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20 Ways I Cut Stress Out of My Investing Life

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“A lot of success in life and business comes from knowing what you want to avoid: early death, a bad marriage, etc.” ~ Charlie Munger.

I recently wrote a post detailing my stock investment philosophy. At the end of that post, I had requested readers to share their personal investment philosophy.

But I didn’t receive a single response to my request except for one reader who wrote that some ideas discussed in that post were “a little heady for a person without a financial flair”!

If that was the case with you as well – that the investment philosophy I discussed then sounded a bit technical – let me discuss the philosophy from a different angle – this time it’s not about what I do, but what I avoid.

These avoidances have helped me cut the entire stress out of my financial life, and I hope some of these might be working for you as well.

So here’s my personal ‘not-to-do’ list with respect to my investment philosophy…

  1. I avoid IPOs. I’m never sure how they arrive at the offer price, plus I don’t want someone else (except my judgment) to decide what I must pay for a business.
  2. I never trade. I think I have a weak heart, so always like to be on the slower side.
  3. I avoid pharmaceutical stocks. I’m never certain about their cash flows and an appropriate margin of safety to apply.
  4. I avoid banking & finance stocks (except one that I bought based on the suggestion of an analyst I trust a lot). I’m never sure what lies beneath most banks’ balance sheets.
  5. I avoid commodity stocks (except one that I bought because I found great value in its assets at the bottom in March 2009). I never get the commodity cycle right.
  6. I avoid oil & gas stocks. I’m always confused about the (mis)regulations.
  7. I avoid real estate stocks. I hate the businesses for ethical reasons.
  8. I avoid textile stocks. These companies will never have any pricing power.
  9. I avoid Reliance Group stocks. I have my reservations against companies that often mistreat minority investors.
  10. I avoid hot sectors. I shut them out with a cold mind.
  11. I avoid predicting the number of leaves on a tree in the next season (the future EPS). I’m more comfortable trying to find what would be the next season (the broader direction of the business).
  12. I avoid stock price targets. They are always moving, and thus rarely reached.
  13. I avoid hunting for the ‘next Infosys’ (if it happens, I’ll count myself lucky).
  14. I avoid derivatives. I fear dying of weapons of mass destruction.
  15. I avoid companies with high debt. They can go bankrupt anytime.
  16. I avoid borrowing money to buy stocks, however attractive the opportunity. If I borrow, I can get wiped out in a crash.
  17. I avoid companies run by egoistic managers. I prefer humble people taking care of the businesses I own.
  18. I avoid more than 15 stocks and 5 mutual funds at a given time. My attention span is very limited.
  19. I avoid watching business channels (except when I’m on the show :-)). They have the uncanny ability to make a sane mind insane.
  20. I avoid online portfolio trackers. There was a time they used to invite me to have a look at them in the middle of the night…only to spoil the rest of my night.

In all, instead of rushing through my investing life, I’ve learned to take things slow.

I enjoy the process of identifying the right stocks and avoid the wrong stocks. I enjoy a great amount of time reading (and re-reading) the ideas of world’s most successful investors.

All possible because I’ve saved myself tons of stress.

Anyways, continuing with the idea of cutting out stress from your financial life, here’s an interesting article on the concept of “returns per unit of stress” written by Prof. Sanjay Bakshi, a finance professor at MDI, Gurgaon, and one of the leading brains on value investing in India.

The idea of this article is to lead investors to incorporate “return per unit of stress” in their investment thinking.

If you can do what Prof. Bakshi suggests in this post, as he writes, “…you will slow down and start appreciating the slow process of long-term, stress-free compounding as opposed to nerve-wracking, adrenalin laden high frequency operations in the stock market.”

That’s exactly the idea that defines the Safal Niveshak philosophy of safe, sensible, long-term investing.

By the way, let me and all other tribesmen of Safal Niveshak know in the Comments below, how you have reduced (or are trying to reduce) stress from your investing life.

This time, I’m waiting to hear your views. 🙂

Here’s to your stress-free investing life!

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About the Author

Vishal Khandelwal is the founder of Safal Niveshak. He works with small investors to help them become smart and independent in their stock market investing decisions. He is a SEBI registered Research Analyst. Connect with Vishal on Twitter.

