Does copy-paste works in choosing an investment ideas?
Many of us know control C (copy) and Control-V (Paste) when you work on a computer. We very often do copy-paste while working on any of the computer applications. Can an investor copy an investment idea from another investor and proceed for investment strategy? Thought this is a good investment strategy, it has several drawbacks. Read on…
What is an investment idea?
Investors invest in several investment ideas like Stocks, Mutual funds, Bank Fixed deposits, Company Fixed deposits, Insurance investment products etc. These investment ideas provide an opportunity for investors to grow their money if used wisely.
Do all investors analyze investment ideas before investing?
It would be little difficult to answer this question. If every investor knows where they need to park their money, there will not be any financial advisors or research sites or investment blogs who put lot of effort in analyzing investment ideas from various angles. At the same time I give due respect to investors who are doing their own analysis and becoming rich.
What does an investor expect?
When I have started investing in my early stages, I wanted only one thing. I do not want to spend time on analysis. I just wanted an investment idea where I would blindly go and invest them. I am not comparing with others, but I felt it is a common phenomenon for major new investors. Every day I get at least 10 to 12 comments on this blog and 5 to 8 emails which contain approx 25% of new investors who say, your blog is excellent, but I am confused where to invest. This is not common for new investors alone. I very often receive messages saying they are seeing stock markets and mutual funds for several years, but still they do not understand how they work.
Well, now let us come to the point on copy-paste of an investment idea
In such cases I felt that copy-paste can be considered as a starting point for an investment idea from existing investor. If existing investor is investing in mutual funds and earning returns, a new investors or any other investor as a first step can consider choosing such investment option.
Does an investment idea suitable for a person would suit others too?
The answer is Yes and No. It could a first step in identifying such investment idea. However, there would be several other parameters which need to be considered.
Risk appetite: When you copy an investment idea from others, his/her risk appetite may be different from you. If they are high risk investors and you are low risk or moderate risk investor, this investment idea would not work for you.
Tenure: If an investment idea is copied from a person who is long term investor and you are moderate or short term investor, it would not work for you. When I was investing in stocks, several years back, I copy-pasted the investment idea from a friend and brought Infosys stock. However when Infosys stock has fallen within 1 year, I sold all stocks and booked losses. Whereas, my friend waited for few years as he is long term investor and doubled his money.
Lump sum Vs Period investments like SIP: This is again several years back, one of my friend told me about mutual funds and how he was earning good returns. When I started investing in mutual funds, I was not that familiar, hence whatever money I got it, and I invested lump sum in mutual funds in all mutual fund schemes which was generating high returns. But when stock market crashed, my mutual fund portfolio has dipped by 15-18%. When I enquired with my friend he indicated that he is investing through SIP. I could realize my mistake. It is not that we can copy an investment option, but to get into the details on how they are utilizing the investment option in better way.
Internet world creates false messages: With growing internet usage, websites and blogs, there is every chance that you would be misguided. To take an example, there are several websites which indicate that investing in penny stocks is good. They also provide several interviews and messages which indicate that investors are making money and flying on the moon. In 2001-2002, I was watching all the penny stocks. One of the stocks was GV Films. The price of this stock was Rs 0.69. Every alternative day the price was moving 5% on upper circuit. There were several rumors on websites that top companies are investing in this and price would touch Rs 10 in short time. When the price was at Rs 1.20, I started investing in it. Soon the price came to Rs 1.5. I invested some more money. Now the stock price started falling and has again come back to Rs 0.65. I lost 50% of money in this stock. Copy paste of an investment idea would not work in such a situations unless you do thorough analysis or you should invest in blue-chip stocks to avoid any further risk.
Conclusion: This would be an excellent investment strategy for either a new investor or for an existing investor, but don’t just blindly invest in it. I enjoy copy-paste of investment idea from others provided it is a starting point in choosing an investment option. Do due diligence before proceeding with such investment idea.
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Does copy-paste works in investment ideas