Dear Marketcalls readers,
AssuredGain, educational-brokerage firm based in Chennai is happy to share with you a series of article titled “LIES, LIES AND DAMN LIES” written by Chief Adviser, Cyriac Kandathil. AssuredGain believes in educating traders and investors rather than giving speculative calls which fail to work in long-term. We do not have any monthly subscription plans or high-priced advisory calls. Give a man a fish and you feed him for a day; teach a man to fish and you feed him for a lifetime. We do provide online mentoring in Chennai which can help one to trade independently. In case, you don’t have time to learn, we do provide managed account service with nominal charge. Please do read all the series and get enlightened. Trading options requires a completely different mindset. Speculative trading in options is very risky.
Happy trading options!
LIES, LIES AND DAMN LIES – 1
My friend Jackie Klein and Jacotte are staunch Socialists. They are French citizens. They are outright anti- American and firmly believe that stock markets are the creation of capitalists. They also firmly are of the opinion that stock markets are gambling dens where no real wealth is created. I on my part was a great advocate of stock markets and we used to argue vehemently about them when we were in a relaxed mood. When ever we parted the couple used to warn me about my adventures with stocks and derivatives. I never took them seriously and always thought them as purely uninformed or misinformed. Subsequent events in my life taught me the hard truth that there are real risks in investing in stock markets and derivatives and that only a few people really make money from stock markets. This is an attempt to show the why and where for of it.
There are many who believe that money put on stocks is likely to be lost. If investing in stock markets is so risky why lots of people enter the stock market? So something must be wrong somewhere. There are stories of people who have made billions from stock markets by investing or by trading. There are also stories of people getting ruined by trading in stock. Contradictory advices given by people with long experience in this field remind me of the story of five blind men defining an elephant. Each one had a different perception and each was right in some aspects. This holds well about stock markets too. It is a fact that young men entering the work force with high ambitions seek to achieve their goals at the earliest. Most of the goals have some connection with money. Therefore all goal- oriented persons will try to maximize his earnings one-way or other. The choices in front of such a person are many. My mother, born and bought up in a village. never had much money. In her old age, she used to put the pocket money she got from us under her pillow. She often complained about money missing from under her pillows. In times of emergency my wife sometimes borrowed money from her. My mother used to accuse my wife of having forgotten to repay her. We can see that the practice of .keeping money under pillows is not wise. Money can be lost by theft, fire, floods and in so many ways. Inflation can reduce the value of the money. Hoarding money like this does not serve the purpose.
My father was a conservative person who believed in saving his money in banks. He knew little about alternate avenues of investments like stocks, commodities and derivative products. He advised us to keep our savings in bank accounts. This may seem to be sensible advice for a person wary of taking big risks with his hard earned money. In fact banks normally do not fail. Even if they fail there is limited protection to the capital. However the returns one gets from bank deposits are very low. In addition inflation will take away almost all the interest provided by the banks. Some times the net return may become negative. This happens often in countries like India. Consumer price indexes clearly show how inflation is making real interest rates negative. Thus keeping money in bank accounts also is not wise. Americans have recently become wiser and have given up the habit of saving money. They never save and their saving rate has gone negative of late. Instead they spend all their money and use credit cards liberally. Only people in third world countries like China, India, Korea and other South Asian countries save and buy American bonds making American consumerism the driving engine of the world.
The old- generation rich liked to invest in real estate. Buying real estate with one’s savings only is not that easy. It is true that land is a scarce commodity. In the long run the price of land can only go up. However, timing of purchase of landed property is very important. How the funds for buying properties are raised is also equally important. All those who bought houses using loan funds have seen the consequences when interest rate went up. Moreover property investments are not liquid and can cause losses when the need arises to cash property investments in periods of slump. It is also a false notion that prices of real estate can only go up. In fact property prices can remain flat or even go down for prolonged periods. Thus there is a speculative element in dealing with landed properties too.
WILL BE CONTINUED…
CYRIAC J. KANDATHIL, Chief adviser, www.AssuredGain.com
AssuredGain Financial Services.
5/318 Rajiv Gandhi Road, Oggiyampet
Phone: 31921155 / 9381921155/ 9962439282