I’ll give you some examples, followed by comments. Since this article is about learning, let’s start with this:
“What we learn from history is that people don’t learn from history.” When investors get either too fearful or too greedy, they sometimes hide behind the notion that “This time it’s different.” Usually they regret it.
On fear and greed
“Two super-contagious diseases, fear and greed, will forever occur in the investment community. The timing of these epidemics will be unpredictable. … We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.” This is the simple recipe for being a contrarian investor. Continue reading
Back from the long Diwali holidays, time to reboot on the markets, long breaks are always good to revive and get some thoughts from your near and dear ones.
On the way back from Bhopal to Mumbai, some fellow passengers were curious about the markets and the train was late as much as 6 hours. It was a holiday special train and passengers paid a premium to board the train compare to other routine trains, they expect the train to come on time as the fare is higher. I did exchange few tweets with the railways department for delayed train.
Getting back to the theory as the fellow stranger passengers did not have a good time with markets as well, most of them were trying to time the market. Continue reading
In one classic experiment conducted by Daniel Kahneman and Amos Tversky, pioneers in the field of prospect theory, subjects were given a hypothetical choice between a sure $3,000 gain versus an 80% chance of a $4,000 gain and a 20% chance of not getting anything.
The vast majority of people preferred the sure $3,000 gain, even though the other alternative had a higher expected gain (0.80 × $4,000 = $3,200).
Then they flipped the question around and gave subjects a choice between a certain loss of $3,000 versus an 80% chance of losing $4,000 and a 20% chance of not losing anything. In this case, the vast majority chose to gamble and take the 80% chance of a $4,000 loss, even though the expected loss would be $3,200. Continue reading
Here is an anecdote between investing and saving , Savings are anyway always killed by the inflation considering the time value of money,
You may lose some or all of the money you invest depending upon your planning and risk appetite . You can earn interest by putting money in a savings account, but savings accounts generally earn a lower return than investments. Investments have the potential for higher return than a regular savings account
Saving is Passive
Investing is Active. Continue reading
Someone asked me what’s your view on the market? my response was it will fluctuate. Some experts feel there is a breakout around the corner, some of them carefully waiting for the Fed policy this Friday. While some of them feel there will be a correction.
Global events are an integral part of market now, you cannot control these events neither can devote your full-time in predicting these events. As an investor what you can control?
- You can control how much money you put behind the idea.
- You can control which markets you trade in.
- You can control how much you are willing to risk per trade barring any gap