Thursday, February 21, 2008

"Value Vs Money"--The STOCK puzzle

Its about an interesting perspective i am kind of trying to discover. About the stock market and money. What is money? A measurement for value, its worth. What is Stock market? Market where value is traded ( Money is not traded in stock market, its the valuation and perception price.).
Then why do people incur losses? Because perception are wrong. Why is Warren Buffet so successful? Because his investments evolve out of valuation. What can impact valuation? Sudden change of management, market trends or a new innovation. Is stock market a gamble? NO, its a very very intelligent game in which 80% of people gamble and hence they loose.
Investment is a bigger and longer trade. One has to step into business man's shoes, know exactly what lies under the setup of an organization, discount for risk and move on to do a similar exercise for more and more organization whose business holder he wants to be. One has to patient for statistical fluctuations, observant of realistic risk factors and then trade. So, if one has mastered the art of analyzing business, identified the real risk factors for business, there is a fair possibility that his investments will not be doomed. BUT, one has to understand the industry, incase one has portfolio, he has to ensure that risks are mutually exclusive for set of stocks to be able to recover losses if one looses. Infact an inverse relationship in risk can pay higher value. ( Its difficult to find a stock portfolio with risk balancing done because risk factors have high dependency.)

Amazing, i always thought stock was gambling. But i think its an intelligent game. It needs a very analytical and balanced player. And its not as unpredictable as it seems. Market emotions settle down, finally what remains is "Value". WB is successful because he invests in value and he invests in industries whose business and risks, he can interpret. So, yes, there is more to this "value" market. Money is a measurement of value, if you caliberate the scale of measurement, the value does not change. Finally you win and loose against value.

5 comments:

sanzzz said...

Amazing post! And this is coming from an ex ibanker, so endorse it.Cuts down all crap and gets into basics. Good!

Garima Ganeriwala said...

Thanks Guru Ji!!
I have written what i concluded from our discussion. :)

sanzzz said...

I am an intelligent investor, you see. I invest in students who add value to what i teach and hence raise my market price. Coming back to basics, i have no listeners for my guitar. Skills must be real bad, huh! :(

Garima Ganeriwala said...

Yep!! it must be. Its BAD. Very very bad, probably need lessons. You need a good teacher for guitar, internet lessons are not working. I am sorry, i cant take that risk of being a listener, i am an intelligent investor too. :)

Anonymous said...

not bad!!!

you can have a future in this line ;)