Muscle and money power has always attracted support in this world. Whether it is the bad guy who lives a few lanes across your home or the next-door wealthy old widow their ability to find support from the unknown and the unheard is one of the most natural things in this world.

Unfortunately the same logic that is applied so genuinely to the various facets of life is mistakenly oblivious in the stock markets. Investors spend hours searching discussing and debating at the smaller font lower single digit quotes. The point of research for these over smart investors is not what you are buying but for how much are you buying. This is so because a Rs 10 stock going to 0 translates into a 100% loss. Another misnomer with these over smart investors is that the quantity of Rs 10 stocks that can be bought is far higher compared to a higher value stock. Now this is the most ridiculous thing that one can hear of. Returns from markets are always measured in terms of money appreciation rather then in terms of quantities of stocks bought. There is nothing in history that proves that a low priced stock provides better returns to investors. If only low prices stocks have been heard of hurting investors more often then not. If only the aspects of life had been applied the dichotomy would have looked less appalling.

While investors spend days, maybe weeks looking for the best refrigerator or an air conditioner and seldom get it wrong their ability to get into bad stocks and seldom get it right is concerning. Just because the refrigerator or the air conditioner cannot be sold through a trading terminal it gets more homework then it deserves. The inner sense of being able to trade out of a stock at a click of a button prohibits the investor from doing any type of serious homework.

In the mid nineties when the auto companies were in fashion. The people who bought Bajaj Auto were frowned upon. The general comment was these stocks are for the High net worth Investors and the over smart money would have picked up Hindustan Motors and LML while his smarter cousin who wanted to stay just smart rather then transgress in the realm of over smartness picked up Hero Honda , Bajaj Auto and Telco . After about a decade it is the smart money that is riding all the way to the Bank.

Coming to banks, if the over smart money had tried to get into one of the not so smartly managed companies like Global Trust Bank and Bank of Rajasthan they would have regretted their over smartness. The smart money was content picking up ICICI Bank , HDFC Bank and even SBI but the over smart people who wanted a quick double have seen their assets being eroded.

In the post liberalization period of 1992 cement stocks were in great fancy. Had the investor been smart he would have stuck to ACC , Gujarat Ambuja and L&T but his over smart cousin would have bought Modi Cement , Kakatiya Cement, Kalyanpur. Ditto for the steel stocks - the smart guy would have bought Tisco while his greedier and multibagger-seeking cousins would have lapped up Lloyd Steel , Sunflag Iron. I doubt if many of us remember these names. When the industry is booming most of the closed down sick and unviable units suddenly become viable. The increase in steel prices for instance has put a lot of steel companies on the profitability track. What would happen if steel pries were to contract once again is a matter of serious debate for the over smart investors.

The most glaring instance was in the tech boom. I have a special remembrance for the tech boom as I was privileged enough to lose more then 80% of my portfolio. The fact that this loss came in the backdrop of identifying ten and twenty baggers like DSQ Software (Rs 300 to 2800), Sri Adhikari Brothers (Rs 115 to Rs 1800) Silverline (Rs 60 to 1300) is a matter of shame rather then record. I failed to recognize the Infosys 's and the Wipro 's of the world. I remember quite clearly that DSQ traded at a PE of 100 and I did not switch to Infosys as it traded at a PE of 300. Agreed that all these companies have also eroded wealth but their over smart cousins have evaporated wealth in the third and fourth line stocks and evaporation is always more painful then erosion.

For long term investors it is always advantageous to pick up stocks of the leaders and leave the laggards for the over smart money. Empirical evidence suggests that investors looking for a 3 year double are far better then their over smart cousins looking for a 3 month double. The number of takers for this strategy is far too less then is desired. This is probably the reason for the simple theory in economics that " everybody cannot be rich at the same point of time!"

Disclaimer: Basant Maheshwari is a Cost Accountant and a Post Graduate Diploma in Equity Research and Analysis from ICFAI Hyderabad). Comments are invited from readers at & .