On Day 7 today I am going to go over all that I have covered in the last six days. Not just for your benefit but also for mine.
I have to keep reinforcing these principles day after day, week after week and month after month. And sometimes I slip but as long as I avoid large errors of commission and make some errors of omission, I am going to be fine.
My goal is to survive and position my self to take advantage of the big move "when" it comes. There is no question of "If". As a famous trader said, "There are bold traders and there are old traders. But there are no bold old traders".
Day 1: I wrote about the Behavior Gap. Most investors when they turn over their investments to a money manager or a mutual fund manager are not happy with market returns. But what they should be keeping in mind is whether their manager is doing a better job than what they would be doing with their own money. If he is, then half the battle is won.
Day 2: I wrote about how most media and any one who tries to forecast markets almost always gets it wrong. Most major market turns have been made when a major business/non business magazine has made a major prediction about the direction of markets on their cover page.
Day 3: I wrote about how bubbles are formed. In times of extreme euphoria when a good premise is taken too far and when investment action is driven solely by prices and leads to too much easy money flowing into markets. It is then that a bubble is formed. No one can predict when or how a bubble will burst. As Keynes famously said, "Markets can remain irrational far longer than you can remain solvent". Two basic primal emotions drive markets: Greed and Fear.
Day 4: I wrote about a particular phenomenon called the Disposition Effect: Holding on to losers for too long and selling winners early. Everyone makes this error and the important thing is to be aware of this behavioral bias.
Day 5: I wrote about Warren Buffet's most famous self admitted error: Buying Berkshire Hathaway when it was a slowly dying textile business. Buffett converted it into an investing vehicle to take advantage of losses and in time added an insurance business to it.
Day 6: I put my self out there and shared with you an exercise that I carried out when I checked up my own portfolio a few years ago and the impact that Disposition Effect was having on my returns.
I have to keep reinforcing these principles day after day, week after week and month after month. And sometimes I slip but as long as I avoid large errors of commission and make some errors of omission, I am going to be fine.
My goal is to survive and position my self to take advantage of the big move "when" it comes. There is no question of "If". As a famous trader said, "There are bold traders and there are old traders. But there are no bold old traders".
Day 1: I wrote about the Behavior Gap. Most investors when they turn over their investments to a money manager or a mutual fund manager are not happy with market returns. But what they should be keeping in mind is whether their manager is doing a better job than what they would be doing with their own money. If he is, then half the battle is won.
Day 4: I wrote about a particular phenomenon called the Disposition Effect: Holding on to losers for too long and selling winners early. Everyone makes this error and the important thing is to be aware of this behavioral bias.
Day 5: I wrote about Warren Buffet's most famous self admitted error: Buying Berkshire Hathaway when it was a slowly dying textile business. Buffett converted it into an investing vehicle to take advantage of losses and in time added an insurance business to it.
Day 6: I put my self out there and shared with you an exercise that I carried out when I checked up my own portfolio a few years ago and the impact that Disposition Effect was having on my returns.
ET reported that Disposition Effect and overconfidence resulted in Indian retail investors losing Rs. 8,376 crs between January 2005 and June 2006 as per a study conducted by Prof Sankar De and his team at Indian
School of Business. The total number of investors
who traded at least once between January 2005 and June 2006 stood at 25 lakh.
If one mirrors a secular trend over the years, the total losses for Indian
individual investors would be around Rs 20,700 crore or Rs 82,800 per active
investor per year.
Regards
Anish
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