Mindset of Individual Investors

Topics: Financial statements, Finance, Annual report Pages: 3 (985 words) Published: February 22, 2013

Previously, it was only financial analysis of the company which used to play an important role when investors had to choose between various alternatives available but now the trend is changing as we all know that financial statements can be manipulated to some extent to show favourable results. Even though GAAP is followed while preparing financial reports, the reliability of such reports is still doubtful. Also, financial reports are generally published annually (very few companies publish interim reports) and hence, the investors who want to invest anytime in the mid of the year have to rely on previously published annual reports which do not provide up to date information but the question arises do they actually take their decisions on the basis of these reports ? If yes, what is the weightage they give ? , Do they analyze the whole report thoroughly ? If no, do they rely on expert views given by various experts in the shows telecasted by various news channels ? Or they analyse the future of the company by relying on the news updates about its contracts and dealings ? Undoubtedly, everything ranging from annual reports to expert comments play an important role and influence the choice of the investor but is it all that matters ? NO, the most important thing missing here is TRUST. Though it is a vague term and can be related to various things such as trust regarding the receipt of dividends timely, trust regarding the earning potential of the company, trust regarding the quality of products manufactured by the company etc. but the most important thing that induces an investor to invest is the trust that company takes care of its investors and trust regarding the working and management of the company i.e. procedures followed by the company are transparent and the management of the company is in non-corrupt hands. To support this statement by an example, here’s the company that was...
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