In such a volatile market the small investor needs protection. I can safely start a speech with this statement immaterial of the forum at which I am speaking. I will get a lot of applauses for this universally true statement.

Let us now see what it means. One it is a Mother Hood statement and hence almost impregnable and nobody can contradict it. Who you may ask is the small investor. To me the definition of a small investor, an uninformed investor etc. are a little blurred. Instead of trying to define him / her we can describe the small investor:

He / She is a voluntary contributor to the Broker’s Welfare fund: They transact so often that it hurts them not to transact. So over activity or excessive activity is a very important characteristics. They are helped by the ‘tele-calling’ employees very nicely designated – and remunerated on the brokerage earned by the firm.

Overconfidence: In spite of under-performing the benchmarks, and in many cases the easy benchmarks like ppf and bank deposits too, they still ‘hope’ that over the next few years they will outperform ALL the indices with the SAME strategies.

Normally their ‘Long-term’ portfolio is a lot of ‘Short-term trading calls gone wrong.

Buying in a bull market – and compensating by selling in the Bear market. How well they can do this is almost amazing.

“Caretakers of the Bear Market” – They normally buy Mutual funds or Equities in an IPO. Then a bear market strikes. Then they wait for the prices to come back to their cost – obviously they cannot accept the thought of taking a loss. After 5-6 years if the price comes back, they quickly go and sell. They actually are happy and tell the whole world “I did not lose much money in the transaction – I got back my cost. They do it so regularly that it is not funny!