{"id":1562,"date":"2021-01-01T00:00:00","date_gmt":"2021-01-01T00:00:00","guid":{"rendered":""},"modified":"2023-05-18T05:33:41","modified_gmt":"2023-05-18T05:33:41","slug":"are-you-watching-a-dog-while-investing","status":"publish","type":"post","link":"https:\/\/www.equentis.com\/blog\/are-you-watching-a-dog-while-investing\/","title":{"rendered":"Are You Watching A Dog While Investing?"},"content":{"rendered":"
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An experiment by Ralph Wanger is perhaps one of the most relevant trials ever conducted in the investing world.<\/p>\n\n\n\n

Ralph Wanger is not only a great investor but a great investment<\/a> writer and is known for unifying his observations into his writing.<\/p>\n\n\n\n

And here is one of his most interesting observations, where he analogizes the stock market<\/a> to a man walking with the dog. This man has been doing the same walk for years.<\/p>\n\n\n\n

But if you have walked a dog, you\u2019ll know it doesn\u2019t walk in a straight line. The dog hops forward and backwards, from one direction to another either to smell something or bark at other creatures. The dog also jumps on you for no reason, and even sometimes jump randomly on benches and other things.<\/p>\n\n\n\n

In short, there\u2019s no way to predict what dog will do and which way he\u2019ll walk.<\/p>\n\n\n\n

But if you know that the owner of a dog is heading northeast at about three miles per hour, towards the museum, you will eventually also know where the dog is heading towards – because that’s where the owner is taking him.<\/p>\n\n\n\n

Wanger further adds, “What is astonishing is that almost all investors, big and small, seem to have their eye on the dog, and not the owner.”<\/p>\n\n\n\n

What we are trying to deduce here is that, as an investor, we often end up following the dog (markets\/ticker price) than the owner (businesses behind the stock). <\/strong><\/p>\n\n\n\n

It\u2019s never been easier to stay on top of day-to-day fluctuations as we see them everywhere. Twitter is shouting out loud about all the daily events, there are online forums, there\u2019s information bombardment on your mobile through various app notifications, the journalists are busy talking about the movements of stock markets and then there are WhatsApp groups, etc.<\/p>\n\n\n\n

Definitely, data or information is not the privilege anymore as everyone has access to real-time data.<\/p>\n\n\n\n

And as markets go up and down every year, every month or every day, the question is not about whether you have information on the market. The advantage lies in leveraging your astute judgement to understand whether the business is heading towards the growth path to give you sustainable returns over the long run.<\/p>\n\n\n\n

Since 1999, we have witnessed many micro and macroeconomic events that impacted the markets favourable and unfavourable. Witnessed natural catastrophic events, trade wars, high inflation<\/a>, stock market scams, global<\/a> recession, and the list goes on. And even as we underwent all this, Nifty<\/a> delivered an impressive 12.7% every year. Isn\u2019t that amazing?<\/p>\n\n\n\n

However, this 12.7% returns was never linear. That is, you should know that markets never delivered 12.7% returns in a straight line like this:<\/strong><\/p>\n\n\n\n