Many young investors,
when they look for inspiration, look at Warren Buffet. They live and breathe by
his teachings and why not? The man is a legend and they are hard to come by.
Of course, the problem
occurs when they finally know his life story, his ideology and that Rule 2 is
not to forget Rule 1 but they have no clue how Nifty is being calculated.
The conundrum of learning
“Risk comes from not knowing what you’re doing”
If an amateur investor
has to place emphasis on the words of the people that inspire them, this quote
by Warren Buffet is where they should start. Using a search engine to get
advice about investment or even trading has become commonplace. There is no
denying that it does come with its benefits but are they quantifiable?
by all may not necessarily be pertinent to decision making, rather it is the
analysis of this information that should form a part of decision making.
There is a hole behind the painting on the wall!
Everyone is familiar
with the tragedies of hidden costs, the feeling of the windows being opaque
never comforts the traveler. We look for the “conditions apply” tag in everything
but when our money is considered, we let it slip. The tag of having incomplete
knowledge is the most lethal one because it often leads to tangible losses.
Conditions do apply
Investor education and
protection are advocated for a reason and that reason often coincides with the
mitigation of loss caused due to incomplete information. It is imperative to not
just read up on literature but also educate oneself.
Financial Literacy should
be the primary factor while making investment or trading decisions. Being able
to understand money and all the questions that go with it is crucial. It starts
with how to earn money and grows into much bigger queries such as how to manage
it, save it or multiply it. Answers to all of which form a strong foundation to
go ahead with.
Investor Education and Awareness
By definition, the
capacity to read, analyze and understand investments and investment vehicles is
referred to as Investor education. If you keep the technical jargon aside, it
is simply the understanding of the different streams of investment or the
market you are trading in. Grasping the idea of financial instruments and how
their value is derived can help you avoid unwanted loss.
Essentially, it is
about knowing completely where you are putting your money and why!
The Specialization Theory
Many retail investors
put up a strong argument against investor education saying that they shouldn’t have
to put in so many efforts when they are already paying
The counter to this is
a plain and simple- “It is your money”
For example, It is
good that you can afford a nurse to care about you full time but you would
still like to know what are you suffering from and what medicines are being
given to you in order to cure it.
Similarly, even if
professional assistance can cure you faster, being aware can make a huge
Importance of Investor Education and Awareness
As Benjamin Franklin has wisely said, “An investment in knowledge pays
the best interest”.