/Animal instincts that stock market investors have
InvestmentDecember 18, 2020

Animal instincts that stock market investors have

​Which investing creature are you?

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​Which investing creature are you?

(Based on text by ET Bureau)

Most investors understand what bulls and bears stand for in the stock market. Some may even know what a dead cat bounce is but that’s not it. There are more animals in the investing world. From pigs to sharks to ostriches, each of these terms denotes distinct traits of investors in the market. We examine the financial traits of some of these creatures. Read on to know which of them is you.

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​Bears

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​Bears

Bears are pessimists of the stock market. Just like a bearish market denotes a falling or beaten down market, these investors believe that prices are likely to fall. This belief runs so deep that they even sell shares they don’t own. When shares consistently fall, you have a what is called a bear market.

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​Bulls

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​Bulls

Bulls are investors who are optimistic about the stock market. They are the complete opposite of bears and believe that prices will continue to rise. One can be bullish about individual stocks, a sector/theme or the market as a whole. A sustained uptrend is called a bull run.

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​Snails

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​Snails

Some investors are content with minimal returns. They will put money in low-yield traditional life insurance policies or in bank deposits. Some even let their money idle in a savings bank account. Little do they realise, their money loses value due to inflation.

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Rabbits

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Rabbits

Rabbits buy shares for very short periods of time, ranging from a couple of weeks to intra-day buying and selling. Rabbits can make quick money but need to be lucky all the time for that to happen. They also incur high transaction costs due to the frequency of trading and such gains attract 15% tax.

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​Tortoises

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​Tortoises

Unlike the overactive rabbits, tortoises invest slowly and steadily. The typical tortoise is the longtime SIP investor or the index ETF buyer who keeps plodding on despite volatility in the stock market. Tortoises win in the long term, for they stay put, but could earn better returns if they were a little more active.

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​Chickens

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​Chickens

These are investors who easily get unnerved when markets tumble. Chickens tend to invest at random. They get drawn to the market on the basis of tips after a big bull run and panic when stock prices turn volatile. Their reactions are not stable, often jumping from one extreme to another. Chicken often lose more than they gain.

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​Pigs

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​Pigs

Often, investors who make good money on their initial bets, turn greedy and unrealistic. These are pig investors who have very high expectations and hold on to stocks or even hoard more in the hope and lure of greater gains. Pigs are the biggest stock market losers.

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Sheep

Sheep investors have a herd mentality and blindly follow suggestions from investment advisers, SMS tips, TV anchors, friends and family and other financial gurus without carefully analysing if the investment works for them and their goals or not. Being followers of trends or fads, sheep are the last to enter bull markets and exit bear markets also late.

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​Ostriches

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​Ostriches

Many investors suffer from a confirmation bias. They seek information that supports their own beliefs and disregard views that don’t. Just like an ostrich buries its head in sand when faced with danger, these investors too turn a deaf ear to negative news. As the market rebound from March lows has shown, this can sometimes work in your favour. However, one should still stay in line with the market reality and not be blinded by self beliefs.

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​Whales

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​Whales

These are not individuals but large institutional investors with very deep pockets. Whales such as FIIs and domestic institutional investors move slowly but have the potential to change the market mood with their mega-sized transactions. Small investors should keep an eye on the whales and their activities to know where markets are headed.

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​Sharks

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​Sharks

Sharks are a red flag for investors, they mean danger. They lure retail investors with promises of very high gains on obscure stocks. Working collectively as a unit, sharks will push up the stock price by trading among themselves. When said price goes very high, they dump the stock on unsuspecting buyers and soon enough, are out of sight.

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