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10 Qualities of Great Investors

Value Investing Workshops in Mumbai, Bangalore, Chennai – Registrations are now open for our upcoming workshops in Mumbai (22nd Jan), Bangalore (5th Feb), and Chennai (12th Feb). If you wish to attend, please click here to register.

One of the first lessons I learned from my Yoga teacher was what she told me during my first class – “Yoga isn’t about rapid movements but long pauses. Slow down, calm down, don’t hurry, and trust the process.”

The thing about yoga — or any exercise — is that there isn’t a comfort zone. But if you have a sound process, and practice it diligently, over time it starts to work for you.

The act of investing your money, as I realize, isn’t much different from practicing Yoga. A superior process and greatness often go hand in hand in yoga, and also in investing. For serious investors, thus, it’s wise to learn to trust the process that generates winning investment results.

I came across one such time-tested process framework recently while reading Michael Mauboussin’s “Reflections on the Ten Attributes of Great Investors.” Mauboussin is a Managing Director and Head of Global Financial Strategies at Credit Suisse, and author of some amazing books like The Success Equation and More Than You Know. He is one successful value investor, and thus the process he has laid out in his note is a great help for any serious investor seeking a winning investment process.

Here are my reviews of the ten attributes Mauboussin has laid out in his note.

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How to Deal With the Harsh Reality of a Stock Market Crash

Short practical advice (may skip) – If you cannot withstand losing a bit of your money in a stock market crash (where things easily go from bad to worse to brutal), please stay away from stocks. But if you are fine with the risk of losing some money in the short run in return of wealth creation in the long run, keep owing your good stocks and/or good mutual funds. Buy more (and keep buying) if you believe the quoted (now lower after the crash) prices offer great value in the long run. Then, once you are with your chosen good investments, just get going with other more important things in life like family, work, and self-development…and let go of the outcome of your investments. Accept that whatever happens, happens.

How to Deal With the Harsh Reality of a Stock Market Crash

Slightly long theoretical advice (must read) – I read a wonderful article earlier today on dealing with life’s harsh realities – sharp fall in stock prices is one such reality for most investors – and here is an excerpt from the same…

…the only intelligent thing to do when such turbulent change occurs is for us to sit back and realize that we are only to be witnesses to change, and to respond to it rather than to react to it—much like we would watch a movie unfold on the screen and laugh at the funny bits and cry at the sad bits, while always knowing that what is happening before our eyes is unreal.

Modern quantum physics after Einstein also points us this way—it says that what occurs depends upon the observer, and not on what is observed. So, in effect, as a witness, I am free to choose my response, and therefore the reality I actually experience.

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Investing and the Paradox of Perfection

A lot of people I meet in the startup world and in investing are aiming for that perfect start when all their stars will align to take them off to the moon.

So, some keep waiting for their “best product” or “best design” before starting up their businesses, and others wait for the “perfect business to invest in” or “perfect price to invest at” before starting to invest their money.

The reason? They don’t want to be criticized for any mistake – like not getting business, or temporarily losing money in the stock market – they may make due to not being perfect at the start.

If you think about why we feel the need to be perfect in the first place, it all goes back to how we think about ourselves and our self-worth. If we have a strong desire to be perfect, then we may use the idea of perfection as a way to validate ourselves as worthy and valuable human beings.

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Investing and Fear of Missing Out

We conducted our Value Investing Workshop in Ahmedabad yesterday, and here are the tribe members…

Let’s get to today’s post…

“You know I saved 50 rupees today,” declares the husband to his wife as he enters the house in the evening.

“And how did you do that?” the surprised wife asks.

“I missed the bus and ran behind it all the way from office to home.” The air of pride was palpable in the husband’s voice.

“Well, then you should have chased a taxi and saved 200 bucks!” the wife said. And her logic was spot on, wasn’t it?

Here is question for you – how much do you think the poor husband saved? Rs 50 or Rs 200? Extending the wife’s argument, the guy could have chased a Limousine and saved Rs 2,000. Do you see the absurdity of the logic?

