Wit. Wisdom. Value Investing.
Imagine explaining why a leaf fell from a tree at 3:42 PM on a Tuesday.
Was it the wind? The age of the leaf? A butterfly flapping its wings in Kashmir?
In reality, it was most likely a combination of multiple factors, many too small for us to even notice.
Well, every movement in the stock market is like that leaf, but infinitely more complex. However, here we have a story for every leaf falling.
[Read more…] about The Dangers of Storytelling in Investing: How to Avoid the Narrative FallacyI am writing this series of letters on the art of investing, addressed to a young investor, aiming to provide timeless wisdom and practical advice that helped me when I was starting out. My idea is to help young investors navigate the complexities of the financial world, avoid misinformation, and harness the power of compounding by starting early with the right ideas and steps. This series is part of a joint investor education initiative between Safal Niveshak and DSP Mutual Fund.
Dear Young Investor,
I hope you are doing well and are eager to learn more about the financial path ahead of you.
In today’s letter, I want to share an idea that, if you grasp and embrace well, can change your financial destiny in ways you may not have even dreamed of.
It is a force so subtle, yet so powerful, that it is frequently overlooked until its repercussions grow too big to be disregarded. But before I tell you about that, let me tell you a story.
[Read more…] about Letter to A Young Investor #3: The Quiet WonderThis is a masterpiece.
Morgan Housel, Author, The Psychology of Money
There is a quirk in human nature that is as old as time itself. Yet, it is as relevant today as it was when our ancestors first started trading seashells.
I am talking about the tendency to see the world through rose-coloured glasses when it comes to potential gains, while simultaneously downplaying the very real risks that lurk in the shadows.
Now, this not just a passing academic observation, but a force that affects not only our everyday lives but also our economies and even the path of history. And it is worth pausing to think about how it might be affecting your own choices, big and small…in life, investing, everywhere.
[Read more…] about The Optimism Trap: How We Misjudge Risk and RewardsFinancial manias, or market bubbles, have been a regular part of economic history. From the Dutch Tulip craze in the 1600s to more recent events like the dot-com bubble and the 2008 financial crisis, these patterns keep repeating. Despite past lessons, people still fall for these moments of market madness.
By studying these past bubbles, we can spot common patterns. This helps us understand why they’re hard to stop and how we can better protect ourselves from their worst effects.
I recently briefly explained to a friend how these manias work and how people typically behave during them. You can read that here.
However, exclusive to Mastermind members, I have created this three-part detailed series to dive deeper into how financial manias operate, why they keep happening, and share some ideas on how to deal with them. Understanding the mental, social, and economic factors behind these events can help us resist their appeal and make smarter investment choices.
Read the first part on the anatomy of a financial mania.
Here is the second part on the inevitable fall, and the most important lessons you can draw from it.
This content is reserved for Mastermind Members. To access, please login below with your membership credentials.
If you are not a member, please consider joining the Mastermind Membership to access my most comprehensive value investing course, plus practical, time-tested ideas in investing, human behaviour, business analysis, and decision making, and get onto the path of becoming a better version of yourself.
Financial manias, or market bubbles, have been a regular part of economic history. From the Dutch Tulip craze in the 1600s to more recent events like the dot-com bubble and the 2008 financial crisis, these patterns keep repeating. Despite past lessons, people still fall for these moments of market madness.
By studying these past bubbles, we can spot common patterns. This helps us understand why they’re hard to stop and how we can better protect ourselves from their worst effects.
I recently briefly explained to a friend how these manias work and how people typically behave during them. You can read that here.
However, exclusive to Mastermind members, I have created this three-part detailed series to dive deeper into how financial manias operate, why they keep happening, and share some ideas on how to deal with them. Understanding the mental, social, and economic factors behind these events can help us resist their appeal and make smarter investment choices.
Let’s begin the series with this first part on how a financial mania typically unfolds, and the most important lessons you can draw from it.
This content is reserved for Mastermind Members. To access, please login below with your membership credentials.
If you are not a member, please consider joining the Mastermind Membership to access my most comprehensive value investing course, plus practical, time-tested ideas in investing, human behaviour, business analysis, and decision making, and get onto the path of becoming a better version of yourself.
This is a masterpiece.
Morgan Housel, Author, The Psychology of Money
The Cycle of Financial Manias: A Simple Explanation
One of the best things about reading history books, especially the financial side of it, is that you realize how not much has changed in how we behave when it comes to our money. And that is the reason financial bubbles keep happening, because human nature does not change.
Whether it’s the Dutch Tulip craze of the 1600s or the 2000s dot-com bubble, the global financial crisis, and the mania we are seeing in certain pockets of the stockmarket now, it seems we never learn.
But the more we study these past bubbles and manias, the better we can identify patterns in which they generally come to pass. This not only gives us insights into how such events are so hard to prevent, but also how we can prepare ourselves to deal with them better, without getting killed.
I recently explained to a friend, in a simple way, about the cycle of manias and human behaviour. Here is the chain of thoughts that we followed through, which may help you too if you are interested in understanding such a cycle, how it develops, and what happens ultimately.
