Thursday, March 13, 2008

The Real Economy vs. The Stock Markets

Globally the stock markets have injured anybody who is a short term thinker and trader. Anybody who started investing in the stock markets with the dream of making a quick buck and exiting fast would be at the moment going through an extremely difficult phase. Anybody who borrowed money to invest must be cursing his or her luck. The same people who might be boasting about their skills six months ago, at the moment might be facing some of the most difficult periods of their life.

That is how markets are-they take people all the way up and then make the person fall all the way down, if the person survives the fall, they once again go up. It is just like a roller coaster. Many of you might be new investors, while others might have been investing for several years and still others might be wondering if you should start investing. I know so many people who are running around for some peace and calmness. Some of them might have been carried away and invested in bad companies, but I tell them not to lose hope and to learn from what has happened.
At the same time there are people who have invested in companies with excellent fundamentals, who also have started panicking because of all the various things happening around. They are much better than those who have invested in companies with no fundamentals. They have invested in companies which are a part of the real economy. Yes reports suggest that India’s economic growth might be slowing down, but please remember that it is still very fast compared to other countries. It still doesn’t mean that everything is doomed and you should sell quality assets in a panic.

Did the promoters of Infosys sell their entire stock after the IT crash? Or did the Ambanis sell their entire company during stock markets scams and corrections? When you invest in a company, you are not just buying stock, but own a part of the company. The stock price will adjust to the happenings in the real economy over a period of time.

For instance several companies today are quoting at prices which are much lower than what they were two years ago, even though profits have increased exponentially since then. Does this mean that a person who has invested in such a company is a fool? If you study the investment style of the richest man on earth today- Warren Buffett, you will see how he has held stocks for several years even when for short periods of times (yes-two years is short when you think of a companies entire life span) they went much below his purchase price.

Anybody who started investing 10 years ago, and held onto quality stocks would be a much richer man today. But does that mean you should never sell stock? Not at all, you should sell your stock whenever you need the money, whenever you are satisfied with the returns or whenever you feel that the company doesn’t have a lot of potential left in it.

I know it is hard for you to hear such things, especially if your portfolio is all in red and you watch your wealth being eroded each and every day as the markets fall. But just look around and you will see that the real economy is still strong. Salaries are rising and so is spending. Profits are rising and companies are expanding. Organisations or individuals who succeed and create wealth have a long term visions and outlook towards things. They too have faced difficult and challenging times, but they do not give up and use those challenging times as opportunities to learn and increase their knowledge. Don’t let your world revolve around stock prices, instead look at the real economy and see what is happening there. Maybe this is the best time to think and make the most of the ideas you have.

A few of you mentioned how you’ll felt a sense of belonging at our blog, and a sense of calmness and peace. I am glad you feel that way and I do hope all of us are able to continue helping each other in whatever way possible. I also have noticed that several of you feel more comfortable sending me an e-mail, instead of posting the message on our blog. The reason I find it easier to reply to messages on our blog is because so many of us have the same ideas and views. Messages on the blog also lead to interesting discussions where ideas from everybody can be used. I truly believe that all of us together have much more ideas than just ‘me’ on my own. There is always more power in ‘us’ than ‘me’.
Some of the best ideas and solutions occur to us when the times get challenging and I speak from personal experience. Feel free to share your personal experiences and ideas with fellow Happionaires!

Yogesh Chabria
© Happionaire

Do you agree with other Happionaires that It Isn’t Just About Money?


Anonymous said...

Thanks Yogesh for once again helping me feel calm and not letting me lose my head. I have read everything you write and today thought I will just tell you "thanks", you have been a lot of help for helping me from losing my sanity. My portfolio is down over 60%, but from this experience I have gained a lot. I have realized how important it is to have the right knowledge and guidance. I am glad to be a Happionaire.

Anonymous said...

Hi. Iam new to the blog, joined just this week, after reading seven ways to manage a correction. Thank you Yogesh .After reading you I feel a lot better. My portfolio is down,red, and heading to south. You are a GREAT HELP! I love to be a happienaire

Anonymous said...

Yogesh, I do not know anything about you. But what I know is that your heart is of gold and that every word you write has touched several people, besides just me.

I have realized that even though the only reason I started reading what you write was to make more money by investing, I have found out that there is more to lfie than just money. I could never imagine that from all the places I would realize this from a guy who started investing when he was 16 and who is an investor.

I have become a Happionaire in full after reading this blog. Please do not stop sharing your nice thoughts and ideas and motivating each one of us with them. May God bless you and may God bless every other person.


I want to discuss more on the 'connected economies'. After free market policy - no one nation can control its stock market. Money can flow easily from any one country to other. I think money will always find better opportunity. This makes the money dynamics very complex. No market is predictable hence forth. Please share your views on this.

Samir dixit said...

Continuing Vinay's question if u can help us in understanding gold us$ and crude equation.. I ll be highly obligied

The Happionaire™ Blog said...

Simran, Anonymous(feel free to share your name), Sabeer may God bless all of you too and thank you for the love and warmth. I am glad that so many people are becoming Happionaires. I have a dream to have a world filled with Happionaires, and I am sure together we will be able to do it.
Yes, Vinay I fully agree. Markets have never been predictable and as you will find out I have discussed this in a bit more detail in Invest The Happionaire™ Way. Money moves very fast these days because at the click of a button it can move across continents, but no matter do remember that old fashioned fundamentals always rule supreme.

Samir, personally I feel to invest you need to look mainly at the fundamentals of your own company. Does your company depend on crude oil? Or the dollar? How much does it depend upon it? For instance airlines do need aviation fuel but also remember that they earn money in rupees. Lots of things are inter-related and you need to look at these things with regards to your company. It never makes sense looking at various assets and making assumptions. This is at least what my experience has taught me, it would be great if others shared their ideas too, as I feel I am no expert and am a constant learner.

Yogesh Chabria

Anonymous said...

Perhaps you are saying something which is the only way out . In some cases people are making their living on the stock market, for them it is a difficult job to overcome this .Indians are emotional by nature our markets fluctuate more drastically than others upwards or downwards . Ithink in the 21 century this should change and a more balanced system should emerge . you are very relevant of course . Our good wishes are with you .

dharma said...

hello sir..the blog contents are excellent..i also write a lot of articles relevant to the stock markets. U can visit my blog when u find free time