Blog on Value Investing | Safal Niveshak

How to Profit from Your Stock Market Losses

Image Source: Donmilleris.com

Let me start today’s post by asking you a question.

Assume that India is preparing for the outbreak of an unusual Asian virus, which is expected to kill 600 people. Two alternative programs to combat the disease have been proposed:

If program A is adopted, 200 people will be saved.
If program B is adopted, there is a one-third probability that 600 people will be saved and a two-thirds probability that no people will be saved.

Which of the two programs would you favor?

Well, if you think like 72% among a few hundred smart physicians who were asked a similar question by the Nobel Prize-winning psychologist Daniel Kahneman, you will choose option A, the safe-and-sure strategy.

Most doctors would rather save a certain number of people for sure than risk the possibility that everyone might die.

Don’t Worry…I’m There for You!

I’m There for You The greatest thing about India is the joint family system. The elders are always there to look after the younger members. The strong are always there to help the weak.

We’ve often seen the old man placing a hand on the sunken shoulders of the disappointed young man – who is out of luck and has fallen on bad times – pats him on the cheek, and says, “Fikr na karo beta…main hoon na.” (Don’t worry son…I’m there for you)

Reassured by the old man, the young man gets a new zest of life and is happy to face the world again.

So we care a lot about our families – their needs, wants, and aspirations.

Nowhere else in the world will you find a father worried day and night about how he will be able to fund his child’s higher education.

Nowhere else will you find a mother saving every bit of her monthly income to buy some gold to gift to her 5-year old daughter when she marries 20 years later.

Warren Buffett Wants You to Buy Stocks, Not Gold

Image Source: The Telegraph

One investing resource that has had the maximum impact on the way I look at this entre field is Warren Buffett’s letters to shareholders.

Each year, toward the end of February, I look forward to the release of Buffett’s annual letter, which is way different from the miserable letters to shareholders that you’ll read in 99% of annual reports.

For as long as he has been writing these letters, Buffett has used them as a tool to share more information with his investors.

These letters are part information update, part investment lesson. He’s quick to admit his mistakes and quick to praise his managers that have succeeded throughout the year.

He also takes great care to share his thoughts on investing.

My Wife Proves Again Why I’m An Emotional Fool

Consumerism for Beginners “Gold prices are on a rise, so let’s buy some jewellery before it gets even expensive!” my wife woke me up showing me the Sunday newspaper.

“Bad start to the day!” I mumbled under my breath.

“Did you say something?” she asked.

“Nah…nothing dear!” I exclaimed.

“You women have nothing on your mind other than shopping?” I asked bravely.

“What do you know about a woman’s mind?” she asked.

“Well…nothing!” I told the world’s harshest truth.

“See, there’s something that we love more than what we shop for.”

What! Are You Exiting the Stock Markets?

I was surprised to read a report in the India Today magazine yesterday which suggested that small investors are fast exiting the stock markets.

One reason for my surprise (and sadness) was to think about the future of Safal Niveshak.

After all, if small investors stop investing in stocks, who would read my daily rants on sensible, long-term investing?

But a bigger reason for the surprise came when I read this…

Most retail investors have lost faith in the capital market…Investors are exiting because there has been no capital protection in India.

Then I read this…

Investors are fast losing confidence in the capital market and unless Securities and Exchange Board of India (Sebi) brings in radical reforms, they would hardly return.

Now my question is – who was worried about “capital protection” during the heydays of 2004 to 2007 when everything they touched turned to gold?

30 Excuses That Prevent You from Investing Success

Be honest. How often do you sabotage yourself in your investing journey?

You trick yourself into thinking that keeping up with stock market news, and reading the latest “10 secrets to become a successful investor” post on Safal Niveshak is “working”.

You know better, but some part of you believes that simply reading the article will help you move forward.

That having a deep understanding of the stock markets and how humans behave when it comes to investing will position you better when the ‘right time to invest’ arrives.

But that ‘right’ time never comes.

My Observations on How North Indians Look at Money & Investing

I recently went on a trip to North India – Delhi and Rajasthan – where I observed some interesting habits people had with respect to handling their money and investing.

Of course, some of these habits/attitudes aren’t particular to the North Indians, but these still give interesting insights into the money behaviour of that lot (and I’m one of them myself).

