Okay, this is going to be my smallest post on Safal Niveshak so far. But I hope this will leave you with something to introspect. 🙂
There are five key aspects of investing…
- Risk = Not knowing what you are doing
- Cost = Broking commission + Financial planning fee + Entry loads + Administration fee + Subscription fee for magazines, stock research + Consultation fee + Taxes
- Time = Long term compounding
- Emotion = Your behaviour
- Return = Future gains/losses
Now…
So it beats me why…
Is this really true of you?
If yes (thanks for being honest!), tell me what you are doing to change this?
If not, hail Mogambo! 🙂
Yes Vishal, it is true with me…! To get rid of that getting myself educated through the teacher like you, reading books on these issues, biographies of value investors..:)
well. true with most people as the media is always screaming sensex falls 100 points .. etc .. whereas hardly any news on unsold plots/houses…
With time I am starting to get some control on these and focussing less on returns. The problem has been that the last 3 to 4 years have been a near washout and so returns pops up every now and then and is many a times negative (and as has been written at many places a loss or its prospect gets hugely compounded in our cognitive set).
I guess and hope patience will pay in equity markets.
That is why my appeal to you that do not stop Stock Talk. It is a decent analysis and a path is shown during or after which the journey man decides for himself what he wants to do.
Dear Vishal
Today is Teacher’s day and what better way than to say – you have lighted a candle to show the way for fellow tribesman in the wonder world of investment. Now coming to your post: It is human nature-control the uncontrollable; again control that is easily quantifiable(Returns as opposed to Risk and Emotions). As regards my experience goes:While I have fallen a prey to Returns on many occasions, i have also reined in successfully Time and Emotions, and not so much with regard to Risk and Cost.
Yes quite right. Teachers day is the most appropriate occasion to say thank you to not just Vishal but to each one who have shared their learnings.
EGGZACTLY.
If you remember, I had briefly touched this point in last jam session. That we all just trying hard to maximise returns, to find the next multi-bagger whichl, we think, will be be all and end all of our quest. Little do people realise that it is your HOLISTIC i.e. overall planning that will lead to fullfillment of your dreams, not just one or ten shares. And the ironical part is, it really is not that difficult:-
1. Risk: I wish you had been a little more elaborate over here detailing both the Systematic Risk i.e the risk associated with a particular asset class like Equity, Debt etc. ( Risk of Inflation in Debt, Overall Market Risk in Equities) and the Non-Systematic risk, which can be reduced to some extent by diversification. The risk involved in acquiring a particular scrip is now being targeted by learning proper valuation techniques, thanks to you.
2. Costs: The lesser the churning, the better it is. If one does the excel sheet calculation of just 2% cost per year, the difference at the end of, say, 25 year period is mind boggling. At times, we don’t think of other charges as they seem so small to the overall cost( saving Rs.1000/- on lamp Vs 1000/- on car, Ref Prof. Bakshi) but the effect is disastrous.
I think you should have mentioned the opportunity cost also. The money that is generating just 6-7% in your traditional insurance plan is gone, just REDUCING your purchasing power every year. That money has lost its ability to get you superior returns forever :(. And to think that Insurance is a long term product, Gawd.
3. Time: Just match the time available for a particular goal to be achieved with the proper asset class. There is no rocket technology here. If the funds available are less, you have to either tone down your expectations or give more time (for a particular class).
4. Emotions: The most difficult of all, I think. The list of biases covered recently show how difficult, and important, it is to control ourselves, given the regular cycles of greed and fear, depression and euphoria. Add to it the fact that their is no single philosophy at work, that you can lose, and gain, in much more ways than one, renders it whole all the more dicey. Lynch rightly said, the most important organ is stomach in investing. Trying to rectify this as much as possible, gaining immensely from the SN initiative and also the comments of various august readers.
Thanks for a wonderful article which, despite being short, offers a great deal to munch on. 😀
Forgot to add 😛
Prof. Bakshi’s post on Stress Adjusted Returns was really great. It is really a great piece for all of those seeking just higher returns.
Here is the link.
😛
Dear Vishal,
We, the Safal Niveshak tribesmen, on the occassion of teacher’s day, thank you very much for avaling us to learn the financial fundas. May it be post, 20 lesson course, workshops, the forum, and much more