A few days ago, market regulator Sebi issued an interim order against a person with the online brand “Baap of Chart”. The order banned him and his associates from engaging in any activity related to the securities markets and also froze the bank accounts into which the proceeds of the entire activity had been deposited. The order stated that he had been working as an unregistered investment advisor in the guise of an investment educator for over two years and had collected Rs 17.2 million from his “students”. It is not clear how much of this quantity was frozen.

In itself the case seems rather banal. This is essentially a variation on something that is fairly common. What’s interesting is the atmosphere of hyperbolic fame and notoriety that arises around the perpetrator. It tells us what type of investors they are. Someone who has chosen and promoted the personal brand “Baap of Chart” is not looking to be an informed or experienced investor. You can watch the videos on his YouTube channel to see what I mean.

If you want to understand what’s going on, check out some of the recent comments on this YouTube channel. These were posted by followers of ‘Baap’ after Sebi banned it. Some blame Sebi and YouTube for allowing this person to plunder them while others blame Sebi for banishing the great man who taught people how to become rich. The latter seem to believe that this is a conspiracy by the rich and powerful to prevent others from becoming rich. All in all, this channel’s comment thread seems to be a crazy alternate universe for anyone who approaches investing like you and I do.

The basic problem is that many of these people do not understand what an exchange is and how it works. I don’t mean it in the obvious sense; that it is a place where people buy and sell tradable securities through brokers. How do you think stocks really move? What mental framework do they have when determining pricing? Previously, the most common mental models were those based on “tips” and “operators”. In the tipping model, people with inside information told you about it and you made money. The operating model was the same, but people believed that some shadow companies were managing the stock prices.

These are old models. In line with the latest technological developments and the emergence of AI, a third, flawed model has been added. Some people claim to have deep technical understanding and tools to decipher what is happening in the markets and offer to share these secrets for modest sums ranging from 1,500 to 12,000 rupees. These amounts are authentic as I have taken them from the Sebi order which is based on the actual payments made into the accounts of Baap and his associates through the payment gateway.

It is unfortunate and incredible that there are people who actually believe this to be true. How can they believe that someone who has the secret to generate a large amount of wealth quickly is running online courses for a few thousand rupees? I don’t want to seem condescending, but anyone who believes this will probably only learn the hard way, and that hard way was arranged by Baap with a little help from Sebi. The only mental model that really works is determined by reality. It may seem like hard work, but it gets easier with time. Following one or another “Baap” – and there are many others offering similar services – is the opposite of this strategy. At the beginning it looks easy, but as time goes on it becomes more and more difficult.The Author CEO, VALUE RESEARCH

Source : economictimes.indiatimes.com

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