In the ever-evolving world of investments, each bull market brings a new flag bearer – a person or an idea promising to quickly fulfil all your financial dreams. Over the years, we’ve witnessed various market trends and the rise of influential figures who seemed to hold the keys to wealth. But history has shown that these personalities and ideas often seem hollow in the long run. We shall explore the recent phenomenon of “finfluencers” and urge investors to approach their advice cautiously, emphasizing the importance of context and informed decision-making.
The Past Lessons from Bull Markets
To understand the present, let’s briefly revisit some past bull markets:
1) Harshad Mehta and Replacement Cost Theory (1990s) – The era of Harshad Mehta and his replacement cost theory marked one of the memorable bull markets in India.
2) FII-Driven Rally (the Late 1990s) – The influx of foreign institutional investors (FIIs) signalled India’s emergence on the global stage.
3) TMT Stocks and Ketan Parekh (Late 1990s – Early 2000s) – The rise of Telecom-Media-Technology (TMT) stocks and the infamous K-10 stocks created a frenzy.
4) Excesses and Land Bank Valuation (2005-2008) – A period of unprecedented excesses driven by abundant liquidity and real estate speculation.
5) Post-Pandemic Goldilocks Economy (2020s) – The recent optimism of a post-pandemic world coupled with cheap money fueling the stock market.
The Rise of the Finfluencers
In the current bull market, the spotlight has shifted to a new phenomenon – the “finfluencer.” These individuals, often young and social media-savvy, claim to have found the secret to wealth creation. They typically base their influence on the following:
1) Massive Returns on Small and Midcap Stocks – Many finfluencers boast about turning small investments into substantial fortunes.
2) Sharing Learnings via social media and Courses – They offer insights and courses on replicating their success.
3) Recent Success (Last 3-4 Years) – Much of their success has been concentrated in a short timeframe.
Challenging the Finfluencer Phenomenon
While some finfluencers have undoubtedly achieved remarkable success, there are reasons to exercise caution:
1) Replicability and Luck – Most finfluencer success stories are not easily replicable. Luck plays a substantial part, and exclusively crediting it to skill can be deceptive.
2) Market Shifts – As markets change, finfluencers may shift focus to riskier assets, potentially causing harm to inexperienced investors.
3) Limited Life Experience – Many finfluencers need more extensive life experience, making it questionable whether they possess the keys to success, not just financially.
The rise of finfluencers challenges established investment wisdom. However, it’s essential to view their advice in context and consider the credibility of their claims. While they may offer valuable insights, investors must remain vigilant and not rely solely on their guidance. The world of investments is complex and ever-changing, and sound decision-making requires a comprehensive understanding of the market dynamics. Investors must remain cautious.
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