‘The adventures of a retail investor with the bikini clad supermodel at a beach’.

Once upon a time, on an island off the west coast of the Indian peninsula, there existed a beautiful beach. It was famous for three things. The supermodels, the food at therestaurants there, and the unusually high concentration of retail investors. Rumour had it that half of the stock market newbies who went to this beach never returned. But the other half returned and did exceedingly well in the stock market. They also raved about the food, especially the ‘shark ambotik’ and their adventures with supermodels there. Foodie magazines said that the best shark meat in the world was to be found at beach X. Out of superstition, it was considered mandatory to visit this beach before starting to trade or invest in stocks.

Anand, Pulkit and Nilesh had been considering trading stocks, but Nilesh thought it was too ‘risky’. So, Pulkit suggested buying mutual funds, as he expected the professionals to manage their money better. Nilesh raised his arms to halt the discussion.In a hushed voice, he said, “Have you heard about the X Beach? It doesn’t even have a proper name. But every newbie who returns from there brings lady luck back with him, quite literally. On an average, he outperforms the indices and generates loads of alpha. Also, we can have a great time enjoying the seafood and supermodels. I also hear that there is a high chance of playing the world’s favourite sport with those supermodels!”

This was too good to resist for Anand and Pulkit. They started planning their itinerary to beach X. If there was paradise on earth, this was it. Great food, great women, and on returning you get rich! What else could one want from life? Off they went to Beach X one Friday evening. The plan was to spend the weekend, savour ‘Shark Ambotik’ and try their luck with the models. The whole trip seemed too good to be true. In light of all the good stories they had heard of, they conveniently ignored the fact that half of the visitors never returned.

On arrival, they were spellbound. They spoke to retail investors from all over the world, who had arrived with similar hopes. It seemed as if god had reserved this area for the best food and women on the planet.  They went into a restaurant that served only Shark dishes. It seemed strange that all the restaurants in the area served only Shark dishes, but then it all was worth it, they thought. After a hearty meal on a Saturday afternoon, they were surprised when three damsels approached them for a swim in the sea. With hopes of playing the world’s favourite sport after swimming, off they went into the water.

“Too good to be true. Too good to be true. Too good to be true.” That was all they could think of, while swimming and flirting with the models. Anand seemed to having a great time with one particular model. He was in luck. Pulkit and Nilesh spotted Anand and her moving back to a beachhouse room. They thought it was a matter of time before they got lucky.

As they went deeper into the water, they spotted a few triangle like figures. The remaining two damsels started swimming back to the shore, leaving Pulkit and Nilesh high and dry. Or KLPD’d, as they say. Something was wrong, and as they got closer to the triangle like figures, they realized they were shark fins.

Pulkit finally had an epiphany. This was all an elaborate plot. The shark dishes were exclusive and delicious at the beach shacks because they had a good diet… of human meat. The models were probably employed by restaurant owners to lure humans deep enough into the sea. The sharks had a regular supply of food, so they had their incentive to swim around in that area. He shared this with Nilesh, but he wouldn’t listen. Nilesh was still hopeful of pulling off anAnand, and discovering the secret to getting rich.

They were at the centre of this drama. They were the suckers in this elaborate plot.

Pulkit, finally having realized where half the junta who came to Beach X disappeared, started swimming back to the shore for his life. He had to leave behind his friend, Nilesh, who was still full of irrational hope, despite his life being in imminent danger.

Half an hour later, Pulkit made it back to the shore, and took the first means of transport to get out of this area. Anand, after having a nice experience at beach X returned, and got rich within a year. Nilesh never returned. A part of him probably ended up as…. nutrition for the sharks, which, in turn would have ended up on the dinner plate of another sucker. The other part was probably floating somewhere in the Indian Ocean.

What do we learn from this story?

Nine out of Ten drivers think they are above average. Everybody assumes the same about investing. Statistically, it doesn’t quite add up. While the Anands of the world are very popular, idolized and glamourized, everybody cannot be an Anand. Don’t be fooled by randomness. For every Anand, there is a Nilesh who lost everything he had thanks to irrational hope, and a Pulkit who figured the truth out at the right point of time and quit the game to play another day.

Also, realize that there are businesses that thrive based on human irrationality, greed, hope and fear. They don’t look out for your best interests. If you don’t look out for your best interests, nobody will.

In the markets, they say, “There’s a sucker born every minute.”

Don’t be a sucker. To win, try not to lose.