Decoding markets one step at a time

"I try to get rid of people who always try to confidently answer questions about which they don't have any real knowledge"- Charlie Munger (Buffet's Devil Advocate) Today's post is a bit different. It is not related to any particular sector or macroeconomic headwinds. We would try to identify the role of human behavior in investing/trading and how efficient market hypothesis does not hold true as long as humans are the participants in trading or investing. This post would cover the following subjects: Explanation of most common Human Biases How stick market experience bull and bear phase Efficient market theory (EMT) and how human behavior negates EMT Examples of assets (majorly equities) exhibiting glaring human biases A short story to start with: Shortly after 1550, the growing affluent class of Holland was introduced to Tulips. Due to their aesthetics, they were well sought by these classes. However demand soon overtook supply and the prices of Tu...

“Ninety percent of all millionaires become so through owning real estate. More money has been made in real estate than in all industrial investments combined. The wise young man or wage earner of today invests his money in real estate.” - Andrew Carnegie, billionaire industrialist The real estate sector has been so important for the country that millions of rupees are earmarked by the government for real estate development. But recently the banks and NBFC's, which are grappling with asset liability mismatch, are unable to provide the funds for real estate and infrastructure projects. While the developers need the funds to pump it into the projects, this is where REIT and InvIT becomes important. In simple terms, these instruments are just like mutual funds which pool in money from investors and invest in real estate/infrastructure projects (in case of REIT/InvIT). These instruments provide the investors with predictable cash flows over the long period of time. The stru...