Suvi Investing Journey

Investment Learning
22

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Month 16- Do not arise, no need to awake without a reason and always stop; also move the goal post

At the outset, I am using the catch line phrase coined by Swami Vivekananda (by the way my father says the line is taken from Upanishad), trust me I have no intent to stir a hot political debate. To do that enough social network activists working day and night. I am taking the audacity of spinning the great Swami’s words; DO NOT ARISE, NO NEED TO AWAKE WITHOUT A REASON AND ALWAYS STOP ALSO MOVE THE GOAL POST.

First, it’s not necessary neither to stand up or get up to grab opportunity unless there is a reason to do so, if you do not stop you are likely to make more mistakes. And in contemporary world you keep moving your goal post to stay afloat. Debatable, of course! I found more relevance of my thoughts in the world of work I do these days i.e. Investing.

** I have not got slightest intention of disputing Swamiji’s word or personality. Even I am a staunch supporter of Swami Vivekananda and all those who preached peace. Neither a minuscule element like me can shake the teachings of one of the greatest religious preacher of all time.

5 quarters and 15 Month is gone (it’s actually 16 now), how I am doing then? Of course still alive, kicking fine in Goa beach on middle of week. It doesn’t mean all that you think now (rich, easy money etc). Simply it means I am moving my goal post after reaching smaller one, hence neither I am awaking and don’t see a reason either. I have to stop if I don’t want to whipsawed unnecessarily!

But first an incident:

As usual I was coming from Gym and getting into lift. I bumped into an old man who was more inquisitive to know what this character is doing in Gym that to 11 in morning. He couldn’t resist the urge I guess but ask; what do you do? It’s a difficult question to answer these days, not that I can’t explain but the process is pain staking to explain stocks to stock market to stock exchanges! I tried to take a short cut, I said I am trying to do something on my own. My answer did not satisfy him, he repeated the question what exactly the kind of attempt of work. I said again something related to research. What kind of research, I didn’t reply this time; just smiled back. And fortunately, the lift stopped at my floor. But the story didn’t end here, he saw me again in Airport after few days and guess what! Our roots belong to same city i.e. Puri. Being a small city horror started encircling my thoughts, this guy must be knowing my misadventure from someone else. I was wrong, my small city has become larger now perhaps! Instead he told me if you are trying to stand successful in something you must not use flights as flying is expensive. And this followed by advice like any well-wisher would offer. Considering seniority all I had to offer is nod my head and smile back. And the story spins further he saw me after 15 days again rushing to airport, again and again multiple times. I am sure he made up his mind, if this guy is destined to screw up his life why should I offer unsolicited advice and that to free!

The incident defines my existence these days, I am finding it difficult to explain what I do even in a city like Bengaluru, imagine what will happen in smaller cities. But I can tell you something, we don’t get deterred from our activities even we are smaller in numbers, investing is an act of intelligence and incredible risk appetite with a curriculum which is open ended for life long.

What’s happening otherwise, lots to share actually; themes, holidays, excitement all over. First and foremost, this is being greatest 15 months in my life, I have never enjoyed like before. No compulsion to get up in morning yet I get up at 6.30 in morning. No need to work beyond 6 in evening, most of times I hit bed at 11 in night even late. There is no guarantee of survival beyond 6 months (I keep 6 months cash balance against expenses, that’s it) yet I made whole year expenses before end of first of month.

Ok, chunking various themes:

Right mode thinking:

This is my immediate task, taking forward behavioural finance to next stage. How do we use gut (right side of brain) with analytics (left side of brain)? Why it’s important for people like us? To give a small perspective here is a table to differentiate attributes between left mode and right mode:

Source: Betty Edwards

Left Mode

Right Mode
Verbal
Using words to name, describe, define
Non verbal
Using non verbal cognition to process perceptions.
Analytic
Figuring things out step by step and part by part.
Synthetic
Putting things together to form wholes.
Symbolic
Using a symbol to stand for something.
Actual, Real
Relating to things as they are, at the present moment.
Abstract
Taking out a small bit of information and using it to represent the whole thing.
Analogic
Seeing likeness among things; understanding metaphoric relationships.
Temporal
Keeping track of time, sequencing one thing after another. Doing first things first, second things second etc
Non-temporal
Without a sense of time
Rational
Drawing conclusions based on reasons and facts
Non-rational
Not requiring a basis of reason or facts; willingness to suspend judgments.
Logical
Drawing conclusions based on logic; one thing following another in logical order.
Intuitive
Making leaps of insight, often based on incomplete patterns, bunches, feelings or visual images.
Linear
Thinking in terms of linked ideas, one thought directly following another, often leading to a convergent conclusion.
Holistic
Seeing whole things all at once; perceiving overall patterns and structure, often lead to divergence

Isn’t it exciting to know our brain emits so many contrarian views for decision making? Answer is no, because there are very few who use right side of brain. The cognitive approach come to some people faster than others, but can be attempted. Most of entrepreneurs, investors are very good in right mode thinking. Both side work in tandem, when it gets optimised it sends physical signal to body also.

See how some of greatest personalities get signal:

  •      George Soros has a backache always before major decisions he has taken i.e. favourable

  •      I just feel it’s right; famous multibillion dollar short selling by Jesse Livermore in 1929.

  •      Andrew Carnegie scratched head while using right side of brain.

  •      Pierpont Morgan use to rotate his support stick.

It doesn’t mean by scratching head we will become Carnegie, but when it becomes automated you know you are on way to optimal stage.

Audit trail of ultra-successful

One of the best way to learn about a vocation is chunk themes from the words of most successful people in that vocation. When it comes to world to investing and speculation I was trying to create themes for some time, here they are. You may add and modify yours and let me know as well.

(* Jack Schwagger books helped a lot to find some of the themes below)

  1.   First why? -  are you sure you really want to invest? Then why? If you think money, excitement then answer is no. You get more excitement in amusement park.

  2.   Does method match personality? -  if you can’t give back much of capital then value investing is not for you. If you can’t read annual reports and financials then focus on growth investing to some extent. Fact you need something which suits to you e.g. I am more familiar to accounting, finance and value investing suits me to analyse the financials and connect with business.

  3.   Do I have an edge? Even greatest discipline can’t make you successful if you don’t have an edge. E.g. when I trade I try to use my own set up, for me standard technical terms like RSI, Fibonacci are of little use.

  4.   Method means hard work- developing your method requires research, observation and thought with lots of modification and failures.

  5.   Skill and hard work- exceptional performance requires both natural talent and hard work to realise its potential.

  6.   Work should be effortless- for us investing may be a lot about research but when we execute it’s just another day! We don’t watch market tickers every second.

  7.   Money management and risk control- know how much capital to put to risk, know when and where to exit, protect capital at any cost.

