Testimonial on www.amazon.in

 

 

“Amit takes us down the memory lane and re-caps the previous rallies and the turmoils. It is very interesting when he says that markets do fall because they do rise. The book is punched with interesting observations from similar books and mixes a good bunch of humour in between. This is a good read to set our expectations as an investor. Very good guide when we need help to learn the right behaviour in the market, as an investor. I enjoyed reading & learning.”

Rohit Shah on http://www.amazon.in

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Easy to make money

When it seems to be very easy to a large number of people to make money, the risk is at the highest.

#RidingTheRollerCoaster

Testimonial from Mr. Mukesh Dedhia

Mr. Mukesh Dedhia, a reputed figure in the financial services industry has this to say about the book:

“A singular book that gives information on all the past market highs and crashes, the human biases that lead to extravaganzas and how mental stability helps you protect these roller coaster rides.”

Thank you Mukeshbhai for posting this review on http://www.amazon.in

#RidingTheRollerCoaster

Why Smart People Make Bad Decisions – a brilliant post by Morgan Housel

In another brilliant post, Morgan Housel brings some extremely important points:

  • One of the most persistent fallacies is the reflexive association of wealth with wisdom,” investor Ed Borgato tweeted this week.
  • Another is the association between intelligence and good decisions.
  • Intelligence increases the ability to fool yourself with elaborate stories about why something happened.
  • … the smarter and more creative we are, the more elaborate stories we can tell ourselves to justify our poor decisions
  • Intelligence pushes you toward the idea that complex problems require complex solutions.
  • Even when a problem requires a complex solution, the ability to communicate it in simple terms is indispensable to getting people to take you seriously.

Read the full post here

There are stories of some intelligent and brilliant investors in the book “Riding The Roller Coaster – Lessons from financial market cycles we repeatedly forget”. The list is quite illustrious.

#RidingTheRollerCoaster – 262

The blame game – whom to blame?

Yesterday I wrote about “The blame game“. It is a common human trait. However, there is another pattern if you consider who gets the blame. In “Beyond Greed and Fear”, Hersh Shefrin continues:

Of course, for this to work, the person to whom responsibility gets shifted must be seen to have expertise. Otherwise, the client will feel just as much regret for having relied on a novice for advice.

 The person to be blamed must be known as an expert, else the blame comes back in a different form, “How could you trust such a person?” But with an expert, there is a comfort that there is no mistake in trusting the expert.

It’s all in the mind, after all.

#RidingTheRollerCoaster – 258

Is this the right investment?

Once again, I came across this question from an investor, “I have invested in such and such avenue. Is it the right decision?

On probing further, one gets the answers, which have by now become highly predictable for me.

In almost all cases, the investment avenue has a lock-in provision, which means the investor cannot get out of the investment even if one realizes that it is not a right instrument. Why, then, this question keeps surfacing after one has locked-in the money? Is it ok to assume that one did not ask this question before signing the cheque?

Doesn’t it make sense to ask questions BEFORE signing the cheque?

We learn from the story of Abhimanyu that it was easy to get into the chakravyuh, but without knowledge, it was difficult (sometimes impossible) to get out of it. Same applies to an investment with lock-in. Buying is easy, getting out is not.

#RidingTheRollerCoaster – 249

Behaviour gap

In our last two posts, we discussed about why understanding psychology is important for investor success. Links to both the posts are given below for a quick reference.

  1. Why understanding investor psychology is important
  2. Why understanding investor psychology is important – 2

In many cases, one observes that what the investor takes home is far less than what the investment avenue generates. Nick Murray and Carl Richards call it the “Behaviour Gap” – a wonderful term coined to explain the role of human behaviour in taking financial decisions. The “gap” in behaviour gap pertains to the negative impact of the human behaviour on investment returns.

#RidingTheRollerCoaster – 248