Investing Behaviour

‘Einstein Way’ to Get Over the Stock Market Insanity

Albert Einstein defined insanity as ‘doing the same thing over and over again and expecting different results’.

In the stock market, these are some things that most people do, over and over again…

Worry where the Sensex is moving next
Worry where interest rates are moving next
Worry what FIIs will do next
Worry about the GDP growth next quarter and next year
Worry about the government’s fiscal deficit targets
Worry what the next quarter might bring for companies
Worry what will happen in the US, Europe, and China
Worry why most people are worried about these worries

The truth is that these worries either keep people away from investing, or these lead them to make serious errors of judgment with their investments.

Investor, Mind Your Behaviour!

Were you ever punished in school for not behaving properly in the class?

If you are like me, you must have experienced the happiness (mixed with some embarrassment) of being an ‘out-standing’ student on a regular basis! But then, you must have behaved well after that punishment.

Sometimes I wonder if we as adults were always guided and punished by our teachers for all our mistakes and mindless behaviour. Growing up and moving out of school gives us a lot of freedom to behave the way we want to. But then, for some of us, it becomes a license to behave any which way…even at the cost of our own peace, and money.

Talking about stock markets, the pundits will tell you that to learn to invest, you need to read the theory books. You need to understand complex accounting. You need to know the jargons, the P/E, the EV/EBDITA, the SOTP.

What these pundits however fail to tell you is that before you get to all that investing theory, you need to work on the practical. You need to study ‘yourself’…your behaviour.

New Investor? Know these 6 Things for a Safe Investment Journey

I often meet people who are just starting out as stock market investors but have no idea where to begin.

Then there are others who have been investors for some time, but are still clueless about taking their next, and the next step.

If this is the case with you as well, here are 6 simple things that you must keep in mind as you enter the stock market.

These are in fact the 6 lessons that I have learnt the hard way over the years. But you must not go through the same cycle, and these lessons will help you be safe, and emerge successful, in your investment journey.

Let’s start right here.

How ‘Minimalism’ Changed My Life as an Investor

Have you even wondered that there are way too many things that you have to face day after day?

Too many responsibilities, too many questions, too many possessions, too much information, too many options for everything, too many stocks to choose from, too many other investments that too many financial advisors push you to buy.

If that’s the case with you, what you need to bring back peace to your life is…minimalism.

Minimalism is basically an extension of simplicity – not only do you take things from complex to simple, but you try to get rid of anything that is unnecessary.

Practicing minimalism has brought simplicity to my life, and I love it for the time it gives me to focus on the bigger, more important things – taking greater care of my health and family.

Education and Investing

Some people are educated. Some are smart. Some are both.

Some educated people are blockheads. Some uneducated people are geniuses.

Put the sophisticated, smart fund manager in the role of a chief financial officer of a company, and see who the intelligent one is – him or the relatively ‘less educated’ CFO who has been managing the ‘real’ business challenges for years.

Some people understand the theory of everything but can’t deal with the reality of anything.

Like an arm-chair financial analyst would continuously blame an automobile company for not managing its cost well, but does not understand a bit what problems that company faces in dealing with its vendors.

So you have some people who are academically capable but practically incompetent!

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.

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.”

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.

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.

How to Get Very Lucky as an Investor

The famous American writer Dorothy Parker once said, “I hate writing. I like having written.”

I know many people who are like that about their life and work. They love to fantasize about what life will be like when they ‘make it’, but they like to skip over the part that reads – hard work.

Like the young man I met a few days back who has spent the past ten years of his life destroying his body with alcohol, excessive food, and a sedentary lifestyle…but wanted to know a quick way to get fit, lean and healthy in just the next six months!

He, probably, expects to get ‘lucky’ in his life by getting whatever he wants without the hard work to accompany it.

Really? Is ‘luck’ really about instant gratification?

If I look back to the lives of great people, the answer I get is something absolutely different.