  8.   A plan- plan is a blue print of core philosophy, know your do’s and don’ts before you start.

  9.   Discipline- one boring and rhetoric word yet most difficult to practice.

  10. Independence- never decide on other’s opinion only.

  11. Confidence- very few believe they won before they start, are you one of them?

  12. Losing is part of the game- if you can’t stand taking losses you will either end up taking large losses and miss great opportunities.

  13. Patience- sitting tight with a plan, one of most difficult attributes I found. Imagine you are sitting on pile of cash and your method says stay out. Second lot of people sit tight without a plan, that doesn’t help either; it’s just a gamble to play into market direction.

  14. Develop low risk idea- it depends on two elements i.e. patience and risk control.

  15. Change position size- when you are riding on profits and confidence increase your position, reverse is the case for loosing.

  16. Pyramid- scale in and scale out your investments in a such way that you don’t miss out opportunities but importantly realise the opportunity as well.

  17. Be stupid- I told few people yesterday market is going to go down, and today it’s up by 5%! Don’t try to shield your old view just because you look stupid, change your view as information comes by.

  18. Catching a part of profit is great- Avanti feeds is a 100 bagger, though I hold and exited partially I couldn’t make 100 baggers. Don’t worry, you are not here for relative return but absolute return against objective. For example, my target in a year is 100 Rupees, I am happy first to reach the target and then re-plan.

  19. Maximise amount not number- win big in amount not in numbers.

  20. Disloyal- if you are on wrong side get out.

  21. Hope is a dirty word- never take action expecting market will come back

  22. Don’t take comfortable action- do what is right not what is comfortable.

  23. Pay attention to intuition- a sub conscious mind is not restricted by constraint, use it when it throws up signals.

Finally, there is life than trading or investing.

I leave with words of one of my friends who started a restaurant in Noida last month after working two decades in a financial services firm.

It took me nine years to have a cold-water shower in morning and tell my boss I need to go for what I dream of! It was matter of seconds after which I attained inner peace and satisfaction level which is way beyond my imagination. To be comfortable in life we need to go through uncomfortable things first.

Have a nice day guys and lots of wishes!

7 Likes
23

Many thanks ! One question, if I may - You mention a precise number for risk % - from 15% to negative. How do you calculate it?

24

I try to buy into strength and sell into strength. What does this mean, let me demonstrate you one example:

Stock name: Gary Ltd :slight_smile:

  1. 05.04.2017- I bought 100 shares at 100 Rs. My cost price is 10000. I decided maximum loss I can suffer in this transaction will be 10% of capital. That means once the price falls by 10% i.e. 90 I will book the loss.
  2. Now assume price moves to 100 to 130. What I do first is move my selling price to my purchase price 100. So even if price falls further I wont make any loss I will exit at 100.
  3. Say price moves to 150, I move my selling price to 120 which is higher than purchase price. Negative risks is nothing but locked in profit.

Imagine a stock I bought at 100 and moved to 500. My protection point should be somewhere 430-440. It means risk of losing capital is gone, locked in profit is 440% of cost.

When you add all the investment with locked in profits even market falls not only you wont get wiped out but will still make profits.

There is a issue with slippage with gap down opening. But slippage can push stock price 440 to 420 or 400 not 100 rupees. A catastrophic loss arise due to bad behavioural finance, indecision to remove a pain which anyway is a reality.

This is how I maintain an investment work book, an excel sheet:

Purchase Date
Demat
Name
Status
Pos Name
Purchase Cost
Purchased shares
Transaction Avge
Total Avge Cost
OCP
OCP-C
MCP
Inherent Risk
Residual Risk
Current Date
CMP
Indicator
CMP-MF
Pyramid
Current PL
Locked in PL
R Factor
Holding days

OCP -C orginal capital protection i,e. in our example 90. At consolidated level.
OCP- Some times I give more breathing space but without increasing risk. How? Using a bracket average. Say instead of 10% overall what I do is 20% shares at 12%, 60% shares at 10% and 20% shares , at 8%.
MCP-: Moving capital protection point, this is when we start locking in profit say selling price move to 100.
Inherent risk- capital loss at OCP- Market price minus OCP multiplied my number of shares
Residual risk- capital loss at MCP- Market price minus MCP multiplied my number of shares If MCP becomes 400 my residual risk will be minus -300.

Over a long period it will be a huge number if you can play into strength. I learnt actual numbers from my mentor, his 92% profits are locked in. It means 8% original capital invested only, either he has taken them away or piggy back on shares where he is sitting on profit.

Hope this helps.

14 Likes
25

First of all thanks for your hindsight and sharing your experience on value investing.
I am catching up on your valuable notes so expect more questions from me :slight_smile:

Please note that I am completely new to value investing and my questions might be silly so please excuse for my lack of knowledge and the purpose to be here is to get that :slight_smile:

My question now is on the point 2 and 3

– when margin of safety 50% I dont jump and buy - Does it mean that although you see a margin of safety you would like to wait until a consensus is there in the overall market for a specific stock?

– I am happy to join at 300 and get down at 1500 - These instances have happened with me but the only difference is I did not get into the bus even at 300 thinking it will come down to 100 :frowning:

For ex - I was watching LNTFH for quite some time when it was around 70+ and the 52 week low was 56 so I was thinking it would come down and I can grab that but it never came down and went on in the upward direction.
How to deal with these situations, I can give you atleast more such examples where the stock that I was watching just went up and up and I was there just looking.
Any thoughts here for me?

BTW really appreciate your inputs to the forum and would definitely help novice guys like me
God bless.

Thanks,
Pandi

26

Please note that I am completely new to value investing and my questions might be silly so please excuse for my lack of knowledge and the purpose to be here is to get that :slight_smile:

Please continue with this thought process even after 10 years when you become ultra successful. Very few carry burning desire for a long period of time. You are all over the place and that’s what will lead you to stardom. Just continue with persistence, do not loose patience or even get disheartened you are not able to understand, ask repeatedly. Doesn’t matter what other thinks, matters what you want.:smile:

See the value chain of a career:

Wandering mind----focused subject----experimentation—customised method----robust investment philosophy

Does it mean that although you see a margin of safety you would like to wait until a consensus is there in the overall market for a specific stock?
These instances have happened with me but the only difference is I did not get into the bus even at 300 thinking it will come down to 100 :frowning:
For ex - I was watching LNTFH for quite some time when it was around 70+ and the 52 week low was 56 so I was thinking it would come down and I can grab that but it never came down and went on in the upward direction.

Our objective is not buy stock at cheapest price but to buy at a price and then sell at a higher price to make more money. Fundamentals have no value unless it’s recognized by buyers. So even we have a margin of safety (don’t forget margin of safety is our calculation, we have lot overconfidence in ourselves, watch for my new thread Behavioral Finance; will try to cover a lot of stuffs similar) if others are not buying we become initiative buyers. It may take long time or even may not happen and story changes. It’s our capital, we cant afford to sit idle for long time. I look for certain constructive price behavior which gives me a confirmation that other’s have joined the party. I can go there and booze.

