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From the managing editor

Good advice isn’t always adequate advice. This is most evident in personal finance. For a magazine, covering the gap between good advice and adequate advice isn’t easy. It requires in-depth knowledge, skill, ability, and confidence to stick its neck out and make some bold projections.

Rohit Saran | Print Edition: August 7, 2008

Good advice isn’t always adequate advice. This is most evident in personal finance. Here’s an example. “Invest in a business, not in a stock” is good advice for retail investors. It implies that before picking a stock, you should learn about the business of the company in some detail. If you are confident about the company’s prospects, buy its stock. You are likely to reap profits in the long term.

Here’s another piece of advice investors would have heard several times since January this year: “The time for an allround rally in stock prices is over—pick and choose your stocks and mutual funds very carefully.” Both these suggestions are good; but both are inadequate. How is a small investor supposed to differentiate between a business and a stock? How can he turn more “picky and choosy” in his investments after January 2008?

For a magazine, covering the gap between good advice and adequate advice isn’t easy. It requires in-depth knowledge, skill to distinguish relevant information from irrelevant data, ability to make intelligent assumptions, and finally, the confidence to stick its neck out and make some bold projections. The last part is the trickiest. If you don’t make any projections and just share information and understanding, readers don’t find the advice “actionable”.

But the same readers often don’t understand that every projection is based on certain assumptions, which may not come true. Between the advice and action lies one significant step that must never be ignored—your judgement. Your judgement about how much risk you can take and for how long. Our advice is meant to help you take a decision; it is not a substitute for your judgement. The riskier the investment you contemplate, the greater should be your reliance on your own judgement.

This explanation goes out to the millions of people who have lost money in stocks in recent months. Many of them blame the investment advice they read or heard for their loss and feel betrayed. We understand why they feel this way. But the media’s recommendations are not the only reason for investment decisions going awry. The investors who lost heavily probably did not blend the advice with their judgement. If you still think you made a good judgement call based on good advice, stay with your paper losses. More likely than not, they will turn into real profits when the markets are buoyant again—whenever that happens. We will, of course, be with you through thick and thin, and to help you get richer. Both in wealth and in wisdom.

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