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
In the financial market arena everyone is pundit and everyone has a say on one market or the other, sharing some of the unfortunate truths about investing some of them are from the past, and they stand true with the present scenario
- Saying “I’ll be greedy when others are fearful” is much easier than actually doing it.
- The gulf between a great company and a great investment can be extraordinary.
- Markets go through at least one big pull back every year, and one massive one every decade. Get used to it. It’s just what they do.
- There is virtually no accountability in the financial pundit arena. People who have been wrong about everything for years still draw crowds. Continue reading
It’s often said that financial markets are driven by two competing emotions, greed and fear. There’s a third emotion that requires constant management: boredom.
It’s exciting when assets go up or down by a lot. Generally, they don’t. It’s boring to watch things that don’t do much in a hurry.
And it’s boring to wait for the market to validate your assessment of fundamental value. Continue reading
The financial markets have come a long way in terms of technology, transparency, accuracy and speed. But there are few basics of the market that never changes, be it thoughts by the great Benjamin Graham, Warren Buffet, Charlie Munger or Peter Lynch.
Here are some thoughts by Jesse Livermore written in 1940 and they apply in today’s market scenario as well:-
- Nothing new ever occurs in the business of speculating or investing in securities and commodities
- Money cannot consistently be made trading every day or every week during the year
I have done series of random posts on this topic; it always questions the investor’s behavioral aspect. The term “Greed” may not be a better word for the society but as Gordon Gekko said “The point is, ladies and gentleman, that greed, for lack of a better word, is good.
Sharing you a classic example of an institutional investor – NatWest markets bought shares of HDFC Bank in 1995 for Rs.40 crores.
Few years down the line, in 1999, they sold the same for Rs.400 crores. Money multiplied by 10 times in 5 years
NatWest might have patted themselves on their back for such a wise decision. It’s a rarity to make 10X money in 5 years. Continue reading