Tuesday, February 16, 2010

Working of Stock Market ???

      In olden days there were a village named Vrindavan.  An outsider came and announced to the villagers that he would buy monkeys for Rupees 5.The villagers seeing that there were many monkeys, started catching monkeys and sold thousands of monkeys to the outsider@ Rs 5. Later when supply started to diminish and villagers stopped their effort, he increased buy price to 10/-… 15/- …20/-....
   This way outsider bought almost all the monkeys from the village and people started their normal routine work farming  etc …Then the offer rate increased to 25/- and the supply of monkeys became so that it was an effort  to see even a monkey let alone catch it, then offer price was just doubled by the outsider to Rs 50/-!!!
   How ever, since he had other businesses to look after he left the village and his assistant would now buy monkeys on behalf of the outsider, In the absence of businessman, the assistant told the villagers “Look at all these monkeys in these large cages the man has collected. I will sell them to you at 35 and when the businessman comes back you can sell him for 50.”  The villagers queued up with all their savings to buy the monkeys. Assistant too disappeared after selling all the monkeys @ Rs 35/- to the villagers.

And see the disaster...

   At the end... neither businessman and nor assistant turned up to Vrindavan…Only monkeys are everywhere …

Lesson learnt
Average buy price                           = 6 Rs
Sell price                                          = 35 Rs
Profit / monkey                               = 29 Rs
Period of Investment                      = 30 days
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