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

Advertisements

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.

#RidingTheRollerCoaster – 255

Financial illiteracy and overconfidence

“Mixing a decline of financial literacy with an increase in self-confidence is a toxic combination,” said John Howe, professor and chair of the Department of Finance in the Trulaske College of Business.

Essentially, the big problems that majority of people do not understand are:

  1. Ignorance about one’s own ignorance. We are often not aware of what we do not know.
  2. Assuming that expertise is fungible. It is assumed that expertise in one area is equivalent to expertise in another area – especially “management of personal finances”

Expertise or success in one area makes one confident and sometimes overconfident. Add a dose of ignorance to that and one does not even acknowledge that one could be ignorant in management of money.

Professor Howe further continues, “This opens the door for more honest mistakes as well as fraud. It’s widely known that older adults are very common victims of financial fraud. It’s important that as we age, we find someone who has our best interests in mind when managing our finances.”

Important to recognise our own inability, our own limitation and seek professional help.

#RidingTheRollerCoaster – 152