An old joke most of you would have heard in school…
There are two guys walking on the road…one of them sees something on the road, and is interested. The other guys says ‘Man this is shit’. The first guy goes near it and says ‘It looks like shit’, then he scratches it, smells it and says ‘It smells like shit’, then he tastes it and says “O M God, it is shit’.
If you think this is a joke, ask yourselves how many times have you done it? The stock exchanges take a lot of trouble in classifying shares into A, B, C, T to T, and Z categories. People go to a Z group stock HOPING that it will suddenly start doing well. The rule is, it will not. Those shares that are likely to do well are already in the other categories.
Why do smart people go and buy this shit? Because somebody sells them a story..see MRF it is at 9500 it can never become 19000 over night, however, this piece of shit is at Rs. 9.5 it can become 19 in 2 weeks…so your money can actually double….
so we fall. We do not realise that profit is:
Price change X probability of price change X volume of shares bought. In a shit share the probability of price changing is SO LOW that it is not even worth considering. Now MRF may go from 9500 to 19k in say 4 years time – this means you have got 18% return + dividends… L OL…
If at 20,000 index (actually at any index this is true!) you have a look at your portfolio and find some shit, just sell it off. You do not have to smell it, scratch it, taste it to know it is shit. If it is making a cash loss for the past few years, if you do not trust the management, if the reason why you bought is lost (the guy whom you trusted has quit the board), …many reasons…JUST SELL WHATEVER YOU HAVE. You may not make money but you will release some precious capital which can be used elsewhere.
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