Comments

  1. Anil Kumar Tulsiram says:

    Hi Vishal

    Thanks for sharing this excellent list of things to avoid. Only if I had known some of this I would not have incurred huge losses. Unfortunately some of this things to avoid I have learnt through hard way. My list of things to avoid is not much different from yours. I have recently ventured in value investing as full time career at the cost of joining a corporate. I think another important thing is to avoid impulse buying: Wait atleast a week after completing your analysis (in writing) before you buy your stock. Your view may change.

    • Thanks for your feedback, Anil! Yours’ indeed is a daring and respectable decision to get full time into value investing.

      Yes, avoiding impulse buying is another important point in cutting the stress out, and thankfully I practice that – keeping a selected stock in my head for a few days and weeks before committing any money…and this has served me very well over the past few years (unlike my earlier habit of letting my testosterone play havoc with my investing decisions).

    • vikrant says:

      Wow anil, Very Strong decision, i am sure you would have thought a lot about it before you took this decision. I am very curious as why would someone leave job and get into full time value investing, i can only think of two reasons, You must be having a lot of money to leave your job and get into full time Value investing, or you must be very old which one is true? or is there another reason?

  2. Sanjeev Bhatia says:

    Hi Vishal,
    It is possible that no body wrote earlier bcoz they (inlcuding me) didn’t have a philosophy or modus operandi earlier…LOL. We all here are trying to have systematic approach to investments now.

    Well, my two cents (or Paise, whichever currency you prefer):-
    Agree to all the points completely.

    Point 3. Not sure really about Pharma companies. Have had superb wealth creators like Sun Pharma in my portfolio, though it was by luck, not by design. I think Companies like Dr. Reddy, Glaxo, Glenamrk etc have given excellent returns too.

    #13. Next Infosys etc have to be avoided at all costs. Most often than not, they just fizzle out. Lynch has written beautifully on this in “One Up on Wall Street.

    #20. The best way is use excel sheet to calculate IRR etc, particularly if dividend flow is also there. But online portfolio managers have their advantages too for lazy people like me. At a glance they give you your absolute returns, holdings etc. Of course, they don’t take into account dividend flows etc. nor do they tell you your CAGR. But still, at least they give you all your cumulative holdings at one go. This is especially beneficial where you have different portfolios in different family members names.

    Prof. Bakshi , the fundoo professor, has been extremely lucky to have trained under Warren Buffet.

    What we have to keep in mind is that ” Sometimes NOT taking a decision is also a decision”.

    Most of my multibaggers have come by sheer luck, not by design or any of my ability to spot them( though I would LOVE to be able to brag about my such non-existing abilities..LOL). But the point is they have turned out to be multibaggers simply because I dont trade in my core portfolio. It is only after years of holding (Infinity – Warren Buffet) that you come to know who are such gems.

    Avoid looking at your portfolio daily, weekly, monthly and you reduce about 70% of your stress, I guess.

    Wish all the safal Niveshak tribesmen (and women too) A happy prosperous and enriching stress-free investment horizon in years to come.

    • Hi Sanjeev, thanks for your amazing inputs as always! Regarding choosing or avoding pharma stocks, well it’s entire the point about circle of competence. The talks of APIs/generics/molecules etc. is dizzying for me. Plus, of whatever I’ve tried to study these companies, I’m never sure how are their business models evolving – some move from generics to R&D to generics…and some do the reverse. And then there are some who do well and then completely sell out. So that’s just outside my circle of competence.

      As for the portfolio trackers, yes I use an excel sheet. My biggest grouse against the online versions is that, since they are updated 24×7, they used to entice me to check my portfolio gains/loss in the real-time…and whenever I missed logging in for a few days, I got fearful whether I missed acting on something the portfolio might have indicated.

      Over the past few years, I’ve ingrained this discipline of not worrying about changing stock prices on a real-time basis, and avoiding online trackers is one reason for the same (the bigger reason of course is the self-control I’ve been able to practice).

      Anyways, I agree with the positives that you mentioned about the online trackers, but I’ve tried to create that environment in the excel.

      As for your point about luck playing a big role in you finding the multibaggers, I can vouch for the same with respect to my personal portfolio as well. When I leave out the my best 5-6 stocks (out of the 15 odd I own), the overall returns are nothing to write home about. So another way I have cut out stress is by accepting that I just need 5-6 good stocks over my lifetime to become a successful investor. More that than would be a gift of God. 🙂

      • Sanjeev Bhatia says:

        Do u know of any method whereby I can import the latest stock price into an Excel sheet automatically?

