The Economic Times carried an interesting news item today, entitled:

Retail investors raise stake in poor stocks hoping turnaround

The article is enclosed here for a quick reference. While the article is very interesting, the title says a lot about investor mindset – the reasons of buying seem to be that (1) the prices have dropped, and (2) they hope for a turnaround.

Someone has very aptly said, “Hope is a lousy strategy.” Many times, buying cheap is a good idea. Master investors make a killing by doing so, but then they are masters. Amateurs get killed while trying to copy the masters. The line between “making a killing” and “getting killed” is a very thin one.

At the same time, I would also remind all to read the following article I had written only a few days back. Click on the link below:

How ‘Loss Aversion’ Affects Your Investments

Investment advisors often witness strange behaviour among a large number of investors – many of them continue holding some poor quality stocks in their portfolios. When probed further, investors reveal that good stocks were sold fast, while the bad ones remained. What explains this? Read more at: https://www.bloombergquint.com/opinion/how-loss-aversion-affects-your-investments        Amit Trivedi