If you are buying at 300 don’t think where it will go, rather think what should I do when it goes down? That’s your point of capital protection, you are going to get off at 270 say no matter what ever the reason. We can not avoid losing in market, in fact my hit rate i.e. % of winning is less than 40% this year. Where we should focus if we allow ourselves to loose 15% we can not afford to make gains less than 15%. With 50% winning chance our story is over, legendary investors cracked less than 30-40% winning rate due to their concentrated approach. Speculators of wizardry caliber hit 50% even. So your loss capacity is a function of winning capability.

No point in looking at 52 week low, that price is history. Those buyers and sellers even if they want can’t influence the price. Always look for reverse, when crowd is trying to pay higher price, so keep an eye on 52 week high or all time high. These are breaking of significant barriers of crowd mentality when crowd is ready to pay a price which they never paid earlier. Imagine you are in queue to Balaji temple, would you walk reverse? No, you will get killed in stampede. Always walk with crowd into same direction, remember we are all part of crowd. What a lot of crowd does not know when to get off? Booking loss can inflict the cancerous damage on lot of people mindset, that’s where we need to excel to manage risk properly.

I will continue to write when time permits in respective threads about all this with working papers I follow. You continue to raise your questions, a small trick I can suggest if you are ok. Target a question to specific or group of individual, you have a higher chance of getting reply. I am here today working on some stuffs. feel free to shoot questions. Tomorrow till 19 Oct I am off, but you don’t stop , chase people. There are lots of diversified and knowledgeable people on this forum. You will get a reply for sure, good wishes.

3 Likes
27

How to deal with these situations, I can give you atleast more such examples where the stock that I was watching just went up and up and I was there just looking.

Do not look, join but work for a more precision timing for further accuracy. You can never predict the time, you can time as it’s happening in front of your eyes. But all these discussions should not ignore basic pillar of investing and that is:

Price action without business fundamentals are of pure speculative nature, can not price appreciate forever. Because speculator doesn’t play for long if they don’t get benefit. And remember speculator includes short sellers, the most powerful force of a stock market. So pay attention to fundamentals. You can find lots of books to start with, mention all over this forum. Pick them and read one by one, by purchasing the book; not PDF copy. That’s a request, as borrowed conviction is dangerous; similarly free conviction is suicidal sometime.

28

Thank you for the wisdom, I bought the Five rules for successful stock investing by Pat Dorsey (no pdf copy :slightly_smiling_face:) to begin with.
As I go through your notes will shoot more questions.
Have a good break

Thanks,
Pandi

29

Please see the link below, I have mentioned a series book with justification. But you will get plenty of book references all over forum.

This is what I normally tell my nears and dears who wants to test the water.

Stage 1: to familirise

Book 1: Why are we so clueless to stock market? By Mariusz Skonieczny

This book uses very simple words to tell you what is a business and stock,
basics of valuation, capital structure, economy, IPO , diversification etc.
Classic primer book.

Book 2: F wall street by Joe Ponzio

Logical forwarding from previous book, talks about business in detail,
prolonged analysis of valuation etc.

Book 3: The little book that creates wealth by Pat Dorsey

A short and sweet version to know why a company can be superior to others?

Book 4: Five successful rules of investing by Pat Dorsey

This will bring you to practice notes, time to put your work into practice
and find out the shortcomings. It’s user manual short of book covering all
major aspects of investments.

Book 5: Common stock and uncommon profits by Phil Fisher

Before moving to stage 2 it takes out from hangover of value based analysis
learnt from 4 previous books and bring a new dimension to growth and
expansion. Stepping stone before stage 2.

All books are written in simple words, short books and pure practical books.

Stage 2 of my list would be: this stage is to start working on investments and refining execution skills as we move forward.

Book 6: The Investment Checklist by Michael Shearn

As the name says it’s a checklist, what better way to do an investment documentation than starting with a checklist. You get question by question , topic by topic guidance.

Book 7: Financial Statements step by step guide by Thomas Ittelson

Introduces value investing, tells you basic accounting and financial analysis. Some of the terms used by Michael Shearn will look easier through this book.

Book 8: Active Value investing by Vitaly

What is sideways market? How can value investing kills boring side ways market with quality , growth and valuation. The author introduces absolute PE model.

Book 9: You can be a stock market genius by Joel Greenblatt

Time to hunt places which are not easily visible, book dedicated to “special situations”.

Book 10: The art of short selling by Kathryn

Best way to build an bear case (what can go wrong with thesis) is having a bear mind or short seller mind. Tells you all those spots which makes you sit upright for stage 3.

Stage 3: this is the optimisation stage which includes maintain and enhance capabilities:

Book 11: What I learned loosing Million dollar by Jim Paul

Foundation for behavioural finance. First time one realise investing is 83% psychology after reading all these books. Nerve chilling story of Jim Paul’s bankruptcy and equally successful comeback with why, and what.

Book 12: Value Investing and beyond by Bruce Greenwald

Arguable an attempt by a professor to bridge business strategy with stock valuation. This book connects well with Porter five force and you will start realise DCF valuation can be hollow many times as well.

Book 13: Quality of earnings by Thornton Glove

Welcome to world of deception, how numbers doesn’t tell you all?

Book 14: Financial Schenanigans by Howard

Next stage of deception…all about manipulation and fakery.

Book 15: The most important thing by Howard Marks

I sign off with this book as it reminds the journey of 14 books as summary.

Few compendiums and special topics I would add after all stages but not during practicing hours.

  1. The Art of Value Investing: quotation board or dictionary of value investing
  2. It’s earning that count: special topic book to short list superior valuation companies
  3. The Manual of Ideas: as the name says ideas and ideas
  4. Creative cash flow reporting: attack on cash flow fakery , very important as investors rely cash flow statement to detect fakery within Profit/Loss and Balance sheet.
  5. Finally Berkshire’s letter- one can’t miss this. No need to write about this one. If someone had seen this year Berkshire AGM live they know what I am talking about. The impeccable energy and truthfulness is what is reflected in these letters.

Of course lots more to read, let us start somewhere immediately.

13 Likes
30

Hi Suvi,

here’s a tweet from Vijay Kedia.
This is about investing on bhangaar stocks.
Good one. Thought you will take on a lighter note. Quite funny and pun intended.


Prasad.

31

Another one.

http://kediavijay.blogspot.in/2017/07/what-i-have-learnt-so-far-from-stock.html

Prasad

32

Good ones Prasad, he is a self made man. Let me check this month whether still I am holding Bhangaarcap? I hold them a lot of them in past and lost tonnes.

We spoke to a revered investor couple of months back. Worth sharing here:

For us he is not part of ‘self-praise club’, rarely anyone outside investment fraternity knows him. Not sure how many within investor community knows him as well, fiercely protective about his own privacy. Getting a snap even he rules out, arguably one of finest investor in India and importantly a humble person. Forget the name and fame, we persuaded this time via mentor (Mr P) to meet at his residence in Pune. 90 minutes of sheer bliss, the multi modal way of thinking….no wonder investors are taught, build and some of them become icon.