        • Sanjeev, here is how you can do this…

          In Excel 2010, click on “Data” menu and then click on “From Web”, which is 2nd option from the extreme left. The dialog box that appears asks for a web address. Here, for example, enter this link – https://in.finance.yahoo.com/q?s=INFY.BO&ql=1 – and press “Go”. It will show you the Yahoo Finance page for Infosys’s quote. Come a bit down on that Yahoo page, and click on the “yellow arrow” placed next to “Prev. Close”. Then click on “Import”.

          It will ask in which cell do you want to import the data. The default cell be the one already selected. So simply click “OK”…and you are done! From the table that appears on the excel sheet, you can pull the stock price against “Prev. Close” into your excel portfolio tracker.

          The next time you want to automatically update Infosys’s latest stock price in the excel sheet, just click on “Refresh All” under the “Data” menu.

          Like I used Infosys’s Yahoo link to pull the stock’s price into the excel, you can first get the links for the stocks of you choice from Yahoo Finance, and repeat the process mentioned above to create respective tables in your excel sheet.

          I hope this helps! Let me know in case you face any problems.

          • Sanjeev Bhatia says:

            This method I already know. The problem is, it always selects the complete table, I just want the previous close. Is there any way to select only the previous close or you just have to import the complete table and then pick the PC from that?

            • What you can do is source the tables for all the stocks into a different sheet in your portfolio excel file, an then pull only the “previous close” data into the portfolio tracker sheet. I do this, and don’t know of any other way 🙂

              • Mayank Shah says:

                Thank you for the Excel tip!

                Google Docs offers Google Finance functions that can be used to access stock quotes. The details of the functions are available here.

                Hope this helps!

  3. Sunny Gupta says:

    Thanks Vishal for a fantastic post, something I was looking forward to, though didn’t have it exactly this way on my mind.

    I’ve transformed my thoughts from a frantic positional trader (0% success) last year to a student of value investing (just started chapter 25 of security Analysis today), and I’m trying to do things (on similar lines as your post) to control and minimize stress due to my capital at risk / investing.

    Couple of points:

    1. Maybe its about circle of competence, but I somehow feel good banks at discount are not so bad. NPAs are akin to “allowance for bad accounts receivables” for a nomal company. But yes, I agree since they’re “hot”, they don’t have a lot of discount to their IV and hence not too great potential for returns

    2. If you shut off your online portfolio, how do you keep in “touch” with your businesses? I wanted to do this, but I fear I might lose touch to important events related to businesses (I recently had IRB, and when I came to know about the involvment of the chairman in murder charges, I was extremely disappointed, and I quit my positions at 30% loss due to the realization that it was an unethical / bad managament – even though charges have not been proved, but the very fact that he was somehow involved makes me lose trust on management’s ethics and honesty)

    Once again, thanks for all your great posts, looking forward to meet you, and also, I’d be interested to read on how you turned into a value investor 🙂

    • Thanks for you feedback, Sunny…and great to know that you have reached so far in “Security Analysis”. It contains a lifelong of learning for anyone wanting to become adept in analyzing and valuing stocks and bonds.

      For your first point about banks, yes it’s more to do with my circle of competence and my comfort in remaining in that circle.

      As for the second point on avoiding portfolio trackers, well that’s for the reason that I don’t want to keep myself updated on the stock prices in real-time. I still keep myself update in the companies (businesses) I own, so that helps me in knowing whenever the plates are shifting for the good or worse.

      I’ll try to write a post on how I turned into a value investor, but I can see that being a very short post. 🙂

  4. R K Chandrashekar says:

    Hi Vishal
    My idea of investing:Keep it simple.
    1. Power of compounding( Have a huge advantage since I started in 1978!) That said, have learnt from the huge mistakes of the past and continue to learn all the time.
    2. Look for companies with market leadership-no 1 or 2
    Ex: Hero Honda, Nestle, Pidilite, ITC
    3. High Dividend plays- Generates Tax Free income
    4. Strong management and ethical companies
    ex: Infosys, Tata Steel, HUL,HDFC
    5. Potential Re rating, Delisting
    Ex: J & K Bank, LIC Housing,Mcleod Russel, Bosch, GSK Pharma
    6. Lucky with a few IPO’s- Colgate, HDFC Bank
    7. Don’t worry about missed opportunities- sold to early:
    Ex: TTK Prestige, Colgate, Page Industries
    8. Timing the market is not important-time in the market is.
    9. Don’t check prices on a daily basis.
    10. Admit mistakes, book the loss and move on.
    11. Idea is: Buy a portfolio of good blue chip companies and stay invested for the long term- 10/20/30 years.
    Bought HUL in 1978, L& T in 1982, HDFC Bank(IPO), Infosys in 1999, BHEL,Nestle, Castrol, Hero Honda- all 6-10 years ago.
    12. Take life easy. Don’t worry about money too much. Do charity.
    13. ”I cried because I did not have shoes, till I found a man without feet”

