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You are here: Home / 2024 / Archives for April 2024

Archives for April 2024

My Pilgrimage

Though I consider myself somewhat spiritual, I’m not typically drawn to pilgrimages. In fact, the last major pilgrimage I undertook was nearly 40 years ago, at age 5, when I accompanied my grandparents on the Chaar Dhaam Yatra (four places of pilgrimage) in the mountains of north India.

I still have vivid memories of that trip, not because of the spirituality those places invoke but because the mountains have always attracted me. In fact, it may sound unusual, but whenever I am in the mountains, I have an eerie feeling that I belong there. The air and the water remind me that at some moment in time, I lived there.

Anyway, forty years later, I am starting on a different pilgrimage. This time, not in the mountains, but I have this feeling that the experience shall be the same – I will feel that at some moment in time, in a previous birth, I had been there.

[Read more…] about My Pilgrimage

Beware the Winning Streak

A couple of announcements before I begin today’s post – 

1. The Sketchbook of Wisdom: Special Offer until 20th April 2024: I have published an abridged version (44 pages) of my upcoming book, “The Worldly Wisdom of Charlie Munger.” This version contains 30 of his best lessons on life, decision-making, and investing. It’s not available for sale separately as of now, but you can get it for free until 20th April 2024 with your order of The Sketchbook of Wisdom. Read more and order here.

2. Value Investing Meetups in Dallas and New York: I am organising in-person meetups on Value Investing in –

  • Dallas (US): Saturday, 27th April
  • New York (US): Saturday, 11th May

If you are in or around these cities and wish to attend, kindly register here.


Here is the latest issue of The Journal of Investing Wisdom, where I share insightful stuff on investing I am reading and thinking about. Let’s get started.

A Thought: Beware the Winning Streak

Howard Marks of Oaktree Capital, wrote this in his seminal book The Most Important Thing –

In bull markets – usually when things have been going well for a while – people tend to say ‘Risk is my friend. The more risk I take, the greater my return will be. I’d like more risk, please.’

The truth is, risk tolerance is antithetical to successful investing. When people aren’t afraid of risk, they’ll accept risk without being compensated for doing so… and risk compensation will disappear. But only when investors are sufficiently risk-averse will markets offer adequate risk premiums. When worry is in short supply, risky borrowers and questionable schemes will have easy access to capital, and the financial system will become precarious. Too much money will chase the risky and the new, driving up asset prices and driving down prospective returns and safety.

Risk, which Marks and Warren Buffett have often defined as losing significant amounts of money and permanently, often moves in the same direction as valuations.

In other words, risk increases/decreases as valuations rise/fall. At the same time, high valuations imply weak prospective returns, while depressed valuations imply strong prospective returns. Consequently, both Marks and Buffett suggest that risk is lowest precisely when prospective returns are the highest, and risk is highest precisely when prospective returns are the lowest.

Economist and investment strategist Peter Bernstein said –

The riskiest moment is when you are right.

In much of life, doing things right over and over again is a sign of skill. Consider chess players or expert musicians. They rarely make a wrong move or hit a wrong note. Also, the skill of one good musician does not cancel out the skill of other musicians, that is, it does not make it harder for others to be equally good. This is not true of financial markets. ‘Skilled’ investors’ actions cancel each other out as they quickly bid up the prices of any bargains, which makes luck the main factor that distinguishes one investor from another.

Skill in investing shines through over the long term, but a streak of being right in the short term can make anyone forget how important luck is in determining the outcome.

Watch out for that streak of being right, dear investor.

[Read more…] about Beware the Winning Streak

30 Big Ideas from Seth Klarman’s Margin of Safety (E-Book)

Seth Klarman of Baupost Group is one of the most esteemed investors in the current era.

Since he established his investment partnership in 1983, Klarman has consistently delivered exceptional returns. Additionally, he has contributed insightful and enduring observations on the dynamics of markets and the intricacies of investment practice.

He wrote “Margin of Safety: Risk Averse Investing Strategies for the Thoughtful Investor,” a book that has been celebrated as a cornerstone of value investing since its release in 1991.

As I was re-reading Margin of Safety, I thought of collating the key ideas Klarman has written about, and present to you as a compilation.

[Read more…] about 30 Big Ideas from Seth Klarman’s Margin of Safety (E-Book)

My Personal Financial Plan

A couple of announcements before I begin today’s post –

1. Value Investing Workshop in Mumbai, Dallas, New York: I am organising in-person workshops on Value Investing in –

  • Mumbai: Sunday, 14th April
  • Dallas (US): Saturday, 27th April
  • New York (US): Saturday, 11th May

If you are in or around these cities and wish to attend, kindly register here.

