Want to invest? Know your zoology first!

'All animals are equal but some animals are more equal than others.' -- George Orwell, Animal Farm

A zoo is a place we typically visit only during two phases of our life: one when we are kids, other when we have kids. Ever wondered how akin is a stock market to a zoo -- complete with all its animals?

While bulls and bears may be the buzzwords on the stock market (or should we say, zoo), these two are not the only species rampaging around. If you have invested on Dalal Street for long enough, I am sure you will have encountered the following investor-species.

Bull

Let's start with Dalal Street's most favorite animal -- the bull. The term, referring to the stock market, describes an investor who is optimistic about stock prices rising and thus buys stocks; thereby pushing the stock index up.

No wonder these investors are also called the 'kings of good times.' The Indian stock markets in the recent past have been on a bull run with the Bombay Stock Exchange's Sensex touching its all-time high. In the history of Indian stock markets, bulls have never had it so good.

Bear

The Street's least favorite animal is the bear. Used to describe downers -- of stock prices as well as individuals -- these investors are least welcome on the stock markets. A bear believes that stock prices shall tumble and hence sells stock; thereby dragging down the stock index.

These investors are also called the 'kings of bad times.'

While the market loves to ride the bull and wish away the bear, history is witness that consistently profit-making investors have been known to deftly switch between bulls and bears.

Lion

Next on the list is the 'king of all times' -- the lion. FIIs (foreign institutional investors) -- big daddies of the market -- are like lions. When they roar, the stock market soars. The reason they are called the king of all times -- good and bad -- is that their magnitude of investment helps them to make maximum profits and least losses by buying at lows and selling at peaks.

Now you know why investors are on the lookout for possible news of FII investment in a stock or a FII sell out of a stock.

Lamb

Next on the list is the 'king of no times' -- the lamb. These investors' investing rationale is a classic example of the herd mentality. They frantically buy a stock when news channels flash pictures of zooming graphs of that stock's price and they sell a stock in panic when the slightest of stock market correction occurs (i.e., when the stock markets fall).

These investors have always experienced that the day they buy a stock, prices of that stock tumble and the day they sell a stock, prices of that stock soar. Hence, defying all investing principles these investors end up buying at peaks (when the stock prices are at their highest) and selling at bottoms (when the stock prices are at their lowest).

No matter which side the market moves, these investors get slaughtered like a lamb in an abattoir. Now you know why they are called the kings of NO times.

Fox

Remember Aesop's fable of the fox, which when unable to reach the bunch of grapes handling from the vines, sighs that grapes are sour? Well, our stock market has plenty of such 'fox' investors who are of the once-bitten-always-shy type.

These investors bet a large sum of money on a stock without having any understanding about the company or the industry. They either try to time the market or act on supposedly 'inside information.'

They tend to forget the golden rule of the stock markets: time in the market is more important than timing the market. When these investors make huge losses, they simply flee the markets once and for all. To carry our theme further, these investors are called 'the kings of sour times.'

For a moment, if we imagine that all these investor species were part of a circus, any guess as to who the ringmaster would be? Well, the 'the regulator of all times!'

Authors' note: This article's theme is a comic analogy. Hope the attempt to amuse the reader will be taken in the right spirit.

Mangesh Sakharam Ghogre is a Mumbai-based freelance writer and a keen observer of the stock markets; Vivek Kaul is Research Scholar, ICFAI University.