Banking & Finance: The Necessary Evil

Indian banks have been in the news for all the wrong reasons, which range from non-performing assets to managerial incompetence to corporate governance. But that’s all “high-level” talk that only the “educated” can understand. For the common man, the problems are different.

The ghost of the PMC scam is still fresh in our minds, where innocent depositors had to suffer. But one doesn’t have to wait for such a scam to suffer grave inconvenience. Most of us tolerate it in our day-to-day dealings with Indian banks. 

I had my first account opened many years ago with a government-backed bank. At that time, the facility of internet banking wasn’t much developed, so I had to visit the bank’s branch. The bank staff used to be arrogant and dealt with customers as if they are doing them a favor. You would frequently find them complaining that the printer was not working or the server was down, so you couldn’t get your work done. 

Times changed. Private banks started occupying the space once dominated by public-sector banks. But their advent has not been free from problems. They are mostly deficient on the service front and ultra aggressive about sales. If you call a private bank, you will probably have to wait for a long time before you get connected. However, we all receive numerous sales calls for credit cards. 

The transaction infrastructure is also a problem. While both private and public banks advertise their “robust” digital backbone, you get to experience the robustness when you actually transact. Dropped online transactions lock in your money for several days. I have personally written to the disputes-resolution department of a private bank to claim my amounts from such dropped transactions. I can tell you from experience that the process is a pain.

The other day someone told me how the bank deducted Rs 25,000 from his bank account as loan-processing charges. The person had no clue about them. Perhaps the bank salesperson had concealed them. Most banking products have such hidden clauses dumped somewhere in the contract. You get to know about them when they hit you.

In the digital era, it’s unthinkable to deal in cash or to store cash. So, you will have to deal with the banking system. Hence, be utmost cautious. You can conveniently assume that banks and finance companies are never honest and there is always hidden stuff. Caveat emptor.       

Knowing More Will Hurt You in the Stock Market

Stock research could be enervating. The classic analyst tracks and studies several indicators before picking a stock, yet the work never seems to end. That should not be surprising. Listed companies have businesses and operations so widespread and multifaceted that no time is sufficient to make up your mind. That’s what gives rise to “analysis paralysis”—you become so entangled in analysis that you can’t make a decision. 

In spite of this, broking firms spew out stock recommendations, thanks to the pressure to deliver. But that’s a different problem; let’s leave discussing it for another day. Let’s come back to analysis paralysis. The core of the problem of analysis paralysis is trying to know too much. And that’s a vicious process. The more you know, the more you want to know and the more confused you are. That’s natural as well. No company is free from problems. All have their strengths and weaknesses. Once you start focusing on the weaknesses, you will find more and then even more. Eventually, you decide to shun your stock and move on. But you wonder when that same stock becomes a multibagger.

Financial parameters aren’t flawless either. Each has its drawbacks and frequently they fail to capture the reality. Sometimes they are even manipulated. So, tracking multiple financial parameters also doesn’t help as eventually they will throw conflicting signals.

In the stock market, you never have full information. The decisions have to be made amid healthy uncertainty. Of course, you have the past financials, forecasts, management outlook, peer views and so on, but the more you focus on them, the more you distance yourself from making a timely call. Little surprise, one of the secrets of successful stock-picking is “picking” the stock.

To do so, you have to deliberately cut your information intake. Yes, don’t look for more data. Rather, cut the existing sources. Knowing more is counterproductive to stock-picking; it’s not the other way round. What’s important is that you make a timely judgment. The next important thing is to stand by your stock. Don’t let the ever-present barrage of information affect you. Learn how to ignore.

Remember that wealth is made in the stock market by picking winning stocks and standing by them, not through endless research.