The Leonardo DiCaprio-starrer ‘The Wolf of Wall Street’ portrayed financial markets as a place riddled with fraudsters. If we go by what the movie portrayed, it is a place where brokerage houses resort to unethical sales tactics and persuade gullible investors into putting money into penny stocks.
Since the movie is inspired from real events, it can’t, and shouldn’t, be overlooked. It’s a different matter than these events took place far away in Long Island, New York. So, we try to draw some learnings from the 2013 biopic here:
1. Don’t trust any absurd claim made by a white collar professional: In the movie, the protagonist Jordan Belfort tells his staff to introduce themselves as senior vice presidents of Stratton Oakmont when they call prospective investors.
This was a deliberate tactic to portray the callers as educated professionals. But just because someone holds a fancy designation in a brokerage house doesn’t make him trustworthy.
2. Do research the stocks you buy: Just because you get a call from a brokerage house, giving you a number of reasons for buying a particular stock, you should not get carried away. And you should buy a stock only based on your own research, if it indicates strong fundamentals of the company.
3. Don’t put too much money in risky stocks: The victims of Jordan Belfort risked their life savings in the stocks based on promises made by Stratton Oakmont, causing great financial and mental agony. No matter how good the stock appears, one must not invest all their disposable money in one or two stocks.
4. Advice from experts is not always bad: One is likely to view every broker with suspicion after watching the movie. But just because of some fraudsters, one shouldn’t mistrust the entire clan of stock brokers. There are a number of SEBI certified financial advisors. In case of doubt, one can also look for advice from more than one broker.
5. Don’t pay heed to the hype: Oftentimes, stock brokers convince the investors to part with the money because they are foraying into a new paradigm of sorts, or a new market wave as they sometimes call it.
The intent of not being left out can make some investors go overboard with their investments. Remember that nothing is more important than the safety of your capital.
So, if you stay on guard and exercise due caution, there is no way that you would be fooled by a fraudster — be it the Wall Street or our own desi Dalal Street.