    Good luck and cheers

    • Amazing ideas, Mr. Chandrashekar! And great lessons on long term investing for all those starting out (or in the middle of it) right now. Specifically, points 7, 8, 10, 12, and 13 are worth re-writing in the collection of greatest ideas on money and investing all investors must have. Thanks for the same!

  5. karthik says:

    Thats true vishal.. We have HUL for more than 20 years .. It started as Ponds india.. HDFC bank for more than 10 years, PFC for 6 years,SBI (IPO), NTPC (7 years) etc.. Reliance for more than 15 years..
    Long term appreciation was really great..

  6. Thanks. Can say only that much. LOL…… Regards. Keep up the good work.

  7. Venkateshwaran says:

    Good work and thanks for sharing. I understand now the various Do Not’s but for the DO’s I am not very sure I can Identify and keep track of the shares as meticulously as you describe, some more basic inputs will help. My present method is to remain invested for long but when I sense that the market is going below my stop loss levels I exit most of the counters and wait for a while before I return, but I do not try to time the market. Thank you again for the Digest it is always very thought provoking and informative.

  8. Hi Vishal,
    Once again a very good article! I agree with Sanjeev in that I didn’t have a philosophy when got into the market about a year ago and I am still learning and in the process of formulating it. Most of my investments were made on bluechip companies while some other based on news/views on TV/internet as I was following them regularly. It is kind of addictive, at least it was for me and it forced me to act (do something) either buy or sell. After a few months of this, I realized that the only person making money is my broker and then began my search of finding books/sites (such as yours) to understand the whole process better. Now I don’t follow the prices/news every day and I am in the process of overhauling my portfolio (it is proving to be tough as quite a few of them are in deep red) but now I have a list of stocks that I would like to own. Thanks to sites such as yours and a better understanding of investment process and more importantly my temperament.
    I do want to build a portfolio for long-term investment and hope that I can one day be like Mr. Chandrashekhar, be invested in good stocks for the real long haul. But currently have more stocks that I would like and also not all that I want to have in my long-term portfolio.
    Lastly, I think getting to your state, Sanjeev or Chandrasekhar’s is a process and takes time and happens only after we burn our hands a few times. The smart ones learn it quickly while others take a longer time to get there. I think most people get into the market after hearing amazing stories of multi-baggers and not because they understand the investment process and not because they want steady growth that beats inflation. So site such as yours is actually facilitating the process and I am and I am sure many others are very grateful for that!

    • Hi Eswar, Mr. Chandrashekar replied to your points in a much better way than I could’ve ever done! Thank you Mr. Chandrashekar!

      He’s given away some simple secrets that can serve you (or any investor) really well over the long term.

      In investing, as in life, the next step always seems a lot fearful. But if we can take them with complete understanding and confidence, we will be happy and satisfied to look in hindsight at our investing careers 20 years down the line. Mr. Chandrashekar stands testimony to this!

  9. R K Chandrashekar says:

    Dear Eshwar
    I am no genius. The big plus on my side was- I started investing when India was still an underdeveloped country and our economy was in poor shape.
    My suggestion to you to create wealth-1. identify your blue chip stocks-may be 3/4/5 , and every month/quarter, do buy small quantities-like an SIP in Mutual Funds. This is what I have done, though not that systematically.2. On the flip side, when my business dried up, and when I wanted funds on a regular/monthly basis- I have sold, 10 Infy, 25 BHEL, 25 HUL, etc. 3. Always exit your weakest stocks in full first. 4. Good stocks/blue chips -never sell in one go, even if they have reached your target price. In any case they are meant for wealth creation to be passed on to the next generation- family heirloom! 5. Never go overboard with stocks- have the right asset allocation, based on your life goals, age, risk taking ability, etc.
    You will definitely create wealth. Your name says it all!
    Cheers and happy investing

    • Thank you Mr. Chandrashekar for your invaluable inputs!

