28094 posts authored by “Anirudh Sethi”

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Big Mistake Done By Traders

  
  Education
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The big mistake traders make is labeling challenges as problems.  A challenge is a function of growth, pushing one’s boundaries, becoming more than you presently are.  A problem is a shortcoming, a deficit, something to move past.
If you are never anxious, you are never pushing your boundaries.  Growth requires movement outside our comfort zones.  That brings uncertainty, nervousness, and doubt.  
The big mistake traders make is trying to eradicate uncertainty, nervousness, and doubt.  They want to trade with confidence and conviction.  They want to fearlessly pull the trigger.  So they stay in their comfort zones and they never grow and they never adapt to changing market conditions.
The trader who wants to develop embraces uncertainty, doubt, and fear.  Growth comes from mastering those, not erasing them.
The big mistake traders make is justifying stasis by calling it “sticking to a process”, “controlling emotions”, and “staying disciplined”.  Every uncertainty is a challenge.  Every challenge is an opportunity for growth.  Mastering challenges means we continually evolve our processes and make growth our discipline.  
If you want to overcome a “problem”, find the developmental challenge it brings to you.  Your problem is a gift.  Unwrap it.  Figure out how it will make you better.  Then tackle one small piece of the challenge and set yourself up for success.  Once you’ve gotten that under your belt, tackle the next piece, then the next.  Bryan was right: confidence comes from doing the things we fear, not from living a static life free of uncertainty.  

Sir John Templeton’s 16 Rules for Investment Success

  
  Education

Sir John Templeton’s 16 Rules for Investment Success

  1. If you begin with a prayer, you can think more clearly and make fewer mistakes.
  2. Outperforming the market is a difficult task.
    • The challenge is not simply making better investment decisions than the average investor. The real challenge is making investment decisions that are better than those of the professionals who manage the big institutions.
  3. Invest – don’t trade or speculate.
    • The stock market is not a casino, but if you move in and out of stocks every time they move a point or two, the market will be your casino. And you may lose eventually -– or frequently.
  4. Buy value, not market trends or the economic outlook.
    • Ultimately, it is the individual stocks that determine the market, not vice versa. Individual stocks can rise in a bear market and fall in a bull market. So buy individual stocks, not the market trend or the economic outlook.
  5. When buying stocks, search for bargains among quality stocks.
    • Determining quality in a stock is like reviewing a restaurant. You don’t expect it to be 100% perfect, but before it gets three or four stars you want it to be superior.
  6. Buy low.
    • So simple in concept. So difficult in execution. When prices are high, a lot of investors are buying a lot of stocks. Prices are low when demand is low. Investors have pulled back, people are discouraged and pessimistic. But if you buy the same securities everyone else is buying, you’ll have the same results as everyone else. By definition you can’t outperform the market.
  7. There’s no free lunch. Never invest on sentiment. Never invest solely in a tip.
    • You would be surprised how many investors do exactly this. Unfortunately there is something compelling about a tip. Its very nature suggests inside information, a way to turn a fast profit.
  8. Do your homework, or hire wise experts to help you.
    • People will tell you: investigate before you invest. Listen to them. Study companies to learn what makes them succesful. (more…)

Shakespeare Was A Surprisingly Ruthless Investor And Profiteer

  
Analysis, Education
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Even the master of literature had to fund his passion somehow.

 Researchers from Aberystwyth University in Wales are calling attention to Shakespeare’s lesser-known ventures, which they say have been scrubbed from history by snobby researchers unable to reconcile “creative genius” with “savvy businessman.”

When the bard wasn’t busy writing dramatic and clever plays, he was also purchasing and storing “grain, malt and barley for resale at inflated prices to his neighbors and local tradesmen,” according to a review of historical literature by the researchers. He “pursued those who could not (or would not) pay him in full for these staples and used the profits to further his own money-lending activities.” (more…)

John Bogle’s 10 Rules of Investing

  
  Education
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“1. Remember reversion to the mean. What’s hot today isn’t likely to be hot tomorrow. The stock market reverts to fundamental returns over the long run. Don’t follow the herd.

2. Time is your friend, impulse is your enemy. Take advantage of compound interest and don’t be captivated by the siren song of the market. That only seduces you into buying after stocks have soared and selling after they plunge.

3. Buy right and hold tight. Once you set your asset allocation, stick to it no matter how greedy or scared you become.

4. Have realistic expectations. You are unlikely to get rich quickly. Bogle thinks a 7.5 percent annual return for stocks and a 3.5 percent annual return for bonds is reasonable in the long-run.

5. Forget the needle, buy the haystack. Buy the whole market and you can eliminate stock risk, style risk, and manager risk.

6. Minimize the “croupier’s” take. Beating the stock market and the casino are both zero-sum games, before costs. You get what you don’t pay for. (more…)

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