Buying the News ?

Theoretically, investing based on fundamentals of a stock is the best option. But many a times, we jump the line and invest based on news. And in the age of social media - such news are everywhere - be it whatsapp / telegram / twitter / instagram / facebook. Apart from this, there are paid services to give you the news ahead of the crowd and pocket the returns.

In reality, if you the news is right - you make killing returns. But if the news is not true, then our investment can take a beating.

For instance, leading newspaper Economic Times published an article on 19th December 2022 stating that TATA MF may buy majority stake in UTI MF. UTI AMC being a listed company, if it is acquired by TATA MF, it could be a back door entry for TATA MF to get listed. 

Imagine what happened next. The stock price of UTI AMC sky rocketed from Rs.760 on Rs.900. A typical stock investor would love to buy this stock JUST IN TIME. Buy at Rs.760 and sell at Rs.900 - all in a day's time - pocket Rs.140 profit which is equivalent to 18% returns. And many stock investors expect their brokers to alert them on such opportunity so that they can grab it with both hands. 

But in reality, by the time they get the news and realize that it is indeed an opportunity, the stock price would has already run up - may to 800+. After bit of dilemma, they end up buying may be around 850 or so. 

Now comes the twist - On 20th December 2022 - TATA MF comes on board and denies the news. And the stock price promply tanks to trade currently at Rs.829 on 23rd Dec 2022.

Now the learning is:

• Though Financial news papers and financial websites are the main source of  news for investors, investing based on news is not the right thing to do.
• Many of us dive in and invest once we hear the news.
• But often we fail to keep track and miss out the news on following day(s). In other words, we lose focus quickly. Sometimes, we are left holding with lemons. 
• It is better to analyze companies and invest in them if they are fundamentally strong. It is ideal to stay invested in the company for long time to benefit out of its growth.
• At the end, it is hard earned money for every investor. Let us invest it responsibly.