Stock Market Tok Presentation

Chasing Investment Returns: Story of Amateur Investors Chirag Shahmachandran

Stock Market • The Stock Market – Institution which facilitates the sale of various securities from seller to buyer – NASDAQ – Dow Jones – DAX – Hang Seng

Amateur Investor • Little Experience or New to Stock Market • Not Active in Stock Market • Elementary Knowledge…at best

Chasing Investment Returns • Basing investment decisions on past returns • Purchasing stocks, using different investment advisors solely to be in the “hottest stock”

Chasing Returns • Negative Returns on Investments • Heavy Losses • 2000 • • • • •

WPJPX MSCGX WPIJX MFITX ATCHX

↑ 328.7% ↑ 313.9% ↑ 279.9% ↑ 273.1% ↑ 248.9%

• 2001 • • • • •

WPJPX MSCGX WPIJX MFITX ATCHX

↓ 71.8% ↓ 21.3% ↓ 60.0% ↓ 56.4% ↓ 63.9%

$950

$270

280 %

S&P 500

8%

Current Price = $17.70

And the List Goes On… •NFLD – Northfield Labs •XNL – Xethanol Corp. •TMTA – Transmeta Corp. •AVCI – Avici Systems •ACH – Aluminum Corp. Of China •AMRN – Amarin Corp. •And More!!!!!!

Not Always… • Many stocks have constant stable growth since IPO • Large Cap Value – MO – BRK-A

Why Does This Happen? "Investors should remember that excitement and expenses are their enemies. And if they insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy when others are fearful." -Warren Buffet

Reason • Get in “hot stock” – Often too late – MSFT – DRL

• Lack of Information from 1 type of information • Misinformation

Emotion • Pick “hot” stocks – Stimulated by the possibility of increased earnings based on past earnings

• Hype • Hope – Ignoring risk

• Previous Losses/Gains – How much risk to take

Suggested Dose of Emotion • Investment gurus suggest not injecting any emotion Emotion = negative for making decisions? For investing….YES

Perception • Overflow of information – Investment Advisors – Past performance – Analysts – Articles – TV Shows – Etc.

• Alters our perception of stock

Language • Bias of FA, Analysts, Spectators, Writers – Bear/Bull Perspective

• Interpretation of recommendations and predictions – Skewed by emotions of company

Conclusion… • Investors should not rely on a single source for information • Confirm reasons why particular stock is “hot” • Objective • Stick to strategy which matches investment goals

"Long ago, Sir Isaac Newton gave us three laws of motion, which were the work of genius. But Sir Isaac's talents didn't extend to investing: He lost a bundle in the South Sea Bubble, explaining later, 'I can calculate the movement of the stars, but not the madness of men.' If he had not been traumatized by this loss, Sir Isaac might well have gone on to discover the Fourth Law of Motion: For investors as a whole, returns decrease as motion increases." - Warren Buffet