2. The Sketchbook of Wisdom: Special Offer until 20th April 2024: I have published an abridged version (44 pages) of my upcoming book, “The Worldly Wisdom of Charlie Munger.” This version contains 30 of his best lessons on life, decision-making, and investing. It’s not available for sale separately as of now, but you can get it for free until 20th April 2024 with your order of The Sketchbook of Wisdom. Read more and order here.


In the endnotes of his brilliant book, Winning the Loser’s Game, Charles Ellis wrote about two of his best friends who, at the peak of their distinguished careers in medicine, agreed that the two most important discoveries in medical history were penicillin and washing hands (which stopped the spreading of infection from one mother to another via the midwives who delivered most babies before 1900).

Ellis’s friends also counselled him there was no better advice on how to live longer than to quit smoking and to buckle up when driving.

[Read more…] about My Personal Financial Plan

The Most Powerful Mental Model for Identifying Stocks

“It’s a funny thing about life; if you refuse to accept anything but the best, you very often get it.” ~ W. Somerset Maugham – English dramatist & novelist (1874-1965)

As I’ve seen in the past 20+ years of investing in the stock market, Maugham’s thought holds a great relevance when it comes to picking up businesses for investment.

Pick up a business with good economics and with good margin of safety, and the probability of making money in the long run is high. Pick up a business with poor economics with any margin of safety, and the probability of losing your shirt, and entire wardrobe, in the long run is very high.

Understanding a business also adds significantly to your margin of safety, which is a great tool to protect yourself against losing a lot of money.

[Read more…] about The Most Powerful Mental Model for Identifying Stocks

How Little We Know

Before beginning today’s post, I have a brief announcement to make.

I am organising in-person workshops on Value Investing in –

  • Bengaluru: Sunday, 7th April
  • Mumbai: Sunday, 14th April
  • Dallas (US): Saturday, 27th April
  • New York (US): Saturday, 11th May

If you are in or around these cities and wish to attend, kindly register here.


How Little We Know

Daniel Kahneman, a groundbreaking psychologist and behavioural economist who taught me that it’s perfectly fine to say “I don’t know” when faced with difficult questions in life and investing, passed away recently at the age of 90.

His bestselling book Thinking, Fast and Slow introduced me to his piercing observation that we, as humans, are generally blind to our blindness.

He wrote, “We have very little idea of how little we know. We’re not designed to know how little we know.”

While succinct, the profoundness of these words extends far beyond their brevity.

Despite its remarkable abilities, our brain is inherently limited in what it can perceive, process, and understand. These limitations aren’t merely gaps in knowledge that can be filled with more information or education. Instead, they represent fundamental constraints on our cognitive abilities.

As Kahneman explains in his book, one of the most significant barriers to our understanding is cognitive biases, which are like mental shortcuts or rules of thumb that our brain uses to quickly make sense of the world around us. They can be helpful because they allow us to make decisions quickly without having to stop and think about every little detail. But these shortcuts aren’t always accurate, and sometimes, they can lead us to make wrong or irrational decisions.

Another key aspect of our cognitive limitation, as per Kahneman, is overconfidence. Most people tend to overestimate their knowledge and abilities. This overconfidence bias can lead to disastrous decisions, as people act on incorrect assumptions and flawed information, believing they understand more than they actually do. Overconfidence in our knowledge not only impedes learning but can also lead to significant errors in judgment.

Anyway, the question is: Now that we know the flaws in our cognition, can we do something about them to make better decisions?

Kahneman advised that the first step is awareness. Recognizing that our understanding of the world – of investing and outside of it – is inherently limited, and that we are prone to cognitive biases, is crucial. This recognition can cultivate humility and openness to new perspectives, reducing the likelihood of falling prey to overconfidence.

Another effective strategy is openness in seeking views from diverse people. Being a loner, I have a lot of ground to cover here, but I understand that this can provide a broader range of insights and ideas, helping to fill the gaps in our understanding. This diversity can act as a counterbalance to our individual biases and overconfidence, leading to more informed, balanced decisions.

Also, education and lifelong learning play a crucial role in mitigating our cognitive limitations. While we can never fully overcome these limitations, being a lifelong learner can help us make better, more informed decisions. The pursuit of knowledge and wisdom should be seen as an ongoing journey, not a destination.

Before I end, here’s the crux of it all. The recognition of our cognitive limitations, as highlighted by Kahneman’s work, is not a cause for despair but a call to action.

By acknowledging and addressing these limitations, we can make more informed decisions, evolve into becoming lifelong learners and, ultimately, move forward through the complexities of life with greater wisdom and humility.

As Kahneman advised, the journey toward understanding and wisdom is endless, but it enriches our lives and broadens our horizons in profound ways.

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