      Your five lessons are indeed summaries of five best books that anyone will read on sensible, long-term investing. 🙂

  10. Hello Mr. Chandrashekar,
    Thanks a lot for valuable suggestions. As vishal says the points that you make can be elaborated into a book easily but are sometimes difficult to stick to. Like selling your worst stocks – you don’t want to do that because you are still hoping to break even and don’t want to turn the notional loss into a real one and end up selling a potential multibagger. I did this thing exactly having bought HUL ~300 last year and selling it at ~330 (for an immediate need) because it gave me the most profit and then watched the stock price hit 450. But now I know better and I will strive to incorporate your suggestions them into my investment process. Thanks a lot!

    • Dear Eswar…before Mr. Chandrashekar responds, here is my take on your point about not being able to sell your worst stocks. This is a typical case of “sunk cost fallacy” that hurts investment returns. But there is a simple way to correct this, which I outlined in this post. Regards.

  11. Thanks Vishal,
    That was a very useful read!

  12. vikrant says:

    Hi Vishal,

    Although i agree with most of the points mentioned above, there are some that i dont agree, and i do see that many readers have already put their questions and thoughts about the same so i wont bother you, But next time we will talk about this 🙂 for my better understanding.

  13. Avadhut says:

    Vishal,

    This is important, you clearly know what you’re doing. As Warren Buffett says, risk comes when you don’t know what you’re doing.

    Very good article. Keep it up. You’re making us disciplined.

    Regards,

    Avadhut

  14. Vishal,
    Thanks for this post. I missed this kind of posts 12 years back…
    I have my own shares of errors
    – Invested in Technology Mutual fund in mid of 2000.
    – Started hearing advice on why others should learn from my money and primairly invested through ICICI stock picks / some IPO’s – Lot of them are good ipos / fpos like TCS etc… Realized its a
    – Bought intelligent investor in 2008 but did not read it completely… Started from Appendix now 🙂
    – Started selling stocks in Sep / Oct 2007 but others were not selling… Looked more like an outlier… Started buying Infy in Mar 2008 and TCS as a contrarian buy (Which turned out good)..
    – Missed reading bakshi’s articles and delayed it for 2 years (2007 to 2009).. Bad miss
    – Bought apartment in Bangalore – Realized the bad effects of leveraged buy when a builder does not build on time / Effects of floating rate interest (where it only floats up)…
    – Missed reading Bakshi’s 2009 resolutions article till Sep’2009 – Very Bad Miss
    – Invested in Telecom at its bottom (2010). Realized another mistake on picking beaten down sector when the market is good 🙂
    Current approach
    – Realized my equity allocation in the last 12 years is miniscule compared to Real estate
    – Focus on allocation of Surplus cash to Equity and Debt instruments.. No more (un) Real estate…
    – Debt on bank deposits and Tax free NCDs
    – Only ETF’s and diversified Mutual funds
    – Sectoral ETF’s when the broader market valuation is not overpriced..
    – Stocks if i see relative undervaluations

    My questions to you —
    1) How come in India Leading fund beat index consistently ? E.g. HDFC Top 200, IDFC Premier equity plan A
    2) Do NAV’s reflect the expenses of the funds or will they sell my units for expenses ? One of my friend witnessed selling of Units on ICICI prudential pension plan hence the question…
    3) Would you invest in a fund like IDFC Premier equity plan A which is not open all the times for investing ? What are the downside risks? Can i sell this fund anytime ?

    Thanks
    Jai

    • Thanks for sharing your learning and mistakes, Jai! 🙂

      It’s always great to hear about personal life experiences.

      As for your questions, here are my replies:

      1) Index funds in India are not properly designed – you can read my article on the same here – https://www.safalniveshak.com/do-not-invest-in-index-funds/

      2) Yes, NAVs are after adjusting for a fund’s expenses.

      3) Sorry, but I don’t offer any specific advice 🙂

      • Thanks for your fast response..

        1. It was a pretty good article.. I will post my responses over there
        2. Thanks.
        3. Dont take me wrong… I came across this as a good fund based on the past and Navneets views. I thought probably someone would have had the same doubts as myself in this forum!!

        Thanks
        Jai

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