15 Dec Rajesh and Rashmi ******
Rajesh was a star performer. He seemed to do everything right. Good in studies and good in sports; moreover a great person.
One day while Rajesh was commuting, a woman who was standing nearby collapsed. Rajesh was the only person who stepped up to help. He sprinkled some water on her face, got her glucose and took her to her home.
It turned out that she was a sex worker and lived in the town’s red light area. Just while Rajesh was leaving after having dropped the woman in her house, the police raided the place. There was huge commotion, the media arrived and took several pictures.
In one picture Rajesh was spotted. All of a sudden Rajesh fell in the eyes of people. His value plummeted. Had he been a stock, he would have been reduced to a penny stock.
Such is the power of sentiments. It neither has patience nor the ability to analyse a given situation. It is simply reactive.
This is what happens when sentiments turn against a market, causing that market to fall.
In the same bus in which the sex worker had collapsed, there was a pretty girl, Rashmi. She had observed Rajesh’s kindness and quickly gauged his character. While Rajesh was being shunned by his erstwhile friends, Rashmi offered her hand in friendship. Soon their friendship blossomed leading to their getting married.
Rashmi managed to marry one of the most happening bachelors while the others who were driven by sentiments lost him to her.
This is how in a Bear Market, an investor can own high quality stocks at very low prices.
Then, one day one of Rajesh’s friend read the article in which Rajesh’s picture had appeared in the media, and realised that the article, in fact, hailed Rajesh as a good samaritan for having helped a sex worker. The article in fact said that Rajesh was awarded ‘Man of Substance’ by the government. The negative sentiments against Rajesh were thus an outcome of half knowledge; the picture in the media. When the truth emerged, sentiments changed; and Rajesh’s reputation soared.
This is exactly what happens when sentiments turn positive, and markets start galloping into a Bull Run. Every stock begins to soar.
It is people like you and me, the buyers and sellers, that move markets in either direction.
Despite emotions, despite volatility, despite people’s mood swings, good companies, just like Rajesh, keep going about their work in an orderly fashion, producing result after result; producing growth after growth.
Moreover, only those like Rashmi, who have the education to comprehend and spot real talent, make wealth for themselves; while the rest continue their journey of gossiping and cribbing.
Therefore for investing successfully, one should have either the knowledge of investing, or take guidance of those who have are knowledgeable.
To end my story, I would like to acknowledge our PM Narendra Modi, who like Rajesh, has gone about his task of demonetisation without bothering about the sentimental force that have been arrayed against him.
Because sentimental noise has no place before long term value creation.
Dharmendra Satapathy at NextLevel-Education