Investing Behaviour

…because most people in the stock market, most of the time, don’t do investing, which is…

• Thinking how markets work,
• Understanding how people behave,
• Studying businesses,
• Sticking only with what is simple and what they understand, and
• Buying stocks at appropriate valuations.

Instead, they are busy…

• Envying (others making money fast or losing money slow),
• Cloning (others’ stock ideas mindlessly),
• Predicting (future of markets, stock prices, and economy),
• Fearing (missing out on future gains),
• Regretting (past mistakes),
• Avoiding (accepting current mistakes),
• Denying (reality, especially when it’s harsh), and
• Indulging (in useless information and noise)

And if that’s not all, these often lead us to –

• Trading (frequently, which adds to our costs),
• Averaging down (on bad businesses),
• Boasting (about our lucky short-term gains), and sometimes
• Trolling (other investors on social media, who have not performed as well as us in the recent past).

With such a busy schedule, where is the time to practice investing? 🙂

[Read more…] about Why Most People Will Never Be Good at Investing

Here is my attempt to answers a few key questions I have received from Safal Niveshak readers on the current turmoil in the stock market.

You won’t find perfect answers below, but this is just my attempt to help you get over your fears, which may otherwise lead you to act in haste, which can cause some damage to your process of long term wealth creation.

Let’s start right here.

1. Why is the market crashing?
It hasn’t crashed…so far! The BSE-Sensex is down just 6% from its peak this year. BSE-Smallcap is down 14%. BSE-Midcap is down 11%. This isn’t a crash!

If you think it is, you maybe be suffering from ‘denominator blindness’, which is the tendency to focus on the absolute number then the percentage decline. Or you just seem to have been spoilt by rising markets over the past few years and were not investing in 2008 when the last real crash happened. That was painful for people who experienced it with their money (and not just their eyes and ears). We have not seen anything like that since then.

[Read more…] about Stock Market Crisis: Your Big Questions…Answered

It was sometime during late 1999 through early 2000, near the peak of the dot-com bubble, the legendary George Soros and his hedge-fund team were working on how to prepare for the inevitable sell-off in technology stocks.

The man in charge of Soros’ high profile technology funds was Stanley Druckenmiller – one of the best-performing hedge fund managers of all time, till date – and he was busy warning his team that the sell-off could be near and could be brutal.

As the markets soared further in March 2000, Druckenmiller was quoted as saying, “I don’t like this market. I think we should probably lighten up.” Soros himself would regularly warn his team that tech stocks were a bubble set to burst.

Despite this, when the sell-off finally did begin in mid-March 2000, Soros Fund Management wasn’t ready for it. His funds were still loaded with high-tech and biotech stocks. Just in five days, starting 15th March, Soros’s flagship Quantum Fund saw what had been a 2% year-to-date gain turn into an 11% loss. By the end of April, the Quantum Fund was down 22% since the start of the year, and the smaller Quota Fund was down 32%.

Post that, in April 2000, Soros said at a conference, “Maybe I don’t understand the market. Maybe the music has stopped, but people are still dancing.”

[Read more…] about The Risks of Speculating During Rising Markets

I recently spoke at the Value Investing Summit in Kuala Lumpur, Malaysia. My topic was ‘The Path of Successful Investing.’

Click here to download the presentation.

Click here to watch the video of my talk, or watch below.

P.S. In the talk, I quoted Peter Bernstein’s book Against the Gods as containing the story of the hedge fund LTCM. It was a mistake! The book that chronicles the story of LTCM is Roger Lowenstein’s When Genius Failed.

Statutory Warning: Nothing in my talk should be construed as investment advice to buy or sell shares. Please make your own decision, as blindly acting on anyone else’s research and opinions can be injurious to your wealth. My analysis may be biased, and wrong. I have been wrong many times in the past. I am a registered Research Analyst as per SEBI (Research Analyst) Regulations, 2014 (Registration No. INH000000578).

In a world dominated by men, here is a rare untold story of a woman who quietly made it big as a stock market investor.

Anne Scheiber was 51 years old when she retired from her job as a low-level auditor from the American Internal Revenue Service in 1944. She never earned a salary of more than $4,000 per year, and although she was an exemplary worker, she never received a promotion. Maybe, because she was a woman and a Jew, the lots that were discriminated against in the workforce in general in the west during that period.

As per the executor of her Will, Benjamin Clark, Scheiber, who was already investing her small savings in the stock market when she retired in 1944, started here post-retirement life with a portfolio of about $21,000. Adjusted for inflation, that was about $297,000 in today’s money. Not really a large sum to retire in the US.

[Read more…] about The Untold Story of A Self-Made Investing Millionaire

“If all you care about is the mountaintop, the climb is going to be rough.” ~ Anon

“We enjoy the process far more than the proceeds.” ~ Warren Buffett

This is going to be one of the shortest posts I’ve written. One book that I keep by my bedside for frequent reading is Ruskin Bond’s A Book of Simple Living. Here is a passage that I stumbled upon from this book last night, and which resonated perfectly well with how I practice investing and one key idea I try to teach here – the focus on process vs outcome, on the journey vs destination.

[Read more…] about The Journey

I recently spoke at IIM Lucknow. My topic was ‘Surviving the Investing Game.’

Click here to download the presentation and notes, or read it in the panel below.