Who says India’s finest speculator and investor appears on television and newspaper, he doesn’t have a Twitter/Facebook (on expected lines), never even bothered to create a website. A self-made IIT engineer who never took a job after passing out.

Knowing his no-nonsense approach, we prepared well this time way ahead, even while hibernating in Goa beach. His wife met us in living room, first bouncer. A simple woman salwar clad with teen age daughter. No iPhone in hand, no big TV screen on wall. No wonder the value has trickle down generation. We asked him more than 100 questions, here they are (many of them have merged, modified to a theme)……I have just collated the discussion.

Q: Do you apply Porter Five Force while investing?

A: I have read about five force theory and I believe Prof Porter bundled business strategy concepts brilliantly. I am sure I am following them but never build a specific document keeping an eye Porter Five Force.

Q. What is your idea of a moat? Or shall we say competitive advantage?

A: I know moat is widely used word, so far, I am not able to grasp what it is all about. Competitive advantage as we know embedded to value chain of a company, I think Automobile is one industry I have some on hands on.

Note- runs an auto ancillary company, automobile industry is his passion and interest.

Q. How do you define your investment philosophy? Value, growth, expectation or trader?

A. I have purchased growing companies at cheap valuation. I try to take position size with a risk amount in my mind. When required I have booked profits, even it is once a day or once in ten years. If you define these as value, growth and trading then yes, I fall into all of them.

Q. Are you saying we need not be focussing so much in creating an investment philosophy?

A. I am unsure about investment philosophy but all I can say is I play in market to make money. Doesn’t matter long term or short term.

Q. But your holding period goes into years, isn’t it?

A. Both, I have invested and traded. Even I haven’t traded much, I can’t ignore speculation being part of price.

Q. Speculation is an interesting perspective, how do you decide speculative interest of a stock?

A. Almost same as you will find in most of books; risk management, money management/position size and price data.

Q. Do they work even for seasoned investor like you? Or do you do something special?

A. No, I don’t do anything extra. Actually, you people have done more research in this area than me these days. You should tell me.

Our update- we dissected data set and concepts, pretty much same what you said; maybe we will like to add; create your own patterns.

Q. How do you catch before or about turn around company? E.g. Indag Rubber. If we are not mistaken you entered first in a range of 4-7 Rupees (split adjusted). I mean we all have caught Indag Rubber but definitely we would never have dared to enter at a stage with so many questions in mind.

A. Wealth creation balance sheet will not be accelerated unless few meaningful decisions are not taken.

Q. Yes, but what was the rationale behind entry at those levels? Still the company was struggling from Saket office?

A. I think a lot of people have done research at same time, it’s just I entered early as per you. I thought if business catalysts are going to work in your favour then let’s allocate higher capital.

Note- he was evasive on question, we didn’t pursue further.

Q. We have to ask this, Twitter/Facebook we can understand but why not a blog? We mean it can help a lot of retail investors.

A. I don’t think I have any special method to disclose. If you are talking about stock specifics even Seth Klarman discloses his live portfolio with entry/exit details we still can’t make money. Those who understand entry into a stock is only part of job not the whole aspect. On the other side if you tell people to read books, go small, understand etc they won’t pay attention. In either case there is no justification for me being there on internet space.

Q. Is this same logic for all other we mean Prof Manekekar, Tej Trivedi, Rajeev Khanna etc?

A. I really can’t say what these revered names do, they only can reply.

Q. True, but fact of matter the best and finest investor shy away from public space.

A. For some it’s other way around, the best tweets and write as well.

Q. What are the benefits of not spending time on internet space?

A. I will use your word, two way communication is too dangerous unless you know why. Internet space otherwise is an excellent repository on information and analytics.

Q. What are the key elements of investing?

A. There are no elements, one element only i.e. Psychology or what you guys call as behavioural finance.

Q. Are you saying no need to read balance sheet or management or industry?

A. (he looked annoyed), you know behavioural finance is master’s in engineering. You can’t do masters unless you are graduated.

Q. What are key attributes of psychology (behavioural finance) you would suggest us?

A. You guys have worked far more on this subject than me (maybe he was trying to be humble), biases and fallacies set out the foundation but the key lies how to put a practice direction to it. You really get perplexed when someone said the additional expectancy or compounding comes by using gut, it difficult for anyone to explain than practicing.

Q. Let’s come back speculation, you said every price includes speculation element which is the most difficult to value. And some time speculation value is too high for any rigid investor with weak behavioural finance to realise before he gets wiped out.

A. Aptly put words, it all started with Jesse Livermore; never changed for 100 years whether it was Baruch or John Paulson. These people mastered the art of speculation but never left that imprint for anyone to get encouraged.

Q. Can you elaborate please.

A. What I was trying to say speculation is chief value destroyer or creator. Some avoids to say in public like fundamental investors; so, we don’t know how do they manage. Those who mastered it also messed it up so badly that there is hardly any Silver line for anyone to follow. Take example of Manu Manek, despite of huge money he will be called as operator only in history.

Q. So we are in catch 22 between Livermore and Buffett.

A. No, everyone is unique. It’s our way of looking, you look at both of them from a learning point of view. A lot to learn and unlearn from both of them.

Q. Are you bullish now or bearish?

A. We are all making money these days, who cares bulls and bears!

Q. Any sector you are upbeat on?

A. Let the market recognise first, we will do research then ( he smiles).

Q. Is it possible for a middle class brought up guy becoming full time investor?

A. You all are example. What else you want to hear?

Q. What we meant we saw early bull run, to a large extent we are lucky.

A. Story keeps changing, 10 trillion dollars may be a small value for next gen. Luck is always going to recycle, isn’t it?

Q. Does hold and buy work?

A. Buy and holding winners definitely works.

Q. Do you use stop loss for other than trading?

A. Of course, capital loss is first thing come into my mind. Though I don’t want to call them stop loss.

Q. How do you define protecting capital?

A. I take net worth, market volatility and few other factors I take into account. To put a rough arithmetic figure I would be hesitant to loose more than 25% of capital at any point of time. One thing I have realised, like old saying I don’t fight the tape. I buy when market is sane, sit out or sell when market is insane.

Q. What would be sane and insane here?

A. Wild volatility is something I can’t manage. If the market is volatile (higher or lower) I prefer to stay out.

Q. Do you buy a stock at one go?

A. (he laughs) I think you guys are pulling my leg. Unless ticket size is a problem no one should invest at one go. Whether you pyramid it or average it out depends on stock and your position.

Q. How do you explain sitting tight? We mean many people think they shouldn’t bother even if the market goes down? For some you must protect capital.

A. Sitting tight if I have to understand from Reminiscence of stock operator hold the stocks if it doesn’t hit your stop loss/exit plan even if they are highly volatile. But let’s not forget his investment style was buy high and sell higher. It may not work for everyone. I think more prudent way to explain would be is ‘stick to your plan even market takes your emotions up and down’.

