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Today at a Glance:
Learning from Book: Fund Manager’s Behaviour
Tweet: Reading without disturbance
Quote: Books as an Investment
Snippets: Cyclical Stocks and Contrarian Value Investing
Fund Manager’s Behaviour (Book: Stocks to Riches)
Because of the pressure to perform in the short run, fund managers chase each other's net asset values rather than follow sound investment strategies. When the Information, Communication, and Entertainment (ICE) sector moved up in 1999, fund managers chased those stocks, and prices rose steeply. Most of them had the same ICE stocks among their top holdings. At the time of the rise of public sector undertakings m the oil sector, most of them had ONGC, BPCL, and HPCL as their top holdings.
Then when the fad passed, they competed to sell and depressed the prices. It is obvious that the herd mentality is what drives them to make decisions. Newspapers and financial journals report quarterly performance of funds. Influenced by this news, investors enter and exit funds forcing fund managers to change strategies midway. They are thus forced to keep up with market trends and this affects their performance. Also, the practice of offering bonuses and rewards for turning in short-term profits, rather than for following a sound investment strategy, forces them to adopt short-term strategies.
As a result, it is the investors who lose. For if making short-term money was so simple, in the market he would not be a fund manager, he would be busy making money for himself playing the market.
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One Tweet
Reading in a room without your phone can increase your reading speed dramatically. Do comment if you Experienced the same
One Quote
Use the money to gain control over your time, because not having control of your time is such a powerful and universal drag on happiness. The ability to do what you want, when you want, with who you want, for as long as you want to, pays the highest dividend
– Morgan Housel
Interesting Books Snippets shared during the Week
2. Buying cyclical Stocks at peak of Earning
3. Contrarian Value Investing in Dot Com Boom
5. Amazon kept showing losses But never raised fresh equity