So here are some of my observations on how North Indians generally look at money and investing…

Money has to be earned at all costs, because the need to spend on lavish parties, expensive clothes and cars, and impress others at family functions is on a rise.
Stock markets are considered some sort of a scam where you will ‘always’ lose money.
Despite the above belief, CNBC remains the first channel to be watched every morning.
Gold and property are considered safer investments than stocks.
People don’t invest with a plan. They ‘just’ invest whenever they have money.
People are more worried about what’s happening in politics than in the economy.
Like their driving, people are highly overconfident about their investing skills.
Not many are bothered about investing education, or blogs like Safal Niveshak. 🙁
Most believe that they ‘knew’ about the 2008 crisis (only that they did nothing about it).
Food occupies a greater mind share than money (the few centimeters I’ve added to my waistline is a proof). 🙂

One more important thing I noticed among people out there is, however rash they are in their driving and investing, they care a lot about the future of their dependents and thus save a lot of money (in gold, property, and stocks).

Anyways, I now invite all my North Indian readers to accept or negate these observations.

Also, all my readers from other parts of India and the world are welcome to add their observations about the way people in their regions treat money and investing. This will be an interesting exercise.

How to Avoid Your Worst Enemy as a Stock Market Investor

If you have been a member of the Safal Niveshak tribe for long, you know our hottest topic of discussion here. It is how various aspects of human behaviour influence investing.

As we have discussed at times, we are often our worst enemy when it comes to investing our hard-earned money.

An understanding of how vulnerable we are to our own psychology can help us avoid the stupid investor delusions that can screw up our financial security.

There is an old adage about the game of poker: If you sit down at the table and can’t figure out who the sucker is, get up and leave because it’s you.

These insights about investor psychology can keep you from being the easy prey.

Burton Malkiel, in his investing masterpiece, A Random Walk Down Wall Street, cites the study done by Charles Ellis, a longtime observer of stock markets and author of another brilliant investing book Winning The Loser’s Game.

The Art of Stock Picking, by Charlie Munger

Charlie Munger Some call him Warren Buffett’s alter ego. Some know him as Buffett’s quirky business partner.

But whatever you may call him, Charlie Munger is ‘the’ original thinker and the silent man behind the success of Buffett’s investment company Berkshire Hathaway.

Ask people about Berkshire Hathaway, and most will tell you that it’s Warren Buffett’s company, which is true as far as it goes.

But those in the know recognize that Berkshire’s success is actually the product of a tag-team effort by Buffett and Munger.

Munger’s book, Poor Charlie’s Almanack, is one of my most prized possessions.

It collects his speeches and musings, including his intriguing thoughts on the several tendencies that lead us humans to make really bad decisions.

A Value Investing Course You Won’t Want to Miss (And It’s Free!)

Something tells me you are smarter than most self-proclaimed stock market experts and others looking to invest in the stock markets.

Something tells me that you are not interested in ‘get rich quick’ schemes or ‘hot stocks’ that promise fast money from the stock markets.

You are not looking for a magical idea that involves no work, no time, and no sense on your part.

And you also realise that you don’t have to be Einstein to become a sensible, intelligent, and successful stock market investor.

So, you are smart. It’s only that you need to realise this truth and believe in yourself.

And with a view to create this belief in you, I invite you to join (if you haven’t joined already) my Free 20-lesson course in investing…

Value Investing for Smart People
Value Investing for Smart People is a simple and systematic way to understand and implement the time-tested principles of value investing (the most sensible way of investing) to create wealth from stocks.

It’s a 20-lesson course on value investing strategies that have helped the world’s best investors amass huge wealth from the stock markets.

Here are 5 key questions the course will help you answer…

Why you don’t have to be a genius to become a successful investor?
How to use ‘investment checklists’ to identify good stocks?
Why your stocks will never make you rich?
How to insure your investments with a ‘margin of safety’?
When to sell a stock?

Despite the immense value that this course carries and the invaluable investing insights that you will learn from it, I have kept it FREE.

Yes, you read that right! Value Investing for Smart People is a free 20-lesson course on value investing techniques that will be delivered to you via email once you sign up for it.

And why is it free? Simply because this is your first step into the amazing world of value investing, and I want you to take this step hassle-free and without any reservations.

So come, sign up for Value Investing for Smart People.