Please trade in equities!

October is a particularly dangerous month to speculate. The others are January, September, April, February, July, November, June, August, March, May, and December.

or something to this effect was said by Mark Twain.

One of the main reasons why people lose money in equities is people speculate instead of investing. Trading is not investing! So you should not trade. Correct? Well yes.

However there is a whole mafia out there wanting you to trade! Who are these people. Let us list them:

Your broker: he makes money going and coming. He loves you trading – because he makes money based on transactions.

Your banker: the demat account charges are obviously higher for regular traders.

Media: The media benefits by ‘number’ of page views! Imagine if a magazine were to just write what you exactly need – it will be not more than 10000 words. And after that what? So they have to come out with issues which say “best 25 mutual funds in India” or “8 great reasons to invest NOW!” or “how to trade using technicals” – do you see a bias towards making you act, NOW? that is the purpose.

Government: All stamp charges, service tax, securities transaction tax – mouth watering is it not? And zero capital gains! Remember stt is so attractive for the government of India that replacing that with capital gains (which was anyway almost impossible for the govt. to collect) is extremely unlikely to happen.

Television: why will a guy buying shares once a month or worse, 4 times a year watch the channel on a DAILY b asis? So they also need a trader. So the best way to do this is to create programs like “protect yourself from demat account frauds” – and they would most probably call a broker to be on the show :). For discussing life insurance requirement most probably the person called would be the head of marketing of a life insurance company …oops my Gawd. What happened to Warren Buffet’s advice of ‘not asking a barber whether you need a haircut?’ Search me.

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