- Posted by: admin
- Category: Stock Market
This is a small story which depicts how people believe the information they get and then get carried away in Stock Market and how they eventually lose money in the Stock Market.
It was autumn, and the Red Indians on the remote reservation 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 had never been taught the old secrets, and when he looked at the sky, 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 meteorologist at the weather service responded.
So the chief went back to his people and told them to collect even more wood in order to be prepared. 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 the analogy to real Stock Market:
Here Red Indian chief is your broker or any person who gives you tips directly!
The members of the village are common retail investors like us.
The meteorologist at the National Weather Service are the people on TV who give advises on different stocks. (You think they are professional traders)
The most recent example of this story is the stock Gati Ltd() See its price on 2nd August was 183.85 and on 16th August, the price was 140. The climate problem was passage of GST. Make a thorough analysis of this Stock and you will understand the above story very well.
Got the point?
In Stock Market, no one can 100% predict what is going to happen. So study the fundamentals of a company which you are investing in. Make a deep analysis of its past results and then only invest!
Don’t go for any tips!
PS: I got this story from WhatsApp message. Just used it at the most appropriate place.