Q. Dividend yield is at lowest, of course market valuations are stretched. Do you still consider as element of investment?

A. We cannot rule out dividend as it’s a return on capital how small it may be. But more importantly it is a capital allocation decision for management and remember management doesn’t keep dividend yield in mind while declaring, rather percentage of profit distributed back. If dividend distribution is high definitely it sends a symbol organic growth is in confusing state of condition for now.

Q. Do you think cost of capital is going to higher further?

A. Difficult to answer, unlike banks where you get a rate straight cut the future is going to be multiple lending vehicles other than bank. Bank have become a whole seller allowing the retailer to take care of high reward and bad press.

Q. Is it necessary to read books? What type of books you will advise?

A. Every book is important if you can write/add one line in your ‘TO DO’ list.

Q. What is the best investment book you have red?

A. What I learned losing a million dollar (he laughed), may be it reminds P’s (My mentor) story resemblance with Jim Paul. Otherwise there is a long list.

Q. If we have to ask you to choose three only other than Jim Paul’s book?

A. 1. Reminiscence of stock operator 2. Alchemy of Finance 3. Money masters of our time (investing), Market wizards series (trading)

Q. What is the best thing (only one) from all these books?

A. Market is not about research, studies or failure. It’s all money mindset.

Q. As last question what is the three things you would like us to change?

A. On a serious note I think you guys put too much effort in analytics, I can understand linear curve on skill push you towards luck continuum but sometime it doesn’t worth it. Second you should donate more, still you haven’t understood your Guru’s message i.e. give 1 and get back 4. The last thing is please don’t bombard the people with your list of books, articles. It won’t help them, people might turn away from investing.

I guess have covered almost everything, If I find out something else then will send across.

Look outside window, sky may be blue, hazy or even grey. You may wake up abruptly by an alarm but make sure your residual dream doesn’t slip away….

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This is what I call ‘CONVICTION’.
Conviction on himself is very high. This guy has patience and discipline which is the mantra for investing.
Then he develops conviction on stocks.
Lucky you to have identified someone like him.
Lots of learning to do.

Name please …(?)

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Hi Sir,

First i would like to thank you for introducing me to Chandrakant Sampath.The more i read about him,i am more intrigued by the man he was.You must be really fortunate to have met him.

I am also thankful for the detailed writing about your investing journey,your mental model and willingness to help fellow investors and helping to build a generation of thoughtful investors.

Lot of your thougs resonate with me and I would consider yourself a virtual guru in my proper investment journey which has started recently.Thanks and keep writing

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Dear Sir,

Thanks a lot for your words of wisdom. Your clarity of thought and the self-discipline in investing is simply fantastic.

However, I have a few doubts on this:

My queries are:

  1. Do you apply this strategy on all your holdings or on only stocks in the trading portfolio, while the long-term holdings are treated differently?

  2. Suppose, I have bought 100 shares of a company at Rs.100. The maximum loss I am ready to suffer is 10%. The stock goes up to 105. I want to buy more (riding with the tide) however I am not sure so I do nothing. I haven’t changed the selling price either as the upward movement is not substantial. Now the stock starts coming down, it comes down to 100, it goes down further to 95, should I buy more (as I am getting it cheaper than my original buy price)? I am not sure. It goes down even further to 90. Now, I book loss and get out, only to see the stock bouncing back to 100 the next day. Could I have done something differently?

  3. Can we keep on churning every stock with the strict stop-loss in this way? For example, if I had entered a stock like Piramal one month back, I would have bought it around 3075. Now the stock is trading around 2650. At this price, should I be getting rid of the stock just because it is 10-12% down my buying price?

  4. Isn’t the value created only when we allow our stocks sufficient time to perform? Isn’t it true that in short-term the market may be very volatile, but in long-term most of the stocks will be near their intrinsic value?

  5. Once I have got out of a stock where stop-loss was triggered, can I enter in the same stock again or not? If yes, at what level?

Looking forward to hear from you soon. Thanks in advance.

Best regards

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  1. Do you apply this strategy on all your holdings or on only stocks in the trading portfolio, while the long-term holdings are treated differently?

No, please see my post somewhere above, I am reproducing here.

Money management and risk controls are the most significant subject for me. I would write in detail on the other thread. Small caution there, I do follow different plans for investing and trading portfolio, but principles remain same as I explained above.

So yes, I treat investing portfolio differently than trading. I am not worried about hit rate or batting average, where as in trading I can’t afford to have a wide loss with low batting average.

  1. Suppose, I have bought 100 shares of a company at Rs.100. The maximum loss I am ready to suffer is 10%. The stock goes up to 105. I want to buy more (riding with the tide) however I am not sure so I do nothing. I haven’t changed the selling price either as the upward movement is not substantial. Now the stock starts coming down, it comes down to 100, it goes down further to 95, should I buy more (as I am getting it cheaper than my original buy price)? I am not sure. It goes down even further to 90. Now, I book loss and get out, only to see the stock bouncing back to 100 the next day. Could I have done something differently?

Unless you cover risk through profit do not be impatient with adding. Meaning buy a such way second transaction do not add your risks. In this case if you buy again at 105 and keep stop loss, you would be increasing your risk to 25 instead of 10. First transaction risk- 10, second-15.

In my approach I do not consider anything available in market is cheap. What is cheap to me expensive to others, comes from a underlying comparison. My duty is to buy at a price and sell at higher price. I am unlikely to average out when price goes down. Reason is this, if a company moves from 100 to 500 that would mean even it falls to 90/80 it will come back via 100-115-125-200. I am comfortable to catch at 115/130 while sitting in profit. Not comfortable when prices goes down and I don’t know whether they will recover even.

Let me put this way:

You are going to lose 45-50% or more number of times in stock market.
So every time you lose money how much can you tolerate? If I have capital and I put 25% risk every time. 4 consecutive attempts and I am gone , I will rather play safe and attempt 100 hundreds which is more sensible. For investing I allow more breathing space meaning higher stop loss and reduce the position size. Once it works out I start increasing, this also helps in keeping a tracking position. Information comes by you keep adding but to profit line.

Adjust risk downside in every unfavorable condition i.e. when you are losing, market is bad or even you are not keeping well. That’s the mantra, decide how much can you lose and manage accordingly each time. I do not average out rather take a fresh transaction again if stocks come back. Ticket size (investment amount) and transaction charges are insignificant for a ordinary guy like me.

I am ready to give more breathing space to a stock only it start performing. Suppose a stock moves from 100 to 150, I can stop loss at 120 allowing 20%. Move to 200, I can keep at 140 even i.e. 30%. But as I said it has to perform, or else I don’t mind to show the door. Not the business but transaction.

