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03
Jul
2011

Anyone who has a good bunch of money can not be termed as a potential investor. Being in investment business for five years I have been working with many people who consider themselves as investors but they hardly know anything about investment science or basic investment features.

 

The problem arises when the cheapest one gets money or the money become so cheap to be in the hand of anyone. Courtesy to the cheap lending rates over different times and independent skilled management of companies that some people become rich businessmen but being an investor of securities, real estate, commercial papers, derivatives & private equity a person need to have a lot of investment character, knowledge and attitude.

 

Over my experience in investment business and analysis of different behaviors & human beings I classify some attributes of people who have money and they misperceive themselves as investors. Even many of investment professionals think them as investors and work with them the way they are dealing with the rational person towards investments.

 

I am not saying that we need to leave them on what they are but rather we need to first work their education about what is investment all about! Below are the points that are based on reactions of people that I sort out for those laymen that are misperceived as potential investor in our markets:

 

·         They seek to invest over the risk level of national bonds or state securities and their yield expectations are more than the yields of high risk equity stocks. They hardly understand the fact that no investment is risk free and higher the risk higher the return is the basic call. Even investment is not a magic. It is a serious process that can have hurdles.

 

·         They are lesser interested in technical and fundamental or any kind of analysis. Their basic point of interests are the buzzes and popular waves in the market even how irrational the majority of investors like them are behaving that are making non-sense trends over market graphs.

 

·         They consider management fees of professional investment advisor as a burden; they rather prefer investing with those non-professionals that doesn’t charge mark to [professional] market management fees, it is indeed; regardless of seeing how harmful their advices would be.

 

·         They hardly follow the principle of diversification whereby they invests whole of their money over one popular investment fashion in anticipation of doubling their money overnight. It gets worsen when they even leverage the funds by taking money from the market to invest in their craze.

 

·         They consider investment over commercial papers, securities and off plan real estate as lottery ticket and their ignorance of investment threshold over time and backup reserve is on the high side.

 

·         They hardly feel to analyze their own self and expertise to take exposure over certain kind of business, sector or its security. They ignore getting equipped with at least basics of that particular business as they solely rely over others. They even ignore professional mutual funds, in order to do things by their own hands but they keep their brain away by trusting their mere one leg into that business.

 

·         They consider investment education, skills and experience of a professional investment advisor as nothing over their raw experience of business.

 

·         They never see their backup funds that can cover their financial state in the event of loss as loss is not something that they had ever planned. Once they invest in something they consider it 100% profit affair without understanding possible reactions of the market that can make good investment at given time work nothing over the time it shall have to yield.

 

·         They hardly have a character and planning to bear losses that disturb their psychology to anticipate, plan and work against possible losses. Being unaware of many things they are just the richest of currency notes but not the worth or value. As they only count over the number of currency notes possibly can increase over time from investment, hence they ignore discount aspect of the value of money & risks. They even work without the calculation that what is the size of loss they can bear in the result of particular investment.

 

·         They always take position in the market that is about to reach her maturity. It is because of the time they generally waste to believe in something, it keeps investment trend far ahead in her lifecycle until they decide. As they are just mouth pieces so they find the point of doubts over markets and investments that are on their bottom and middle life and once they believe it, they are the last to invest in. This make them paid a lot of premium and get end quickly towards downward slope from the maturity.

 

All above points that I listed are the common  that I have been seeing in many people who have money and they consider themselves as great potential investors. I would like rich people in the world to get themselves educate about investment science a little.

 

If they shall take art of investment properly and with true rationale so they can be the real winners otherwise in developing sense of professionalism in the markets around the world; there are chances that non-professionals or even dishonest professionals can easily make them fool. Even how much they consider themselves as experienced and Aristotle of investment and business, they can not be able to save their money termed invested-in.


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Mr. Omer

Mr. Omer [1982 born] started  his professional career as a commercial / investment banker after achieving Gold Medal in Finance at master level from University of Karachi in 2006.

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