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Investing Lessons I Learned from Tic-Tac-Toe

Tic Tac ToeIf you have sat in a classroom dragging your feet through an uninteresting lecture, you must be familiar with the game of tic-tac-toe, also known as noughts and crosses or Xs and Os.

The game’s simplicity lies in fact that it takes not more than a minute to learn it and it can be played anywhere. All you need is a piece of paper, a pen/pencil and some time to kill. Like chess, it needs two players, but some people don’t mind it playing alone by taking turns and becoming their own opponent.

When I was a kid I even had a water bottle which had the grid of tic-tac-toe built on one of its side and plastic pieces (crosses and circles) to play.

In case, you’ve forgotten how the game is played, here’s a crash course to refresh your memory. A 3X3 grid is drawn on the paper and each player chooses their mark i.e. X or 0. The player who succeeds in placing three of their marks in a horizontal, vertical, or diagonal row wins the game.

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When In Doubt, Please Don’t Predict

A leading Indian brokerage – let’s not take names here – is in the limelight these days for being consistent in revising its Sensex targets at the drop of a hat. In fact, it has been consistent in such revisions for almost the past two years. But the real beauty of all this lies in the fact that experts from this brokerage have no qualms about ditching their existing Sensex target to adopt the new one.

Just a month ago, its Head of Research appeared on CNBC and advised people to “take the market’s exit opportunity with both hands,” as he predicted “the Sensex is likely to touch 22,000 mark by the end of this year (March 2017).” He reiterated this target on 31st May.

Then, just a week later, he did a complete u-turn and raised the Sensex target to 29,500, again by the end of March 2017. On a lighter note, I suspect some superstition in this new target because unlike the earlier rounded-off targets of 36,000 (January 2015), 34,000 (March 2015), 32,000 (May 2015), 28,000 (August 2015), and 22,000 (March 2016), the new target is 29,500 (midway between 29,000 and 30,000). 😉

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When Long-Term Thinking is a Terrible Idea

During my evening walk yesterday, I was with a 75-year old gentleman who seemed fitter than I am, walked faster than me, had a wider smile than I can ever manage, and talked much more than I do in a few days.

During the ninety minutes we walked together, we talked about our lives, careers, and investing.

“What do you do for a living, young man?” he asked me.

“I am a blogger and an investor,” I replied.

“What kind of an investor are you?” he asked back.

“Well, a long term investor in the stock market,” I said.

“Long term? Great! Even I have been a long term investor all my life,” he told me. “Long term investing makes a lot of sense.”

“Yeah it does,” I said. “Having a long-term thinking is always good.”

“Well, not always, son!” he replied.

“Why do you say so?” I asked.

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Admission Open: Safal Niveshak Academy of Stock Market Failure

“We learn wisdom from failure much more than from success. We often discover what will do, by finding out what will not do; and probably he who never made a mistake never made a discovery.” ~ Samuel Smiles

“Fools say that they learn by experience. I prefer to profit by others experience.” ~ Otto von Bismarck

If, like me…

  • You hold a PhD or post-graduation in making mistakes in the stock market – as an investor / trader / speculator
  • Some of your teachers in the stock market have had the following surnames – Mr. Blunder, Ms. Mistake, Mr. Error, Ms. Fault, Sir Omission, Mr. Hit and Miss, Ms. Oversight, Mr. Slip, Ms. Trip, Mr. Stumble, Ms. Mess, Mr. Misfortune, Mr. Downfall, Mr. Bite the Dust, and Mr. Lose Your Shirt.

…I welcome you to join the Safal Niveshak Academy of Stock Market Failure.

Safal Niveshak Academy of Stock Market Failure

The idea of this Academy is to bring together all those who have attained graduation or PhD in making mistakes in the stock market (and I am one of those), so that…

  • We learn vicariously from the stock market mistakes others have indulged in and we haven’t (as yet)
  • We confess the blunders we have committed so that others may know what they must avoid

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