  1. Can we keep on churning every stock with the strict stop-loss in this way? For example, if I had entered a stock like Piramal one month back, I would have bought it around 3075. Now the stock is trading around 2650. At this price, should I be getting rid of the stock just because it is 10-12% down my buying price?
  1. Isn’t the value created only when we allow our stocks sufficient time to perform? Isn’t it true that in short-term the market may be very volatile, but in long-term most of the stocks will be near their intrinsic value?

No, not at all. But don’t think in that direction, buy and hold winners that is more important. Do not hold a stock beyond a capital loss which you can tolerate. Tolerance level can be 30% even, but make sure then you are rolling on risk meaning increasing position by reducing risk. And of course keep your position size minimum and then scale up as favourable.
By the way I still hold couple of stocks which are with me since I started i.e. 1996, almost 22 years now. But they are grand winners for me, had they been losers I wont worship Mr Bangur say and hang around.

Differentiate execution from research, risk appetite from market volatility. No matter whatever the reason if you are wiped out in 2 times none of your method works. Second please remember the intrinsic value itself has 1000 different meanings for 1000 different people. Over confidence/bad behavioral finance makes us to believe too much on our calculations than what may be true. So do not ignore what market is sending you information because prices are moved by buyers and they can be influenced by many reasons. One of the reason is intrinsic value.

  1. Once I have got out of a stock where stop-loss was triggered, can I enter in the same stock again or not? If yes, at what level?

Of course I have entered multiple times, good company is good company for me. My research and hard work I wont throw to dust bin. But at same time I don’t get to whipsawed because of my over confidence or bad market conditions. Rather wait for a right opportune moment.

I use these days some specific entry bands to understand when crowd buying footsteps are seeing. This helps me avoiding volatility (I hate volatility but cant avoid them) and increase my chance to fight longer. Despite of all this I am going to lose 40-50% at least. That means I need to be safe at least to the point I can play the game. If I am out of game, story is over.

Money management, risk control has been very intrigued subject. You can read books by Ralph Vince and try customizing differently to your need.

I will cover some of these things with more illustration as what I do. I have a flight to catch at 3, shutting down laptop. May not respond for till 19. Please feel free to send mails at : suvendurath@yahoo.com

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Thank you so much for putting it so eloquently. It’s indeed a privilege to have you and other seniors at this forum sparing your valuable time in discussing with us the finer points of the investing journey.

Looking forward to your further posts on this subject.

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Just met few folks in Airport and on flight, everybody is talking markets!
Time to shoot a mail which I shared internally few months back.

Statutory Warning: Stock Market is Not Easy Place to Survive

Feeling fortunate meeting and talking to so many buddying investors, I can
see fire in their eyes, anxiety at heart and determination in talks.
Exciting days to see so many people seeking stock market, question is for
what? If you think it’s financial freedom then RE-THINK, with a stroke of
mid night it can become never ending nightmare.

This mail is for those guys in FAQ style (only few questions). I am no
celebrated investor but failed so many times in journey (both financially
and emotionally) I can share you the nuggets of experience.

Why such a mail when there is optimism in air?

Imagine you are asked to give an entrance examination, you score among 10%,
study for four years in a premier institute and then get recruited in some
company. You work for 10/12 hours a day and still see money is not
compounding even 12-15% per annum.

Visualise another situation- open a demat account with a PAN card and
photo, address proof. Within 7 days you got a key to buy and sell shares
sitting in any corner of world. Buy 10000 shares at 10 AM in morning for 15
rupees and sell at 17 by 11 AM. A neat 20000 rupees on 1.5 lac investment
for 1 hour. Theoretically you can make 320% per day and 116800% in a year,
fascinating? This is what draws scores of people to stock market. Media
makes it rosy by throwing names of multi baggers or how someone make 10 Cr
in 4 years and even he before turned 27!

*The reality is advent of online execution and crowd participation has come
a boon for seasoned guys. Earlier they had to fight with a lot of people of
similar mindset (as entry barriers were high with physical work), now they
have tonnes of crowd and make them their prey, take a ride on them. *

It may not spell doom for everyone, but be wary of fact market is also a
zero-sum game. You gain when someone lose.

Category: General

Q. The only way I can retire is 60 or say 3 years earlier. Stock market is
a place where I can retire even before 40. Isn’t it true?

Answer: the good news is you can make a lot of money before 40 which is not
possible in employment (not for all at least). But that has nothing to do
retirement or stock market. In both quadrants of investing and
entrepreneurship the owner takes the risks and rewards both. A good deal of
money can ONLY be made in these two quadrants. Second retirement doesn’t
mean to have a lot of money in bank and sleep every day. Not only you will
lose everything in few years nor this attitude will ever make a lot of
money either. Additionally, not everyone becomes a billionaire in stock
market.

All our fathers and forefathers worked for years and retired. Happiness,
obstacles, dreams and excitement were also part of their life. Happiness
and success has nothing to do with age and money. They survived, you know
why? Because all of them loved their life and work. If you do not love
investing you will never like life even if you are not making money.

Q. So many stocks are delivering 10/20 bagger in few years. Isn’t that a
stupendous return comparing fixed deposit? Why shouldn’t I join the party?

A. Stock exchange is a free market place where buyers and sellers determine
the price. In any free market speculation is bound to build up in price
which also means price comes down as well with more force. A wealth is
created by entrepreneur over a period of time with a combination of
business strategy and good people. Unless you know why prices are going up,
what is the business value (which is an extremely confusing and complex
process) included price and what is speculation element included you will
never be able to get out in time. The prices are abstract numbers or
information comes out of a system called stock exchange at a particular
time, it changes rapidly as well. The 10/20 bagger depends on a. when you
enter b. when you exit.

Q. Investment in equity can be managed with another profession. All I have
to do buy and sell, isn’t it?

A. Not at all, investment is a quadrant higher to employment, doesn’t
matter whether you like it or not. If one has to move to a higher quadrant
he has to cleanse himself first psychologically. Then prepare a fresh plan
and set out a method, modification is a continuation process. End result
still can be negative. It’s a lot of work, not possible while having a job.

Category: Research and Execution

Q. What’s the point in doing research? All I have to do is follow Rakesh
Jhunjhunwala, he may earn billions, at least I can make millions.

A. Mr Jhunjhunwala sits on a stock for 20 years, you have to reincarnate
yourself 20 times for achieving that discipline. Holding a losing position
can be your worst nightmare. Those who have practised it they only can tell.

Q. What good these books are after you learn basics? I don’t get time to
complete my office work, you know I am extremely busy.

A. Books are reflection of ideas and research. They allow you to build
blocks and modify your system ongoing basis. You have survived decades of
employment without flipping a page, here you will get whipsawed in few
months.

Q. You know my friend/brother/father is an astute investor, he gives me
tips and I buy. Little chance of failing, he will let me know when to do
what?

A. Same like Mr Jhujhunwala analogy, when fear grips sentiment and market
place; only few able to sustain that maniac depression. In short, it’s not
possible to survive on tips.

