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March 04, 2015

Off Topic: How Indians Buy Shares

Anuvab Pal has a funny - but so true - article in Economic Times on how the average Indian buys (typically when high) and sells (typically when low) equity. Extracts:

We think differently. A broker told me, "Boss, all that Buffett-Shuffett doesn't work in India. Annual reports, company's patents, customer base, who is competition — too complicated. Customers just ask: will it go up or down? And on what I say, they put money." With that logic, the public are better off putting their money on Sleeping Beauty at the 3:45 derby.  
Respected mutual funds consistently try to do their best to inculcate an investor mindset: invest when stocks are down, don't run when stocks fall and buy 32 gold necklaces. Stocks are here forever and the returns outmatch any asset. Read the prospectus. Read anything, something. What the Indian 'investor' hears is 'Blah blah blah.'  
One such 'investor' told me, "I put in money because my wife's cousin's uncle said to do it. He said the company was into pharma. But they are into shoes actually. Doesn't matter. It won't affect the price." And, naturally, in a speculative market where no one reads what the actual company does, it is ripe for middlemen to lie.

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