Safal Niveshak

Wit. Wisdom. Value Investing.

Latticework Of Mental Models: Mental Accounting

Imagine yourself with your friend in the Sin City, i.e. The Las Vegas. While walking on the Las Vegas Boulevard you find a $10 bill sticking out from the side of the pavement, as if it’s telling you “Please Pick me!”. You pick it up and feel ecstatic about your moderately good fortune.

“Wait a minute! Is that a sign from the universe?”, a strange but perfectly reasonable thought appears in your thought screen. Perhaps the lady fortuna is nudging you to try out your luck using this $10 totem. After all it’s Las Vegas. The Gambler’s Paradise.

Your friend however is tired and heads back to the hotel. But you just can’t ignore the sign from above. Taking this as an omen, you enter the first Casino and head straight to the roulette table. You want to bet on your lucky number 7. Sure enough, the roulette ball hits 7 and 35-1 bet wins you $350. You let your winnings ride and the ball lands on 7 again, paying you $12,250. And so it goes. Within an hour you are a multimillionaire with $50 million in your kitty.

Feeling like Daniel Ocean from Ocean’s Eleven, you intend to bring the house down with your raging streak of luck. Being just one step away from becoming a billionaire you bet all your money on number 7 one last time – only to lose it all this time. Broke, dejected and little flabbergasted you walk down several miles to join your friend in the hotel room.

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The 37th Lesson

On this very day last year, I had shared with you 36 lessons from 36 years of my life. Today, I complete 37 years in the present state of being, and thus wish to share with you the 37th lesson I have learned in the year gone by – one of the most powerful lessons that I believe has the ability to turn me into a better person and a better investor going forward.

That lesson is of mindfulness, or a state of active, open attention on the present.

When you are mindful, you observe your thoughts and feelings from a distance, without judging them good or bad. Instead of letting your life pass you by, mindfulness means living in the moment and awakening to experience.

Mindfulness

“Oh, that’s same as meditation, right?” you might wonder like I did when I came across this practice some time back. Well, meditation is a tool to help you learn to be mindful.

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Poke the Box: The Hardest Part is Starting

Let’s Start with Safal Niveshak
Just in case you missed any of this on Safal Niveshak over the last few days…

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Microcap Investing, the Ian Cassel Way

Note: This interview was published in the November 2015 issue of our premium newsletter, Value Investing Almanack. To gain instant access to more such interviews and other interesting stuff on value investing and business analysis, click here to subscribe now.

Ian CasselIan Cassel is the founder of MicroCapClub.com, which is an exclusive forum for experienced microcap investors focused on microcap companies (sub $300m market cap) trading on the US and Canadian markets.

Ian has been investing in microcaps for 15 years and has been a full time microcap investor since 2008. Ian looks to invest in great management teams running great businesses with a moat. He tries to invest in the best 5-6-7 companies he can find at all times.

Ian founded MicroCapClub in 2011 to be a place for “real” and experienced investors in the microcap space to share ideas and learn from one another. When Ian isn’t researching stocks or administering MicroCapClub, you can find him reading, golfing, or shopping at Costco with his wife.

Let’s now jump straight into the interview.

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The Curse of Knowledge

Note: This post was originally published in the August 2015 issue of Value Investing Almanack. To read more such posts and other deep thoughts on value investing, business analysis and behavioral finance, click here to subscribe to VIA.


“See, when you want to reverse the car to left, you have to turn the steering wheel to the left,” I told my wife while I was trying to teach her reverse parking.

“But when I turn left, the car is going towards right!” she exclaimed.

“No! The car is going towards left. See, the left tail lamp is going left,” I showed her in the side view mirror.

“Yeah but the right headlamp is going towards the right,” she pointed towards the right headlamp which appeared to be moving towards right from driving seat. Of course, it had to. If you are focusing on the front, the nose of the car will seem to go towards the right.
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The Mother of All Investing Mistakes

What would you do if you had something coming at you at 110 km an hour and less than half a second to react?

Soccer goalkeepers saving penalty kicks face this situation often. While watching penalty kicks looks like a lot of fun for the audience, it’s often a tricky situation for the person facing the penalty i.e., the goalkeeper. He has to make a decision in less than a second and that too a decision on which the balance of his team’s fortunes hangs.

Penalty kicks are a great way to understand one of the biggest mistakes investors make. More on that later, but first let’s talk about the options in front of the goalkeeper saving the kick.

Lesson in Investing from Penalty Shoots

He has three choices available – He can dive left, dive right, or stays put.

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Life 2.0: Pursuing a Memorable Life

The key to living a memorable life is the pursuit of a memorable life. We share few ideas to stock up your personal happiness store, without spending too much money.

Let me ask you a question – “Can you recall what you did on each day for past 30 days?”

Don’t feel bad if you can’t because it doesn’t indicate a poor memory. In fact, if it gives you some comfort, here is an interesting fact – according to a study most people can’t remember more than 3 days from their past 30 days of life.

Surprising, isn’t it? So what happened to all those forgotten days? You might as well have not lived them since they, in hindsight though, appear to be a complete waste of time.
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Poke the Box: Embrace your constraints

Let’s Start with Safal Niveshak
Just in case you missed any of this on Safal Niveshak over the last few weeks…

Book Worm
If you are familiar with the terms ‘value investing’ and ‘behavioural biases’ then chances are that you have heard about ‘checklists’ too. The idea of checklist has been made popular in recent times by Dr. Atul Gawande through his book The Checklist Manifesto.
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Latticework of Mental Models: Gambler’s Fallacy

Let’s start with a small riddle.

A man, probably a statistician, believes that his next child will be a girl since his wife has already borne him three sons.

Do you find his argument convincing?

The argument intuitively doesn’t feel right. Isn’t it? But why?

We’ll circle back to this puzzle but before that let me indulge you in another interesting thought experiment.

Imagine yourself as a spectator in a coin flipping tournament. You notice that in one of the plays, the coin has landed on heads for 5 consecutive flips. If you were given an opportunity to bet on the next flip, would you bet on heads or tails?

I know you’re a value investor and don’t believe in speculating or gambling away your hard earned money on frivolous coin flipping tournaments, but this being a thought experiment I would request you to play along.

So what’s your answer?

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