Q. All I need to know is where the stock will go? Up or down, and how far?

A. True, answer is no one knows ever and will know either.

Even if you spot a dozen fundamentally good stocks and vetted by even
Warren Buffett, still chances of making money can be zero. Wealth creation
is a convergence of crowd behaviour, good fundamentals with industry
forces. Crowd behaviour, industry forces studies can be learn but not
overnight. It takes years to understand a good risk management, position
size customised to your portfolio. So equity investment is not about
selecting a good name and the buy blindly and hold. The scene is very hyper
now as we just saw a massive bull market, and any bull market will produce
abundant amount of fortune tellers.

If you want to fall in love madly with equity then you are welcome. That
means think, sleep and talk markets, stocks and associated subjects. Do you
have time? Do you have resources? I meet folks who flips data, information
till the sun arrives next day which includes me as well. Had I not been
madly in love with markets I would have definitely consider doing something
as well. It’s not money drives the people but their love for work, which
happens with any profession.

To sum up equity is an incredibly dangerous instrument and asset class to
deal with. Your love of price watching may not come to your rescue when
things goes contrary (which happens always!). Equity investment is not buy
stock and watch price only, much more beyond that and unfortunately, it’s
never ending quest for those even who have achieved stardom via investment.

Don’t get carried away speculation, always remember someone will make money
out of you unless you are diligent enough to protect yourself. That
protection includes 6-8 hours research every day, if you can’t manage time
then limit your exposure, stay with mutual funds or any other alternative
actions which deem fit. Or else losing 95% of money is a regular folklore
in stock market!

I started in 1996 while I was studying (actual investment), lost almost
everything twice before standing on both my legs. Had there been an
official bankruptcy in India I could have been declared bankrupt and
invalid by CA institute and other from which I am holding a certificate.

But you are determined and want to go all out of course anyone can do it,
but only when you are committed in terms of time, resources!

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A useful article on the sames lines of Suvendu sir’s thought-
Buy high, sell low-http://theirrelevantinvestor.com/2017/10/16/advice-for-aspiring-traders/?curator=alphaideas&utm_source=alphaideas

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Latest Mentor Review: Minutes

Mentor Review on 18.10 2017, One guest reviewer included

Time- 3 Hours approximately (this a major half yearly review, twice a year. Otherwise we do a monthly round up)

Mode of review- remote desktop sharing, telephone conference

Mentor’s investing philosophy- Growth investing and constructive price behavior

Guest’s investing philosophy- Value investing and discretionary fractal analytics

KPI’s Submitted:

Performance Period: 01 April 2017- 30 Sep 2017, Consolidated Period under review: 01 Apr 2014 to 31 Mar 2017

Capital Allocation- Split of trading, core portfolio and liquid funds

Core Portfolio- CAGR, Risk Free Amount, year wise performance

Trading portfolio- winning rate, average winning and loss margin, R Factor, largest winner, largest looser, average holding period

Liquid funds- changes in contribution with why

Financial performance- target amount with trading profit, objective with incremental combined portfolio, donation against dividend

2 lessons learnt from investing, trading and anything. He doesn’t allow more than 1 normally.

Question by Mentor (QM): You say you are yet to receive target dividend amount. Hence there is a shortfall in remittance of donation, what stopped you paying from other sources and account dividend differently.

Answer: I have always paid after receipt of dividend, point noted. This would be dispatched by next week.

Question by Guest (QG): Why there is a fall in return from non-equity funds?

Answer: I invest in two liquid funds, apparently due to adjustment in REPO rates fixed instruments are giving lesser yields. Hence there is a fall.

QG: Have you not explored any other fund like Franklin Institutional Debt?

Answer: happened to be told by friend, will look into it again. I was not happy with their exposure with risk graded bonds. I need safety.

QM: Portfolio stocks does not move more than 2, it’s been one year you have not added. Why?

A: I steel feel market does not offer 25% kind of capital allocation to a new investment. Couple of growth stocks under radar, the documents once finish I will send it.

QM: What do you mean by growth stocks?

A: Acceleration in revenue, EPS and margin.

QM: And it would be supported by which style of valuation?

A: I am bit confused, definitely I will not use franchise or DCF. Possibly a EPS growth and Cash surplus growth with an expectation.

QM: Not sure what you are saying. Make sure it takes care growth maturity cycle.

QG: Are you saying your average margin in trading do not exceed 25%? Are you booking profit early?

A: I am calculating margin transaction wise, a stock having multiple transactions may have exceeded that. But in terms of transaction I made sure I exited at 3.5 R plus. I believe this is a range bound market, margins are hard to come by.

QG: Despite stock continues to be in up trend?

A: yes, but it’s not complete exit of stock. I remove one base (transaction) and support by newer transaction. The locked in profit gives me leverage to play at least 3 more times.

QG: Where is your sectoral view goes at this point of time?

A: I still stick with financial services, bank will more aggressively become whole seller. That would mean margin from retailing should go up like housing finance or more in non-lending based financial services. Of course, growth sectors will continue to push like retail, digital but it’s putting us in front of different valuation approach.

QG: What is the best book you have red this year and why? One investing and one other.

A: Think and Trade like a champion by Mark Minervini- the deliberation and examples on results based forecasting helped me. It’s overall good package for growth investing. Second book would be Chaos Theory. It’s giving me some idea how fractal is associated to neuroscience.

QG: Do you still write in different blogs? What would be behavioural portion?

A: Yes, I do, just trying to form some ideas on behavioural finance. Yet to consummate idea.

QG: Do you have a chart showing biases and actions mapped?

A: I am not sure what it would be.

QG: Do you have a lesson learnt list?

A: Yes

QG: Map lesson learnt list to biases.

QM: Two stocks in portfolio do not justify your capital allocation still. I am not convinced, how are you planning slippage even all transactions are risk free. Second if management or any drastic events turned up which is company specific?

A: Agreed, from 8 stocks last year I pruned out non- performers. In terms of exposure the current percentage is less than 15%. Even with total 100% capital loss I would still need less than 20% amount to breakeven again. Second a stock like AvXX I have classified as Trading stock despite holding period is since 2013. I need to work reclassify a couple I guess.

QM. SXX, this stock is with you from the day started. I can understand it’s a performer. Has it become a favourite?

A: The stock has appreciated 20% last one year, 118% in last 3 years even. This is still close to trading performance. Apart from tax free status and dividend makes it an incredible stock to hold even now. In past SXXX and AXXX was shown the door due to poor price performance despite SXXX still continues on watchlist.

QG: Who is Cricket Captain of India?

A: Virat Kohli

QG: What is the last match India played?

A: No idea

QM: Let’s come back to your metrics. The percentage of winning has gone down to 38% last week from 62% in April first week. What would be reason behind this?

