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Fact or opinion:Do Due Diligence

Dec 11, 2011 | 6 comments

According to Webster’s Dictionary a fact is “anything that is done or happens; anything actually existent; any statement strictly true; truth; reality.” fact is a statement that can be proven by direct experience or objective verification.  This evidence may be in the form of the testimony of witnesses, agreed-upon observations, the written records of such testimony and observations, or the result of research or investigation. A statement of fact can theoretically be checked for accuracy.

Whereas an opinion is defined as “indicating a belief, view, sentiment, conception.” An opinion is a statement of belief or judgment that cannot be objectively proven true or false.  Opinions usually express the feelings, preferences or biases that a person has about a subject.

Facts or Opinions

Let’s look at some statements to see if it is a fact or opinion.
1. Taj Mahal was built by Mughul emperor Shah Jahan.
2. “My experiments with truth” was written by Mahatama Gandhi.
3.  Whenever Sachin hits a century India loses.
4. Aishwarya Rai is the most beautiful women in the world.

1 and 2 are facts for sure. Regarding Sachin centuries being unlucky for India, Onemint did an analysis and found that Sachin’s centuries only result in about 69% wins  for India whereas Sehwag’s 14 centuries have led to 13 wins! But  Sachin has scored more of his centuries against tougher opponents, and while his centuries have in general markedly improved India’s winning chances; those chances were so low to begin with that it gives a semblance that India doesn’t win as often as it should. Full article at onemint

Aishwarya Rai even after becoming mom has managed to be the “Most Beautiful” in this year’s Filmfare’s 2011 college poll.RefWhile we can come up with lots of survey it still represents an opinion for “beauty lies in the eyes of beholder”.

You should know that a statement of opinion is sometimes disguised as a fact. For example:   It is understood that the children of working mothers feel rejected.
The use of the phrase “It is understood…” implies that what follows has been proven.  This is not the case and the statement is still an opinion.

Financial Facts or Opinions

When it comes to money, You cannot blindly accept financial advice, You must know the numbers. you have got to know the difference between facts and opinions.You must know the facts. And numbers tell facts. Let’s go through some statements:
  • “Your house is an asset.”
  • “The price of real always goes up.”
  • “Blue chip stocks are your best investment.”
  • “It takes to make money.”
  • “Stocks have always out performed real estate.”
  • “You have to be dishonest to be rich.”
  • “Investing risky.”
  • “Play it safe.”
  • “You should marry him. He’ll make a good husband.”
  • “Find a secure job and stay there all your life.”
  • “Doctors make a lot of money.”
  • “They have a big house. They must be rich.”
  • “You shouldn’t diversify your investments.”
  • “You should diversify your investments.”
People spend their lives determined by opinions. “Study hard, get good marks, go to IIT then IIM and you are settled for life”. Read Chetan Bhagat’s Revolution20-20 (or earlier Five point Someone ) to know the pressure one faces to become an engineer. And are our engineers ready for job. No says most of the employees.
Found a similar discussion in Robert Kiyosaki’s(Rich Dad Poor Dad fame), book CashFlow Quadrant . Quoting from it:
For a person’s life to change, they first need to change their opinions… then start looking at the facts. If you can read financial statements, you will be able to see the facts not only of company’s financial success… if you can read financial statements you can tell it immediatley how an individual is doing… rather than going by yours or somebody else’s opinions. As I said, one is not better than the other. To be successful in life,especially financially, you must know the difference. If you cannot verify something is a fact, then it is an opinion.”
“Do you know what ‘due diligence’ means?”rich dad asked. I shook my head.

“Due diligence simply means finding out what are opinions and what are facts.When it comes to money, most people are either lazy or searching for shortcuts, so they do not do enough due diligence, And there are still others who are so afraid of making mistakes that all  they do is due diligence and then do nothing. Too much due deligence is also called ‘analysis paralysis’. The point is you must know how to sift through the facts and opinions, and then make your decision.

Invest in equity for double digit returns!

That is what we are told. Capitialmind.in did an article recently on Nifty Adjusted For Inflation Returns Just 2.6%. It says :
In the 17 year period that the Nifty has existed, the return, net of inflation, is 55%. The long term return of the Nifty, net of inflation, is 2.6%.
Nifty returns adjusted for inflation
Those retirement plans that assume 15% equity returns need some rethinking.
Learning the game of money and how it is played is an important part of your journey to financial freedom. Before you accept some financial advice -please check if it a fact or opinion. Please do due diligence for it is you money after all!
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6 Comments

  1. ANIL KUMAR KAPILA on December 23, 2011 at 6:09 PM

    A useful post.Financial literacy is very important.Unfortunately the level of financial education in our country is extremely poor.It pains me when I find that educated young people are not able to even fill the forms required for making investments correctly.Most people ask the agents to fill the forms and they just put their signatures.People make investments without knowing anything about the products.Even for basic things they seek advice.

    Reply
    • admin on December 24, 2011 at 7:29 AM

      Thanks Anil. I know what you are talking about for I have been in that category inspite being an engineer from a premier college.
      This website and blog is my humble attempt is making others aware of money and it’s related stuff.

      Reply
  2. sujatha sathya on December 12, 2011 at 9:39 PM

    sound advice

    Reply
    • admin on December 13, 2011 at 5:02 AM

      Thanks Sujatha..easier said than done..

      Reply
  3. deb on December 11, 2011 at 9:45 AM

    excellent and very useful writeup. a comprehensive study as always.

    Reply
    • admin on December 11, 2011 at 11:50 AM

      Thanks Debajyoti,

      Reply

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