Hemant : My life is so messed up these days that even Google is not able to answer my question.
Niraj : Why, what Happened Hemant ?
Hemant : Arre yaar, When I am confused about a question, I try asking it to Google, it gives so many answers, I get further confused.
Niraj : Ok. May be you aren’t asking the right questions to it Hemant.
Hemant : How can a question be wrong or right ??? I thought only answers could be wrong or right.
Niraj: Let me explain to you, how Google actually works. Google works on the principle of “string matching”
So for example, if you are asking a factual question like “In which year Akbar was born?”, Google is most likely to come up with the accurate answer.
But if we ask a question which involves an opinion or judgement, for example “Was Akbar a Great King?”, do you think Google will have a clear answer ??
It will throw various opinions of people about your question. Now based on those opinions, you will have to take a call what is the right answer to your question.
Another example, if you ask Google, “What is the GDP of India?”, it can give you an accurate answer. But if you ask it, “what are the important constituents which will make Indian GDP 5 Trillion USD by 2025?”, will Google be able to answer on its own? It will come up with some statements from different economists which may have diverse answers.
The bottom-line is, if you ask the right question, i.e. a fact-seeking or data-seeking question, you are more likely to get a crystal-clear accurate answer.
But if you ask a wrong question i.e. an opinion seeking question, you will get a plethora of opinions. You might not get a clear answer unless you do an in-depth study of the opinions, the background of the people having those opinions and so on.
By the way, what question you were asking to Google?
Hemant: Actually I had some spare amount to invest. And I wanted to grow this amount. So I asked google, which are the next Multibaggers. I got several answers from different brokerage houses and I got confused.
Then I asked Google, “Which are the best funds to invest?” It again threw so many names from different newspapers and news channels that I got confused.
Do you think I asked the wrong question?
Niraj: Yes, you did. What you asked Google, was not a fact-seeking or a data-seeking question. If you had asked, what was the Sensex level on 1st Mar 2013, it’s a data seeking question. Google would accurately answer it.
But if you ask, which is the best fund or next multibagger, obviously it’s not Google’s business to research them. It will do a string matching and throw up links which have used this phrase “Best Fund” or “Next Multibagger”.
What you are actually getting is opinions of people who might be from a brokerage house or a newspaper company or a news-channel. Now first thing is to understand is, these are not “Google’s Opinions”. Second is to understand that these opinions need careful evaluation and can’t be trusted blindly.
Hemant: So what should I do if I want to do my own research on next multibaggers or best funds to invest?
Niraj : Now that’s a good question. You may have to pick up a company and do in-depth research about it.
Start with its products, then how is the demand of its products, whether it has a competitive advantage, whether it has pricing power, how well it is received by customers and so on.
Then move on to its Financials, Debt/equity ratio, Interest coverage ratio, Liquidity ratio, ROA, ROE etc
Hemant: Stop Stop Stop !! O My God !! So much research?? And all this I have to do for how many companies??
Niraj: Well, there are some 6500-7000 listed companies listed on both the exchanges. So ideally all of them. Or if you want, you can pick up the top 500 companies and do all this research for them.
Hemant: Dude, I just want to invest small amount. Let’s say Rs. 15,000-20,000 a month. If I keep doing all this research, then when will I do my job? I will be thrown out from my company. I will also incur a cost in doing this much research. Please suggest me an easier way.
Niraj: Easier way is to have someone do it for you. You can hire a professional who does all this for you for a fees.
Hemant: But isn’t this professional fees an additional cost for me?
Niraj: You have 3 choices.
- Keep asking “opinion-seeking” question to Google and get random opinions.
- Do all the research yourself.
- Hire a professional
First 2 choices don’t have a direct cost, but indirectly they may prove more costly. Random opinions might lead to wrong investment choice which will lose you money. Doing own research will consume too much time and Money. Still you can’t be sure if your research was truly “in-depth”
Third choice has a direct cost, but will benefit you by saving lot of time, getting professional research and a face to talk if you have some specific queries. In investments, we many a times feel fearful and concerned. Do you think Google will be able to address that?
Hemant: You are absolutely right Niraj. I was actually asking the wrong questions. We need to keep Google search restricted to data and information. When it comes to Knowledge and Wisdom, we need to have a trusted human advisor on our side. Thanks for clearing my thoughts.
We look forward to your feedback and comments on the above article.
The Author Prof. Saurabh Bajaj (BE, MBA, FRM, CFGP, CIA, AFGP) is CEO with Nidhi Investments, Mumbai. His articles have a readership from 78 Countries across the Globe. He may be contacted on CEO@nidhiinvestments.com if you have any questions.
(The views mentioned in the article are personal opinion of the author. The characters used in the article are imaginary).