yield greater returns. (Debatable, source not known, unexaminable)

4) Buying funds may not be the wisest recourse. Since all fund managers have access to the same pool of information, the likelihood is that they'll behave similarly under the influence of common factors. i.e. don't trust them too much. Besides, they, like you and I, are only human beings.

5) Every investment is risky. Do the small-time investors have the wherewithal to go against Wall Street Princeton/Harvard/Yale/Cambridge/Oxford graduates working in reputable banks like JPMorgan, Citibank etc? Can they defeat super computers which can buy and sell in mere seconds to gain max profits?

6) Investment psychology, micro- and macro-economics greatly affects the stock markets. Technical analysis is merely part of the story. It isn't the story in and by itself.

7) The amount of stuff that I'm woefully unaware of can fill libraries worth of books.


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