Dalal street’s animal kingdom: Not just bulls, bears, other ‘friends of forest’ too roam stock market

Recently, the Securities and Exchange Board of India (SEBI) barred financial influencer Asmitha Patel from capital markets for unregistered investment advisory services. It impounded ₹53.67 crore from her and five other entities and asked why a whopping ₹104.63 crore, collected as course fee, should not be seized as well.

Market buffs were taken aback; for, the YouTuber was often dubbed as a ‘she-wolf’ of the market and ‘options queen’ who, as per her claims, had mentored over one lakh investors across the globe. Amid the hullabaloo over the case, the one word that caught our attention was ‘wolf.’ It is not just bulls, bears and wolves, that are present in the market, but others from the animal kingdom too.

Fraudulent wolves

The most unscrupulous one, wolves, use unethical ways to mint money and extent of the crime would be such when it comes to light, the entire market would be jolted. In the 2013 Hollywood film The Wolf of Wall Street, infamous wolf Jordan Belfort and his band of broker cronies would manipulate the market and make a huge fortune by defrauding wealthy investors. Closer home, we have had the likes of Harshad Mehta and Ketan Parekh who duped lakhs of investors. of their savings. So, be careful with such wolves.

Greedy pigs

“Bulls make money, bears make money, pigs get slaughtered,” is a popular Wall Street quote. Risk-tolerant and impatient, they toss aside basic principles of investing and indulge in chasing a wild goose (unrealistic returns). Gripped with the greed of making quick profit, pig investors take excessive leverage from brokers and make huge losses.

For instance, let’s say Shyam invests in ABXYZ stock. Though the stock doubles, Shyam would cling to it instead of selling a portion and realising some gain. What he failed to realise is the momentary price rise could be a short-term bubble.

When the bubble bursts, Shyam might have lost expected profit and even capital. Greed and fear result in failure in the market. If a stock’s price rises, one must do thorough research and ponder on questions such as — why did it rise; how long the price might stay at this level; is the rise real or inflated; are there any good news about the stock?, etc. If one is unable to find valid reasons for a spike, it is better to book profits and get out.

Cautious chicken

These ‘fearful’ investors chicken out of stock market owing to risk aversion. They adopt a conservative approach, mostly investing in safer financial instruments. While they make minimal losses, they also miss out on inflation-beating returns. For instance, most senior citizens stay away from stocks, equating bourses to a casino. Afraid of losing their principal, they invest in conservative instruments like fixed deposits and government bonds.

Blind sheep

Known for a herd-like mentality, these investors follow the crowd, and often form the biggest chunk of the market. They do not have any investment knowledge or ideas of their own, and tend to blindly follow friends’ or brokers’ recommendations. They buy when others buy, sell when others sell, and won’t wait for markets to recover from downturns.

Dabbling in the stock market might not be a good idea for them even if it may be for their friends. You can avoid being a Dalal Street sheep by assessing your investment goals, when you need your money back, do you want regular income, etc. Similarly, when a stock crashes, think twice before you sell out.

Ask yourself questions such as whether you need the money immediately; is the downturn transitory and if so, why; will there be a recovery in the near future?

There are more animals traversing the markets that we will explore soon.