A: One first week data is having lesser sample, actually profit was calculated basis one trade. The average was meaningless data then. If we look at June end where decent number of trades were available for analysis I had a 45% hit rate. I booked few early losses as my constructive price behaviour showed abnormal behaviour. Despite of a fall in hit rate my average winning margin went from 12.39% to 24.68%. At same time average losing margin has come down from 7.56% to 4.32% now. I am running at a reward to risk around 5 and half. Yes, it can be improved, but need a strong tail wind to do so.

QM: You termed my approach constructive price behaviour. I understand you are a big fan of Keynes. For benefit of guest can you please what is it?

A: A place of demand and supply will never be in equilibrium state permanently but temporarily. In short, a stock will have time when buyers and sellers disengaged themselves from exchanging activity i.e. buying and selling. That would mean extreme low volatility and volume. This succeeds with a non-linear nature again when buyers and sellers join.

QG: I understand you spend 20 years on value investing before taking up rather added speculation to your framework. For my knowledge I want to know how much it has impacted?

A: Oh yes sir, it broke my beliefs which were held for a long time. It was never easy of course, but small trick I realised; through a deliberate practice you can create a bad or good habit. Secondly, I was never a value investor, I called myself so more for egoistic reason. Rather it gave me a reason myself to associate with a society where certain value investor are worshipped. I am now realising every school of investing have lots to offer, how much we can accept is up to you.

QG: You are using vocabulary and web of statements to evade specific answers. One you tell me which were beliefs you wanted to break, what is deliberate practice, what do you mean value investing or ego.

A: What I meant belief was folklore told and you become a bhakt. Like stock is of good value and cheap, tailwind of industry etc. I realised mathematics working against me, market is not irrational it’s the human. Deliberate practice is change methods like I set up new an execution plan which addressed pyramid, capital protection etc. Over a period, it’s become automated processing. What I meant by ego bad practice infused become ego. It’s the good practices we need to accept like break even recovery of 90% loss is 900% which is even insane to think.

There were few other questions, may not be useful or too personal in nature. I have avoided them.

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Month 21 UPDATE: Strong beliefs underneath a Canopy

We say learning is timeless, we learn even when we are in death bed. Yet here I am finding difficult to put forward ideas even after hardly 21 Months post-employment. The mute question for me today is why am I out of ideas? Have I reached a plateau and become frozen where to move next? Is that some internal crisis and enabler I was looking at before 2 years. I struggled twice to write an update this time, let me try to share and understand with you.

You will be happy to know I continue to break my beliefs after I set out on the journey (no matter with or without terrain). Initially it was painful, couldn’t adapt some of them. For a great deal my interest in certain activity became a question mark. The normal nuts and bolts for wiring were not working to break those beliefs which were literally jeopardising my process of work and life. Perhaps once again I was at cross roads with lights appearing as blickers, undaunted noise of hope and fear.

What is the beliefs being I talking about? How do you break beliefs? Why it is painful to do so? I want to share with you some of these today. Hopefully you will enjoy the same as I am enjoying writing for you.

But before breaking a belief system, one need to know whether a particular belief is aligned to your framework of principles. Not all beliefs are bad for you thought a good portion of bad beliefs we have ingrained within ourselves.

Fear and feedback

Though I loved to do things on my own way for long time, even I ignored unwarranted changes from authorities on a number of occasions, it developed another problem within me. Whenever a constructive feedback came from I played it down due two reasons 1. If they are wrong good number of time they may be wrong this time as well. 2. How a feedback can be customised to your need. Today I can say I was not entirely wrong perhaps but what I missed out was nuggets of wisdom offered for practical execution.

First what I will continue to do:

  1. I am going to continue to speak radically about my traits, experiences even at the cost of privacy and exposures. By doing this not only I let others know what I am in much efficient manner but offer to help them. For example, it was never a secret what I wanted to become ultimately in my entire career. Even on 2 occasions employer got confused and withdraw offer letter at end moment.

  2. I will continue to speak for reality, refuse to decline being a bhakt of any sect. I have taken heads on at office (there was nothing personal). Yes, we can argue what is real and unreal.

Issues encountered for this belief:

  1. Top down or bottom up: frame effect is one of major biases of behavioural finance. The way you look at things determine transparency, real or benefits. For example, if your job wants you to do a bottom up there can be argument top down can equally be important. But need of day requires to overturn belief system.

  2. Not all about should but shall: life should become this, job should become this; we can queue up a list of should which can cover from Bengaluru Airport to Whitefield. My problem was I saw successful principles are built by ignoring the should in many circumstances. For example, I feel sometime miserable child labour practices. We all feel. Then when I ponder over is that only a greedy, selfish and criminal short of person pushing these children to hell. May not be in all cases, for example eateries employ lot of children. Even a good heart human is forced or else his business may come crashing, but he can do provide education along with employment. And that perhaps better solution between nothing and everything.

  3. I thought even if I am going to do well still may not be rewarded. The picture I missed out was reward is not restricted to place and time. For example, I been to office in early morning all my life. At same time I have seen people coming at different times, then I may have had few bloopers. Little did I knew this habit will reap golden eggs somewhere else, for an investor getting everything before market begins is a huge plus point. This is helping me to prune further risky ideas which is helping me a superior return.

Now what is the solution? - Self reinforcement process

First thing I was forced to work on a natural self-reinforcement process. This process alone I think is biggest edge for a person working independently. How, these are my examples:

  1. Self-reinforcement comes from feedback. Like a stock influenced by individual traits, group and market; an individual gets influenced by society, group/family and evolution. So, I started noting down advices given by people during many places to my memory (I should have recorded then) and started looping to reinforcement process. How?
  • Go for trial and run (one of ex manager): agreed, it helps natural selection process much stronger. I would have attempted 20 times minimum a process for speculation before getting a meaningful conclusion.
  • Presence can be hero or zero (my colleague): same person feels climate is fantastic, other feels horrible. This forced me to start thinking a particular task with respect to perspective.

  1. Self-reinforcement comes from taking pain, sometime unbearable. Everything gives pain may not be good for us, but good number of times pain works wonders. For example, when my daughter was in hospital I had a sore throat. With brouhaha around the whole episode I realised whole thing is gone for some reason. If you targeting something ambitiously you will have pain be it mental harassment or frustration. Every time I took the pain something better always come out. I had or still may have a problem when a pain occurs to me it diverts all my attention to pain only. The moment I started developing accepting pain it became valuable.

  2. Chase the hero. I completely stopped thinking what the hero thinks. To my surprise a US investing champion not only responded to my queries but answered my questions. A number of times I refrain thinking what he will think. It’s more important what I want. True this is told to us for long time, I never imagined practising will be so difficult.

Is that all? No, many more beliefs to be broken like any ongoing process. If I will go on with example perhaps gist will become meaningless. I am trying to identify the barriers now which stops me from breaking

Otherwise so far, no surprises, trading income may hit at least 100% this year on capital employed. If this is not achievement definitely it gives me more courage and energy to move forward.

I wish you the best and thanks for good wishes always.

Regards

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