Stock Market isn’t a Monkey Business

 

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Today on AI post, we have monkey as a central topic 🙂 No, we are not kidding. Today, we are sharing a famous fable (tale) from the world of financial literature which can benefit you on this leisurely weekend. It is an interesting tale with a few turn of events which teaches as many valuable lessons of investments in a funny way.

The Fable

In a village, one fine day a person Mr X appeared and told villagers that he wanted to buy monkeys for ₹500 each. Villagers were perplexed and thought Mr X is a mad man who wants to spend so much on useless monkeys. There were a few greedy villagers who had nothing much to do, so they went ahead and caught & sold monkeys. Flush with easy money, these greedy villagers proudly narrated their story on every tea stalls.

Soon more villagers started to catch and sell monkeys to Mr. X. There were rumors going around about the benefits of once considered as useless monkeys. Some of them included that that monkeys can be used to treat incurable diseases and what not. Even people who earlier thought that monkeys were worthless, they also started doubting themselves.

After some time, all monkeys of this village were sold to Mr X. Now, Mr X raised stakes and announced to buy monkeys at ₹1000 each. Villagers went to neighborhood villages to catch monkeys. Soon after, Mr X announced that he wants to buy more monkeys at ₹3000 each and appointed an assistant to take care of his monkeys in his absence as he was going to the city. Villagers were euphoric and went to all nearby villages but there were no more monkeys left.

Sensing this, the assistant offered villagers to sell monkeys under Mr X’s possession in his absence at ₹2000 each which they can later again resell to Mr X on his return. By now, monkey saga was so famous that even neighborhood villagers also queued to buy all monkeys from Mr X’s assistant.

One night, Mr X’s assistant also disappeared. Many villagers were distraught and released monkeys. A few still kept monkeys as they believed in rumors and thought someone else will appear to buy monkeys. But they only kept on waiting and no one ever appeared to buy monkeys again.

Seems Familiar?

The analogy of this story can be drawn on many aspects of life and certainly to stock market, especially small caps. Interestingly, such tricks are very old and they appear to be changing different forms with time to time. During 17th century, Tulip Mania happened where people believed that tulip was very valuable. This mania went to a stage where one tulip bulb was sold at almost 10 times of an average worker’s annual salary. So much worth for one tulip flower!

We also keep on witnessing many ponzi schemes (Sharda Chitfund) running in rural places. They basically promise to double your money and they actually do so for the initial set of investors at the expense on new joiners. Ultimately, one day bubble has to burst and last one in the chain has to loose money. Similar to the game of musical chair.

Many experts like Warren Buffet believed that same thing is happening in bitcoin as well. As there is no tangible value behind bitcoins other than perceived value that it will be worth more in future. However, one can not deny that the technology of blockchain is going to stay and reform many things in the future.

So, next time if you encounter any such wild rush or a panic offer or a super hot stock tip, think twice before jumping in. It makes sense to understand the real worth of the deal and if it is legitimate & regulated.

Avoid free hot tips when it comes to investment. There are no free lunches in hyper competitive world of stock market. Always trust independent & regulated stock advisers like us. Click here to join our premier stock recommendation service today!

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