Pearls Of Prudence

 BY HARMAN SINGH SACHDEVA

The rise of mobile applications like Robinhood etc. have led to the creation of new speculators. Such ‘Delusional’ investors tag their sheer luck as their hard work, which makes it no less than gambling. It is quite interesting to know that the same people bargain really hard for their groceries, we can thus say that they are penny wise and pound foolish. Mr. Peter Lynch, Ex-Fund Manager of Fidelity, identified the emergence of such delusional investors early on. Through his book, One Up on Wall Street, he has conveyed the importance of investing in only what you know. Fundamental analysis of companies helps in assuring faith in the stock. The financial script of a company is not a lottery ticket, it is a part in the ownership of a business which has an underlying value. It is this underlying value that should be researched about. A strong balance sheet can help a company to bounce back much quicker from unforeseen circumstances. In the COVID-19 companies which were fundamentally strong recovered at a much greater pace while others had to go through an existential crisis. 

The bottom line is that one should not invest in any stock without studying it. The chances of winning without studying are the same as in a game of poker.