Who is an expert?

Amazing what the 2003-2007 boom in the markets have done to people!

Many people have taken their income from 2001-2007 and are extrapolating that growth over the next 20 years, so some of them are hoping to retire on a salary of Rs. 3 crores a year – at least that is what the excel sheet is telling them.

People who have done 1 or 2 transactions in real estate in one city suddenly know how to extrapolate real estate prices, rents, inflation for the next 10 years and believe in that excel sheet.

People who have bought and sold a few shares can now suddenly tell you why Tata Motors, L&T, India Cement, Hindustan Oil, are great buys and your answer to alpha. Of course they all have their own theories or they are now armed with charts.

So suddenly you have experts on economic trends, real estate, equities, etc. and some of them are clearly of the belief ‘this has happened to me, so it will happen to everybody and everytime’ . This is just a version of cut n paste.

Unfortunately when you tell them that it may / may not happen, they can quote the scriptures – like:

– “when you buy the shares of a good company it does not matter if you pay a slightly higher price

– in the long run equities give better return than debt

-greater the risk, greater the return

– Just as you said I am averaging. I have been buying 10 shares of Hindalco every month. Now I am in a loss of Rs. 5000, but that I can afford. I have been averaging for the past 23 months.”

OMG…I refuse to take responsibility for the understanding of the customers / readers of this website. I can only write. How you read, how you interpret, is your call please…..please…

 

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8 Responses to “Who is an expert?”

  1. “Averaging Share price” is it wrong..? My doubt is like i have averaged few scrips even when it is in red and sold it in green got handsome returns in a period of two years. My decision to average it in red with loss is it wrong ..? I just have 4 years of trading experience and i am following ur blog since a year. out of curiosity i raised this question…:)

  2. With few transactions, studies & deals, I see this trend of assuming of expert status in every field. More so with our country men than anyone else.

    One of my family member who is a consultant since long to ‘potable water equipment’ company installing kits at household level also get a sales calls from competitors explaining the chemistry of drinking water and perils if they do not drink from their kit. Surprisingly no one asks what his profession is and they try to scare with all the misleading information to close the call.

  3. Averaging is not wrong.It is the best way to minimize your Losses or maximize your gains.Buying 10 shares of a single company for the past 23 months….it can’t be termed as AVERAGING……its is a simple SIP in that particular stock.

  4. I think this is true of ANY profession, subrabhai…experience cannot be compressed.. people tend to oversimplify, frame out of context…whereas “joota ghisna padta hai” there is no short cut to that…

  5. Averaging is right or wrong depends on the end result. If you had averaged in some shares from Rs. 1300 to Rs. 6, you would have dramatically increased your losses, right? So re-read this article – what I am saying is ONE or 2 empirical evidence is not enough to establish a theory. I recently bought some share at 159 and sold at 201. FORGOT TO GIVE DELIVERY. Got auctioned at 197. Made a profit of Rs. 4*no. of shares! Now sold off AGAIN at 201.

    CAN I SAY ‘not giving delivery = profit”. That is the problem. AVERAGING A SINGLE SCRIP is stupid, simply because you are ignoring market info. SIP should be done ONLY, ONLY, AND ONLY in a portfolio like the INDEX. If you see all my SIP articles you will find that.

  6. GOT IT SIRJI..SUBRA JI..

  7. Subra, not just 1 or 2, any number of evidences will not conclusively prove a theory in many cases, remember the Thanksgiving Turkey?

    http://statspotting.com/2011/06/bitcoin-talebs-thanksgiving-turkey/

  8. I came across you and your blog just yesterday. I enjoy reading your articles and really love those punches and satire.

    In this article, you forget to mention Brother & Sister-in-laws in the list of experts. “Jo Biwi se kare pyar, woh Sali ko kaise kare inkar”. Needless to say, it is true the other way also.

    This is were maximum mis-buying is taking place.

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