First, What Creates a Financial Mania
Second, What Leads to Its Fall
Third, Why We Fail to Learn
Fourth, What Can We Do?
While explaining all this to my friend, I also reminded him how the basics of human nature have not changed much for thousands of years. We are still drawn to the excitement of getting rich quick (and now also look down upon those who can’t). But when we understand the entire cycle of mania, then crash, and our failure to learn from the same, we can try to make wiser financial decisions and avoid getting caught up in the next big bubble, as and when it happens.
I left him with this passage from John Kenneth Galbraith’s book ‘A Short History of Financial Euphoria’ –
When will come the next great speculative episode, and in what venue will it recur – real estate, securities markets, art, antique automobiles? To these there are no answers; no one knows, and anyone who presumes to answer does not know he doesn’t know. But one thing is certain: there will be another of these episodes and yet more beyond.
Fools, as it has long been said, are indeed separated, soon or eventually, from their money. So, alas, are those who, responding to a general mood of optimism, are captured by a sense of their own financial acumen. Thus it has been for centuries; thus in the long future it will also be.
Investing, at its core, is a deeply personal journey. Yes, we operate within markets that are moved by collective actions and collective madness. But our individual paths to financial well-being are unique. If we remember this, by staying true to our own analysis and convictions, we give ourselves the best chance of surviving panics and manias, as and when they come to pass.
The crowd may sometimes seem to have wisdom. But more often than not, true investing wisdom comes from the ability to think independently, act rationally and, occasionally, to stand alone.
This is a masterpiece.
Morgan Housel, Author, The Psychology of Money
If your investments keep you up at night, it’s not your returns that need adjusting, but your investing strategy. True wealth is peace of mind.
***
Letting the crowd’s optimism blind you to risks in investing…is one of the biggest risks you take as an investor. Beware.
***
The wisest choices rarely feel good in the moment. True growth, personal or financial, requires living through periods of discomfort and delayed gratification.
Holding cash is uncomfortable, but not as uncomfortable as doing something stupid.
– Warren Buffett
***
What you should learn when you make a mistake because you did not anticipate something is that the world is difficult to anticipate. That’s the correct lesson to learn from surprises: that the world is surprising.
– Daniel Kahneman
***
Favourable surprises are easy to handle. It’s the unfavourable surprises that cause the trouble.
– Charlie Munger
That’s all from me for today.
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Thank you for your time and attention.
~ Vishal
As Warren Buffett turned 94 the day before yesterday, I found myself reflecting on his extraordinary life and that of his late partner, Charlie Munger, who passed away at 99 last year.
Their longevity is impressive enough, but what truly stands out is the quality of those years – the clarity of thought, the continued passion for their work, and the seemingly unshakeable contentment they exuded.
So, what’s their secret?
[Read more…] about A Philosophy for a Long, Happy, Rich LifeI have started this new series – Five Good Lessons – for Mastermind members, wherein I will be sharing five good lessons from a book on investing, money, behavioural finance, learning, and life, and my perspectives on the same.
The second book I write about today is Nassim Taleb’s Fooled By Randomness.
First published in 2001, this book continues to challenge our understanding of probability, risk, and success in both financial markets and life. Let’s explore five crucial lessons from this thought-provoking work, examining their relevance in today’s context.
This content is reserved for Mastermind Members. To access, please login below with your membership credentials.
If you are not a member, please consider joining the Mastermind Membership to access my most comprehensive value investing course, plus practical, time-tested ideas in investing, human behaviour, business analysis, and decision making, and get onto the path of becoming a better version of yourself.
I am starting this new series – Five Good Lessons – exclusively for Mastermind members, wherein I will be sharing five good lessons from a book on investing, money, behavioural finance, learning, and life.
The first book I start with is Benjamin Graham’s The Intelligent Investor, one of the very few books in investing that have stood the test of time.
First published in 1949 and revised several times since, this seminal work continues to shape the philosophy of value investing and influence investors worldwide.
Let’s delve into the five good lessons from this financial classic, examining their relevance in today’s market context.
This content is reserved for Mastermind Members. To access, please login below with your membership credentials.
If you are not a member, please consider joining the Mastermind Membership to access my most comprehensive value investing course, plus practical, time-tested ideas in investing, human behaviour, business analysis, and decision making, and get onto the path of becoming a better version of yourself.
As an investor, analyst, or business owner, it is very important to understand how to value companies across different sectors. I have created this detailed guide to help you with exactly that – explore various relative valuation methods, and their applicability to different industries.
I have also added a few practical examples from the Indian market to explain the concepts better. Here, please note that the financial numbers or stock market data I have used are just for calculation purposes and are approximations around the current values (as on 28th August 2024). Also, none of the stocks listed below are recommendations.
Anyway, let’s start right away.
This content is reserved for Mastermind Members. To access, please login below with your membership credentials.
If you are not a member, please consider joining the Mastermind Membership to access my most comprehensive value investing course, plus practical, time-tested ideas in investing, human behaviour, business analysis, and decision making, and get onto the path of becoming a better version of yourself.