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You are here: Home / 2020 / Archives for December 2020

Archives for December 2020

51 Ideas from 2020

Dear Tribe Member,

Despite the despair all around, I trust 2020 treated you well and that you and everyone around you are keeping safe and healthy.

Right before the year ends, I thought I’d share a handful of ideas I’ve learned, re-learned, and wrote about in the past twelve months. Here are 51 of them categorized under the subjects of investing and life. I hope you find these useful, as much as I did.

[Read more…] about 51 Ideas from 2020

Lost Money on Stocks? Have No Shame

Adolf Merckle was a leading German entrepreneur who, in the early 1970s, founded Germany’s first generic drug manufacturer, Ratiopharm. For several decades he also held large parts of cement company HeidelbergCement as well as vehicle manufacturer Kässbohrer.

In 2007, he was worth US$ 12.8 billion, and among the five richest people in Germany.

Adolf Merckle

However, near the end of 2008, Merckle’s investment company VEM faced a liquidity shortage, and he also faced huge losses on speculation in Volkswagen shares, which he bet would fall but instead surged. It is believed that he lost as much as €500 million on this speculative bet. His trouble was made worse by the spreading financial crunch, which hit his corporate empire hard.

Crushed by watching his life’s work slip through his fingers, on 5th January 2009, Merckle walked out into the bitter cold night and threw himself under a speeding train.
“An industrialist losing a fortune on the stock market has different motives for killing himself than a father with six children who loses his job,” said Detlev Liepmann, professor of economic psychology at Berlin’s Free University. He added, “Merckle’s livelihood was certainly not threatened by his risky investments but he was threatened by shame, a loss of face in society, and a loss of honor.”

A man who spent a life working hard to do good, built a billion-dollar wealth, then lost a part of it due to wrong bets and collapse of world markets, died of guilt and shame seemingly because he equated his financial failure with failure in life.

Though at his memorial service, Gerhard Maier, a retired bishop, said, “What brought a man of great will who felt responsible to God to the point where he took his own life is something that, deep down, we humans will never comprehend.”

There is Merckle in All of Us
Well, the reason I brought in Merckle’s tragic story today is because there is a part of Merckle in all of us that causes us to feel shame for our financial mistakes – even small – that often leads us to bigger mistakes. Of course, most people in the same spot as Merckle would not think of killing themselves no matter what happens.

People talk about regret aversion and how we make decisions to avoid regretting an alternative decision in the future. But I would rather call it ‘shame aversion,’ because most of the time most if you see guilt or shame as a more powerful emotion than plain regret.

So, we feel guilty for not investing in rising stocks when we see our friends making money on them. We feel guilty of not having invested in stocks when the prices were down, and we knew (now, in hindsight) that we should have sold our houses then to invest.

We feel bad accepting we made a mistake that causes us to hold on to our losing stocks (bad businesses) because the shame of such acceptance would be too heavy to bear on our already frail hearts. So, not only would people bet heavily on hot stocks in frothy markets, but they would also double-down when these stocks fall to avoid the shame of turning their paper losses into real ones.

Losing Money on Stocks is NOT a Shame
My dear friend, there is no shame in losing money on a stock or any investment. Everyone loses at some point in time, and there is not a single investor who has never made a mistake.

Of course, that does not mean you bet your house on stocks – even the best ones. Losing ₹ 1 crore on a ₹ 100 crore net worth is not the same as losing ₹ 1 crore on a ₹ 2 crore net worth. So, you should always be worried about losing big money permanently. But that worry should show up in the kind of work you do on your process to pick stocks, not after you have already lost money.

Investing or money are such insignificant parts of this beautiful thing called life that you must not lose sleep over them, forget losing your life.

Markets change, cycles turn, everything passes, and there are numerous opportunities one gets to rise after a fall, clean the dust, give up any guilt or shame of falling, and start walking again.

