Friday, August 28, 2015

Financial Porn revisited

In my last article, we saw an example of financial porn. Read it here. In this post,  let us see the relationship and why financial porn is so called.

Imagine, you are watching a porn movie. What is your second reaction (first reaction is highly subjective and hence we jump to second reaction). Let me guess - "Wow, how did they manage it?". You get super excited due to both the reactions. However, the problem is you cannot implement it. Rather, you cannot recreate the scene yourself. The reasons could be:
  • The actor's motivation and energy is fueled by monitory benefits
  • The actor is helped by steroids
  • There are various cuts and edits before you see the final movie.



Now, imagine, a person comes and says on TV: "you must invest like Warren Buffet. He holds on to his stocks for almost forever. He purchased X company for $2 and now it is $2500!!!"

Excellent piece of advice!!! You get inspired and excited. However, what can you do with this advice? Nothing, nothing at all.
The reasons could be:
  • WB has staff of research analyst. Do you?
  • WB has enough money in 'spare' for his retirement. His retirement can be funded by his business and dividends. He can afford to risk his capital by buying penny stocks or future growth stocks. Can you?
  • He has guts of steel (due to his experience in the market). Do you?
Photo Credit: Flickr - Jaysin Trevino


On Monday, 24th, everybody was shouting "end of bull run", "market will remain down for next few days", "market will fall another 1k in next 2 days", etc. On Thursday, market (sensex to be precise) went up by 500 points and again everybody started shouting: "bull is back", "20 stocks that can give 18% in next 3 months", "take long calls", "take short calls", etc.
If a sane investor listens to all this things, he will go crazy.

So again, the question is what should you do? The counter question is - "what should be done for what?". We cannot do anything about market. We cannot control international sentiments. The only thing we can do is take care of our investments by comparing our goal sheet and investment sheet. If your goal is achieved, you should not be in market anyways. For others, there is no other option that staying calm and be in market.

Ashal has rightly said, "Do not be distracted by market movements. MDBSC (My Dull and Boring SIPs will Continue).

What does this article convey?

It conveys that I can write financial porn too :-)


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