September 26, 2006


Investing, Speculating and Gambling

SMS received from ICICIDirect -
Sep25 - Pepper OCT.
Buy 13915
Target 14175-14325-14545
Stop Loss - 13775
For more trade calls, refer Commodity Compass.
Please refer risk disclosure document as ICICIDirect.
ICICIDirect has recently launched Commodity trading. They are sending newsletters, recos by SMS (I have received it for Crude Oil, Chilli, Gaurseed,..), conducting the training sessions, etc.

When you buy a stock after knowing the company's business, financials, future prospects, it is investment. When you buy a stock based on a hot tip, it is speculation. Because, for the stock there is a still an underlying company. Just that you have not done your homework. When you are getting into commodities and derivatives, most of the time, it crosses the boundary of speculation and can be termed gambling.

Retail investors have lost money in commodities. Just last week Amaranth, a hedge fund from US, lost US$ 6 Billion( That's right. SIX Billion Dollars) in one week due to loss on speculative positions in natural gas. It is extremely easy to lose capital in commodity trading with little or no knowledge of how it works. And in some cases, such as Amaranth, even the knowledge doesn't help. Retail investors should definitely stay away from this. Instead of letting people know the risks associated with commodities, ICICIDirect is turning them into a bunch of speculators.

To use Peter Lynch's words, if you are into commodity trading, there a better idea to part with your money - at India's only casino in Goa. At least, you will have fun losing your money.

PS: Firefox crashed while this post was almost complete. I was upset with myself for not saving the text. Magically, the Session Saver extension retrived the content of the page! I love it when things just work.

Update: I received the following SMS today (9th October).
You are receiving our daily trading calls that helps you to take investment decisions on commodity markets. If you wish to unsubscribe, SMS as COMM NO to 676766
Hmm.... Do ICICI folks follow my blog?

Technorati Tags: India ICICIDirect Commodity Trading

Investing or trading cannot be done part time, but many casual players become torpid as time goes by. This is a huge set up for complete failure.
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