The history you do not know …

One of the ex-Presidents of the United States, Harry Truman is believed to have said, “The only thing new in the world is the history you do not know.”

I was reminded of this while talking to someone. When I asked a question, he responded stating that, such a thing has never happened. What he left unsaid was, ” … hence it is not going to happen”.

There are two important issues with such line of thinking.

  1. While talking about history, we often forget that what has not happened so far can still happen some time in future.
  2. The history one is talking about has limitations. It is either the recorded history or the one that one has read about or seen. This is what reminded of Harry Truman’s statement.

There is almost nothing new, except that part of history that we have not read. This is especially true in things involving human nature and human mind. Some things do not change. These include our basic instincts and emotions.

Read as much as possible about the history.

Investment is closely related to how one behaves rather than which is the best investment option or whether the timing is correct. If human emotions have not changed over the millennia, it makes life easy – just read.

This is exactly the purpose why I read many books on investment history and wrote “Riding The Roller Coaster – Lessons from financial markets we repeatedly forget”.

#RidingTheRollerCoaster

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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

Learn from others’ mistakes and experiences as it is costly to make mistakes

Mr. Nilesh Shah, MD – Kotak Mahindra Asset Management Company Ltd recommends the book strongly. Here is what he has to say,

Wise men say, “We should all learn from our mistakes”. Someone added, “Learn from others’ mistakes and experiences as IT IS COSTLY TO MAKE MISTAKES .”

This is true in the world of investing, too. For investors, it is impossible to go through all experiences, especially what happened in the past. Amit Trivedi writes about various episodes of booms and busts in the history of financial markets in his book “Riding The Roller Coaster – Lessons from financial market cycles we repeatedly forget”.

It is a very well-researched book and yet so easy to read for even those who are new to finance and investing. I thoroughly enjoyed reading it and strongly recommend FOR READING AND REMEMBRANCE

#RidingTheRollerCoaster

Beating the markets

There is a tendency among the investors to be able to beat the market averages and their own peers. in this process, many take unnecessary risks or make mistakes. these risks may offer rewards or generate losses. The mistakes take away some part of the earnings that one would have otherwise got from the investment.

The strategy should be to take home as much out of the investment income as possible. It is not about beating the market, it is about participating in the market.

A simple analogy would be to see the average mileage given by a vehicle. If your car runs 15 kmpl, what should be your objective? Should it be to try and get 16 or 17 kmpl? or to get as close to 15 kmpl as possible?

Think of investments in the same manner.

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Amnesia

Jason Zweig writes the following in “The Devil’s Financial Dictionary”:

Wall Street suffers from many ailments also, but amnesia is foremost among them. By burying the past, the financial community can disavow any responsibility to learn from its own mistakes and can minimise the odds that its clients will be able to learn from other people’s mistakes.

In the above paragraph, “Wall Street” is representative of investors at large. That is exactly why in the “Introduction” chapter of the book I have written the following words:

Our memory is short-lived. I would strongly suggest you keep reading this book every year to keep your memory refreshed. (That is why we are printing this book in hardbound format).

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Understanding the roller coaster

“Riding The Roller Coaster – Lessons from financial market cycles we repeatedly forget” – the title of my maiden book.

Someone remarked about the title stating that while roller coaster takes you to the same place once the ride is over, the markets may take you to higher levels. I do not disagree nor do I have an argument against this line of thinking. However, read the subtle message of the book and you would realize that we are referring to two roller coasters – one in the financial markets and the other inside all of us – the emotional roller coaster.

So what really do we mean by the roller coaster? The roller coaster is at two places – one in the markets and the other in the mind. While the above discussion may be correct about the market that it may not come back to the same place, the mind comes back to the same place often. We forget the lessons learnt and repeat the mistakes all over again. The mind often is more volatile than the financial markets. Our reaction to the happenings in the market leads to behavior that may not be in our right interest.

The book is not about doing away with the roller coaster in the market (which refers to the bumpy ride), but to understand the roller coaster that is present in our mind.

#RidingTheRollerCoaster – 193

Grexit – Brexit – Rexit – Investorexit

Last year, it was all about whether Greece would continue to remain a part of Eurozone. The event (or the speculation of the event), popularly known as Grexit caused a lot of anxiety in the financial markets the world over. Around this time last year, people started forgetting the same.

This year, we are struggling with another speculation – Brexit. Will Britain exit Eurozone?  While the decision is yet to be taken about the same, the markets are already nervous.

And while the world was debating about Brexit, we got a different exit, this time from a central banker. The Governor of Reserve Bank of India, Mr. Raghuram Rajan announced on Friday last week that he would go back to academia once his current term as Governor RBI gets over in September 2016.

We were very quick to coin the term for this exit – Rexit.

See the pattern – all these words sound so similar: Grexit – Brexit – Rexit. Our brains start to interpret such events as having similar outcomes. Read one of our blog posts on similar lines. Grouping the investment themes – a mental short cut. We love to take mental short cuts.

Biology says, the brain uses maximum energy and hence tries to conserve the same by taking short cuts.

Such short cuts invoke a fear and Grexit – BrexitRexit may trigger Investorexit from the markets.

Go back and read the blog we just referred to.

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