Sunday, May 4, 2014

Sunday musings: about ‘maya’ and reality of making money in the stock market

In Hindu philosophy, the idea of ‘maya’ is a key to understand the concept of ‘Brahman’ (Cosmic Spirit or Energy). ‘Brahman’ is to be realised and can’t really be explained. But sages have tried their best by using the duality of ‘illusion’ and ‘reality’ to provide answers to questions like who we are, where we come from, and where do we go when we leave this world.

In the scriptures, ‘maya’ had an earlier association with wisdom and power. Later it came to mean ‘illusion’ or rather, ‘delusion’. Some scholars and experts refer to ‘maya’ as the power or energy of a Supreme Being that it projects on to the universe. That is what creates life, existence and death of all mortal beings in an eternal play (or ‘Leela’) for the pleasure of the Supreme Being.

Others refer to ‘maya’ as ignorance or delusion that confuses the individual soul (or ‘Atman’) from attaining divinity (or ‘Moksha’). The ‘Atman’ identifies itself with a body and mind and gets stuck in the pitfalls of the physical world and its transient feelings of being happy or sad, well or unwell, rich or poor.

In Hindu scriptures, the anecdote of mistaking a harmless piece of rope for a poisonous snake in indistinct light is used as a metaphor about the incorrect identification of the imperishable ‘Atman’ with a perishable body. The ‘snake’ is the impermanent and perishable body; the ‘rope’ is the reality (or ‘Atman’) and the ‘indistinct light’ is the delusion of ‘maya’ that causes the confusion.

The stock market is but a subset of the physical world. The illusion or ‘maya’ is the belief of anyone with a demat account that incredible wealth can be attained by simply buying a stock of a company. It is ‘maya’ that prevents even apparently intelligent individuals who are successful in their professional lives from accepting and understanding the reality (by learning the ‘rope’s) of the stock market.

Danger is lurking at every corner. Experienced investors with deep pockets are just waiting to take away the hard-earned money of small investors who are under the illusion that making money is as easy as sending an SMS.

Give yourself a chance. Learn the reality – not only of how the stock market works, but the steps and plans that are required to build and keep wealth for the long term.


Hiren Banker said...

I dont understand.

Every commentator/author says that the stock market is not for the retail investor. They keep on talking a lot about "protecting" the retail investor and keep on giving gyan on all the TV channels about what the retail investor should do.

On the other hand, when the market does not move enough, they again start complaining......there is no bull run ! where is the retail investor ! there is no retail participation !

Here you (and many others) keep on saying the retail investor will not make money out of the market......however, there are many retail investors (like me) who think they can make money out of it.

Now, (what I think) the retail investors want to make money inspite of all the warnings that people give.....this is something which no one explains or cares to address. Rest what they all say is just rhetoric.

Subhankar said...

@Hiren: You have raised some important issues. I'll try to respond in order.

1) Buying individual stocks is not for retail investors. Most enter the market without any knowledge or preparation. They will be better off investing in an index fund or a balanced fund.

2) The market loves retail investors because they create 'trading volume'. That benefits brokers, and the experienced investors can sell them stocks at high prices.

3) Please re-read the last paragraph of my post. To make money, retail investors need to learn how - which most fail to do.

4) This blog has several articles on the topic of 'making money in the stock market'. Search the blog with that phrase.

One can start by reading: 10 DOs and DON’Ts for making money in the stock market - posted on Feb 3, 2011.

Bottomline? Yes, it is possible for retail investors to make money in the stock market. But it requires a willingness to learn, patience and discipline.