Easy to make money

When it seems to be very easy to a large number of people to make money, the risk is at the highest.



Herds galore …

We see many examples of herd mentality in the financial markets. Tulips were a huge craze in Amsterdam in the early 1600s. Dot-Com companies became a rage in 1999-2000. Both these were examples of greed. However, post the sub-prime crisis, when stock markets crashed in India, fear made people flock to the safety of capital protection products and LIC’s Jeevan Aastha – a guaranteed return (but lower than inflation) product.

#RidingTheRollerCoaster – 150

Investing in IPO and herd mentality

Herd mentality is clearly visible during IPOs. Many investors want to know the subscription numbers thus far before lodging their application. Very often the success (in collection) of an IPO depends on the subscription amount in the initial few minutes after opening of the IPO.

IPOs fail to get subscriptions if the initial response is poor and vice versa.

This is nothing but herd mentality at play. This is an example of outsourcing investment research and thinking.

Be careful. Invest in an IPO only based on the merit of the issue and only if it fits into your personal investment plan.

#RidingTheRollerCoaster – 146