Simplify …

Most financial products have seen complexity rising over the years. As we spend some time in the financial services, there is an itch for innovating. many innovations end up as complexities. Now a research conducted in the US finds that majority of consumers choose the wrong plan for their financial and health needs because they do not understand basic health insurance concepts. The study recommends standardisation and simplification of health insurance plans.

In the absence of any regulation doing so, at least the consumers should stick to simple plans – to what they understand – be it health insurance or investment products. Simple is beautiful, at least it is less risky.

#RidingTheRollerCoaster – 227

DotCom deadpool

Came across this article in Mint titled Dotcom deadpool returns as India’s start-up boom turns to bust

We have covered this topic in detail in the book as well as in many of the blog posts. A small list of these blogs is as under for quick reference:

It is always interesting

Here is an excerpt from the book:

Throwing money at every start-up without proper due diligence would look silly years later. Sachin Tendulkar came from Shardashram Vidyamandir School, but that does not mean that every Shardashram pupil would be picked up by the indian cricket team.

#RidingTheRollerCoaster – 22

History repeats …

Look at this interesting article about Indian start-up boom of recent times:

Dotcom deadpool returns as India’s start-up boom turns to bust

Sir John Templeton has famously said, “The four most dangerous words in investing are: ‘This time it’s different’.”

#RidingTheRollerCoaster – 225

 

11 times in 18 months …

In September 1998, Kothari Pioneer launched a new scheme – a sector fund, Kothari Pioneer Infotech Fund. By February 2000, i.e. within 18 months, the NAV had multiplied close to 11 times.

#RidingTheRollerCoaster – 224

Lessons from a Ponzi scheme in Finland

In Finland, a company called Wincapita operated from 2003 to 2008 in Finland, defrauding more than 10,000 victims – about 0.2% of Finland’s population – of approximately 100 million euros.

Here is a post regarding the study conducted by someone on the scheme, seems like the first of its kind.

Some interesting findings and my views on the same are as under:

  • A specific feature of Wincapita is that investors could join only by invitation from a sponsor.
    • Many fall prey to such a scheme, as “exclusivity” is so tempting that the brain stops thinking.
    • We don’t want to lose out on such an “exclusive” scheme
    • The word “exclusive” along with invitation from someone you knew massages the ego and makes one feel special. Ego is the enemy
  • Rantala studied the relationship of personal characteristics between sponsors and invitees. He found that invitees invested more if their sponsors had higher income, were older or more educated.
    • Higher income, more education and old age are not equal to better financial decisions. I have come across many investors in India, too who think that such traits make one a better investor.
    • The Ponzi scheme operators rely on such behavioural traits of masses and employ employees that look educated, smart and are well-groomed and confident – traits many equate with financial savviness.
  • Rantala said. “When information comes from a friend, it overrides safety mechanisms.”
    • This can’t get more ridiculous
    • Trust is surely built on the integrity, but the other and equally important leg of the same is the ability or skills or competence. The best of the friends may be able to offer an honest opinion without any axe to grind, but will he or she be able to offer an informed opinion?
    • In any financial matter, remember while taking someone’s opinion – you need both integrity and competence.

The book’s chapter titled “The Pied Piper” starts with the following line:

“How easily the masses have been led astray” – wrote Charles Mackay in his 1841 classic, “Extraordinary Popular Delusions and the Madness of Crowds”

#RidingTheRollerCoaster – 223

 

 

Is it a bubble?

One of the hallmarks of a bubble is that it’s most easily detected after it has popped. Part of this is because there’s a certain logic to high prices at the time.

I have borrowed the above lines from a blog post I read today. I really liked this superb line from this blog post.

Very often, the investors want to know answer to this question in advance. However, very few have been able to correctly predict it and even fewer have been able to repeat the feat.

This is what I wrote in the book on this subject:

Attendee at a seminar: “There are bubbles in the market every now and then. What are the indicators of the next bubble?”

Expert speaker: “The day you stop thinking of this question, that is an indication of the next bubble.”

Enjoy while it lasts.

#RidingTheRollerCoaster –

Another “safe haven”?

Look at what happened to another “safe haven” investment …

How safe is your PF money?

Very often, investors think something is safe so long as nothing wrong happens. And then, it is already too late.

I wrote in the book the following line: “We do not perceive risks when things go right and by the time we do, it is too late”

#RidingTheRollerCoaster – 221