Saturday, July 9, 2016

With Enough Insider Information and a Million Dollars, You Can Go Broke in a Year

What you require for fruitful investment results is not insider information, nor a large initial corpus, is the clear message of the title, which is one of the many golden quotations of Warren Buffett.

Many believe, that in order to make riches on the stock market, one needs to have access to insider information or prior information of significant happenings in a company’s affairs.  Yes it is true that many have made large sums in this way, out of short-term fluctuations in the share price.  A number of people have gone to jail too, as it is a crime to use such privileged information for personal gain.  Recent confinement of “Rajat Gupta”, a renowned banker of Indian origin, in the United States is a perfect example.

The second important facet about insider information is, that it is useless for successful, long-term investment.  It is useful only for speculating, which is not investing at all, and this blog is meant only for long-term investors and clearly not meant for speculators.

Buffett is also trying to warn common investors about the inherent dangers associated with the approach, as only a select few, who work on the boards of listed companies or top level advisors will have access to such key and sensitive information and what percolates down to the layman is mostly junk in the form of Tips from brokers, which is a sure way to losses.

Having read this article, I hope you would have certainly realized veracity of the quote “with enough insider information and a million dollars, you can go broke in a year”.

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