Monthly Archives: April 2017

Thursday Trivia ~ Grocery Market or Stock Market?

Grocery markets are one of the most interesting to visit. A random walk enables so much wisdom about buying at right price, money management, quality assessment, quantity and the most important thing – negotiation. In India, we always look at groceries with a sense of suspicion. In fact, knowledge of various grocery markets is prevalent in every household. Lady of the house exactly knows various prices of various vegetables across many markets. Most of the times, we simply overlook this basic trait. At times, we also feel why to waste so much effort and energy into it. Let’s just buy it from some branded store and get over the hard work. Since,  lady of our house has done grocery shopping for over 10,000 hours in her life, it seems like a cake walk to her. Which also brings a conclusion that practice is the best method for excellence.

But how does this matter to our investment in stock markets?

Let’s look at it this way, when we buy a share in a public company, it is usually recommended by somebody. A simple call to broker or punching an order online seems to be the best way. Then it’s about tracking the movement of that share and recommending it to someone else. Let’s be honest, sometimes simply bragging about it. It feels smart and intelligent to buy something that goes up in value. But the very research about the company, it’s price, understanding of how much money should be allocated to that investment is hardly ever carried out and the most important mistake is buying after the price has gone up. Unfortunately, it feels as a very time consuming process. So we don’t do it. But it’s kind of okay to rely on a friend’s advice because his uncle works in a company which is in the building of any stock exchange. Suddenly, the value is not in the share, it’s in the person recommending it. So do we even question him before buying it? 99% of the time, we don’t.

Let’s think about this with a little peace of mind. Isn’t this crazy?

Investors who have made money are the ones who never relied on outside tip. They did their research, understood how much price they should pay for, negotiated by waiting for a long time so that they can buy with comfort, assessed the quality of the company deeply and took only so much quantity which would give them a good night’s sleep. Whenever price went up, such investors became extremely suspicious and cautious. Rather than sitting at a coffee table and bragging about it. At high prices, such investors look out for exits. Since, they understand the pulse. They usually roam around different markets to understand what’s happening. These days, it happens over a computer but even that dedication is extremely important.

Isn’t this exactly what lady of our house will do?

Lady of our house who is incharge of grocery market goes through exactly the same process what an able investor would do. If potato prices have come down, they will quickly buy them and store it for a longer period. If they are expensive, they will try and look for alternative. If not, then they will buy only that quantity which will give them comfort. Since, they know difference in price of various grocery markets, they quickly calculate if there will be a rise in price or not. They don’t even need to know the rates prevalent at Agriculture Produce Market Committee (AMPC). It’s kind of too macro economics for them. How many times, people think about macro economic factors. Recent one which is trending is current President of America is bad for India’s Information Technology sector. But lady of the house won’t worry about that, she will allocate her monthly expenditure accordingly.

Consumption v/s Investments – That’s not a perfect match !!

It is easy to deviate from the topic of both markets and make an argument that grocery is used for consumption whereas shares are used for investments. Well, in the long run, with money made in shares, are eventually going to be used for something. It would be a foolish decision to keep our gains from investment forever in the shares of that company. Just that waiting period of grocery is shorter since it’s a perishable item while shares being a non-eatable item, tends to have a higher waiting period. As time and again we have seen, higher the waiting period, higher is the irrationality.

All that is fine. But what about that ‘branded store philosophy?’

D-Mart is the hot shot name of this year. Earlier it was Big Bazaar. It became so fascinating to see that so much was available at one place. There was no worry about quality, price or negotiation. It seemed as if one had simply outsourced everything to them and picked up whatever was available. Suddenly, grocery shopping became so easy. Everyone was moved by the venture of Mr. RK Damani and Mr. Kishore Biyani. Word of mouth publicity was about how much they care about their customers, their integrity, hard work and darkest days are still discussed at tea time in many places.

However, when it comes to investing, what comes to mind is ‘returns’. Often times, no background check of a tip seller, an investment advisor or that very same uncle who works in the building of a stock exchange is done. There is no question about their character, morality or integrity. Seems like, it’s kind of okay to compromise all that just to make some quick money. Just think about, what question would you ask your investment advisor to ascertain his abilities. For that, you may refer to our previous Trivia – The Oracle Question of Portfolio Management.

Doesn’t it sound a little irrational to take our hard earned money so lightly? Just to invest something for an instant gain rather than actually solving some future problem. If not, then let’s revisit the simple fundamental of stock markets which co-relates with grocery markets – buy when it’s cheap and not expensive. How to know whether it’s cheap or not? Just do some in-depth research or some hard work.

It will be a better option to sit down with lady of the house and learn these important tricks of buying better groceries oops investments.

– Jinay Savla