Tuesday, September 30, 2008

Welcome to the Stock Market

Once upon a time in a village, a man appeared and announced that he would buy monkeys for Rs 10 each. The villagers went out to the forest and started catching monkeys. The man bought thousands at Rs 10 and as supply started to diminish, the villagers stopped their effort.
He further announced that he would now buy at Rs 20. This renewed the efforts of the villagers and they started catching monkeys again.
Soon the supply diminished even further and people started going back to their farms. The offer rate increased to Rs 25 and the supply of monkeys became so little that it was an effort to even see a monkey, let alone catch one.
The man now announced that he would buy monkeys at Rs 50. However, since he had to go to the city on some business, his assistant would now buy on behalf of him.
In the absence of the man, the assistant told the villagers, "Look at all these monkeys in the big cage (that the man had collected from the villagers itself). I will sell them to you at Rs 35 and when the man returns from the city, you can sell it to him for Rs 50."
The villagers squeezed up with all their savings and bought all the monkeys. Then they never saw the man nor his assistant, only many monkeys everywhere!
Welcome to the Stock Market.
This story is still incomplete.This happened in another village.
Replace the monkey with GOATS.
Though the Man and assistant never came back, the goat is a useful animal,though the villagers purchased it at higher rate, it gives milk and when goat becomes old it can sold for meat.
Moral of the story: When you get into stock market make sure you buy goats, not monkeys.

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