Don't chase market whims and fads

A common mistake a number of investors make is to look at what top market investors are buying. India's favourite investor is Rakesh Jhunjhunwala. Many investors closely follow and track what new stock he is buying and follow him by buying that stock. The rationale that often goes is to hop on the train to quick riches. This is often not the case in the real world. Here are the common reasons why you should not follow market experts blindly. You don't really know why the expert has bought a particular stock. Is it because he likes the company or is it the sector or is it just the valuations? The investment may just be a tax-saving strategy. The expert may be buying to shore up a friend's stock (yes, it happens). The expert could have been taken over by market exuberance. The expert could change his position at a moment's notice, catching the public unaware. The expert may just be wrong in buying a stock (this happens, too). Following market fads Then there are market fads. At various times, markets take a strong liking to a particular sector or stock and go overboard with optimism about it. Market experts and big fund managers too get caught up in irrational market exuberance. The story of Jai Co