The noted British writer and speaker Alan Watts said –

Man suffers only because he takes seriously what the Gods made for fun.

Russian philosopher and novelist Fyodor Dostoevsky agreed in a way when he said –

The cleverest of all, in my opinion, is the man who calls himself a fool at least once a month.

Learn from your mistakes, but stop taking them, or yourself, so seriously.

How much I wish Adolf Merckle, and others like him who passed through similar tragedies, understood this.

How much I wish you do.

* * *

That’s about it from me for today.

If you liked this post, please share with others on WhatsApp, Twitter, LinkedIn, or just email them the link to this post.

If you are seeing this newsletter for the first time, you may subscribe here.

Stay safe.

Regards,
Vishal

I Have Never Sold Stocks for This Reason

I am a ‘buy-and-never-sell’ kind of investor. But I have sold a few stocks in the past.

I have sold stocks that I realized were mistakes to begin with. I have sold stocks that did not move for a few years (and then they moved!). And I have sold stocks when I needed money for my requirements and had no other asset to encash.

In fact, I have also created a comprehensive illustration of when you should sell your stocks –


But there is one important reason for which I have never sold my stocks. Not a single one.

[Read more…] about I Have Never Sold Stocks for This Reason

The 42nd Lesson

Value Investing Almanack (VIA) – Special Offer Ends TODAY: VIA, our premium newsletter that subscribers call “the best resource on Value Investing in India,” which was closed for new subscriptions for the past few months, is now accepting new members, and at a very special 55% discount, or Rs 9,000 off the base price! Click here to join now.

* * *

Life’s passing by too fast, or so it seems. I complete 42 years in my present state of existence today. That’s around two-thirds of the average life expectancy of an Indian male.

While spiritualists would want me to believe that I have existed from anadi (before the beginning of cosmos) and will exist till ananta (infinity), I see forty-two years as a good enough time to find some meaning in one’s life. At least, my rapidly greying hair and receding hairline help me realize that.

Now, while it amazes me that I’ve been around that long — I feel like I’ve barely begun.

I’m not usually one to make a big deal about my birthday, but as always, it has given me an opportunity to reflect.

[Read more…] about The 42nd Lesson

Dare to Be Wrong

Value Investing Almanack (VIA) – Special Offer Ends on 7th December: VIA, our premium newsletter that subscribers call “the best resource on Value Investing in India,” which was closed for new subscriptions for the past few months, is now accepting new members, and at a very special 55% discount, or Rs 9,000 off the base price! Click here to join now.

* * *

Here is your latest Saturday newsletter, where I share the latest updates from the site, an idea worth thinking about, few stories you shouldn’t miss, and a question for you. Let’s get started.

Safal Niveshak Updates
Just in case you missed, here are a couple of recent updates on the site –

  • Wisest Words Ever Spoken About Investing
    The Best Books: Recommended Reading List

[Read more…] about Dare to Be Wrong

Wisest Words Ever Spoken About Investing

Value Investing Almanack (VIA) Special Offer Ends 7th December: VIA, our premium newsletter that subscribers call “the best resource on Value Investing in India,” which was closed for new subscriptions for the past few months, is now accepting new members, and at a very special 55% discount, or Rs 9,000 off the base price! Click here to join now.

* * *

Some nice stuff I am reading now…
 

  • We are fortunate to be living in an era where we have all the teachings of wise investors available to us. As compared to 19th century, it has become much easier and cheaper for small investors to participate in the growth of businesses through stock market. Jason Zweig reminds us of some of the wisest words of investing wisdom that have been spoken in the past century. Zweig writes –

    You don’t need to have known these people to be grateful for their wisdom. As the biologist Richard Dawkins pointed out in a lecture in 1996, many of us today know more about the world around us than Aristotle, the greatest mind of his age, did more than 2,300 years ago: “Science is cumulative, and we live later.

    [Read more…] about Wisest Words Ever Spoken About Investing

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