How Stock Markets Work?
Once upon a time in a village, a stranger man appeared and announced to the villagers that he would buy monkeys for Rs.100 each. The villagers, seeing that there were many monkeys available around free of cost. They started catching these monkeys and were sold to this stranger at Rs.100 each. Soon supply of monkeys started to diminish and the villagers stopped their effort.
He further announced that he would now buy at Rs.200 each. This renewed the efforts of the villagers and they started catching monkeys with lots of effort.
Soon the supply diminished even further and Very soon the village became empty of monkeys. There was very hard to find even a single monkey.
The man now announced that he would buy monkeys at Rs.500! However, since he had to go to the city on some business, his assistant would now buy on behalf of him.
In the absence of the man, the assistant told the villagers; "Look at all these monkeys in the big cage that the man has collected. I will sell them to you at Rs.350 and when the man returns from the city, you can sell them to him for Rs.500 each."
The villagers rounded up with all their savings and bought all the monkeys. Then they never saw the man nor his assistant, only monkeys everywhere!
Moral: Never overpay for any stock for more than its real Value no matter how bull the market is. Always buy stocks at discounted prices from the market. Value investing is the method to buy stocks at discounted prices than its real value.
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