Aaditya Chhajed, CA, CFA

What investing behaviors undermine investment performance? Following nine investing behaviors that can undermine investment performance. Active Trading:  An investor using an active trading investment strategy engages in regular, ongoing buying and selling of investments. This kind of investor purchases investments and continuously monitors their activities in order to take advantage of profitable conditions in the market. Active trading generally results in the underperformance of an investor’s portfolio.

You don’t have to be a genius to achieve your investment goals. But if you’re a knowledgeable, disciplined, and confident yet humble investor, you’ll end up looking like one.   Follow these 12 Principles and you're set for life with regards to your investments. Develop a financial plan: Identify your goals and design an investment program to reach them. Be conservative in your projections. Become a disciplined saver: Learn to live below your means. Make it a habit to put away money every month. If you aren’t naturally disposed toward saving money, find   ways to trick yourself, such as automating your savings program. Start early and continue: Continue investing in both good and bad times. Focus on your Net-worth: How much of the net-worth is liquid? Return on net-worth is more important than return on investment. Control costs: Avoid instruments with a high expense ratio. Manage risk: Create a portfolio that will enable you to sleep peacefully at night.   Be a buy-a...

your capital may erode slowly. You might have to work in later stages of life even if you don’t want to. In 58 years, petrol has approached INR 100 per litre w ith the implied growth in price of 8.86% per annum.  Similar is the inflation rate for other expenses as well.  Simply, if your money doesn't earn at least 8.86% post-tax, you are losing its value. Human nature is a failed investor. The human being is naturally bound by a complex of fatal misperceptions diminishing the capacity of executing a successful lifetime investment strategy.  Cultural factor is a major factor contributing to the essential human incapacity for successful investing.  Humans, in general, cannot distinguish between currency and money. Currency is a medium of exchange. Money is a store of purchasing power. The only rational lon-term definition of "money" is "purchasing power" is a perception that is culturally unavailable to human mind. - Nick Murray   Invest for maximum total REAL ret...

Regret is the most enduring emotion in the lives of most equity investors. Because sooner or later, they make the mistake of getting out of a falling equity market, only to see it turn around and rise, three years out of four, and for the rest of their lives. Some get back in much higher; others never get back at all.  This process gets repeated during the next bear market and the next. No matter: the pain of regret is with them forever. Nor does the passage of time heal the pain. If anything, time and relentlessly higher prices make it worse.  There are, after all, only two master emotions: love and fear.  When markets are falling, investors fear permanent loss; When prices go up, investors fear missing out, and envy (another face of fear)  those who seem to be getting rich. I say again: that isn't "greed". It's just a different form of fear.  Don't envy the harvest of the rich. Envy their pl anting. - Bo Sanchez. Many years ago, there was a detergent adve...

I want to talk about the five things that virtually everyone I speak with is trying to achieve with his/ her money. Some people have only one of these goals. Some have two or three. And, not infrequently, I meet people who, with a little prompting, turn out to have a bit of all five. And since these five issues are the main emotional and financial concerns in my own and my family's life, I can effortlessly (and quite genuinely) spark a tremendous amount of empathy on this topic and so can you.  The Five Great Goals of Life are: The endowment of a long, comfortable, and totally worry-free retirement, with no compromise in lifestyle, and no real concern about ever running out of money. The need/ desire to intervene meaningfully in the financial lives of one's children , during one's lifetime, and/ or in the form of legacies. The ability to fund, in whole or large part, the education of one's grandchildren. The capability to provide quality care to parents in their later ...

Equity markets are fundamentally unknowable. If markets and/ or investments lent themselves to rational analysis in any significantly predictive way, somebody (or more properly, somebody's computer) would have perfected that analysis long since and would have taken away all the chips of everybody else at the table. This has not happened. And if it hasn't happened by now- with every computer nerd in the washing through his computer every recorded trade since the Assyrians swapped wheat to the Babylonians for bronze- it is not going to happen. The secret is: there is no secret.  No matter how much you know, you still can't prove what's going to happen in the future. And the more you try to prove what's going to happen, the more you put yourself in an obviously false position. Once again: no one can, with any precision, give knowledge of the future. The battle we fight is not one of knowledge vs. ignorance, but of faith vs. fear. Your belief system is your sword and yo...

Points to ponder while taking investing in equity: 1. Do you travel to foreign countries like the US, UK, Japan, Switzerland, etc.? 2. Do you send your kids abroad for education? Shouldn't you balance your equity exposure to Indian and Foreign stocks/ Mutual Funds/ ETFs/ FoFs?  Reasons for the globally diversified equity portfolio: 1. Reduces country-specific risk Country specific risk includes negative events such as  war,  drought,  political turmoil, etc. 2. Winners keep rotating Winners keep rotating frequently Predicting them in advance is impossible Reduce the risk of our investors losing out when the Indian stock market underperforms   3. Reducing Portfolio Volatility All stock markets do not always move at the same pace or same direction   Investing across countries helps to reduce the volatility of the portfolio Lower fluctuations in the portfolio which also helps in better good night's sleep 4. Wider choice Several world-class companies do no...

What is equanimity? It is keeping your emotions under control.  The point is not to get excited and euphoric when things are going your way at the same time not to get depressed when things are not going your way or the environment is bad. From the year 2020, one of the lessons, I have learned is that it is difficult to understand the markets, as it is a place where people make emotional decisions. To be successful in markets, you have to control your urges. What I mean is, do not sentimental in the market. In markets; volatility cannot be avoided.  All of us crave stability and fear volatility. However, is life always stable? No. It is not. All of us have experienced the highs and lows that life has to offer. Yet, hardly anyone has stopped living due to that.  Very few have always stayed indoors merely because 'anything may happen' once they move out. Most of us want new experiences, even though we are not entirely certain that those experiences will always be pleasant. ...

I recently read the book- The Psychology of Money by Morgan Housel, Timeless Lessons on Wealth, Greed, and Happiness ;  the most intriguing investing book I have ever read. Top 20 learnings from this book as follows: Financial success is not hard science. It’s a soft skill, where how you behave is more important than what you know. If you are short of time jump directly to points 19 and 20. 1. No One’s Crazy Your personal experiences with money make up maybe 0.00000001% of what’s happened in the world, but maybe 80% of how you think the world works. Spreadsheets can model the historic frequency of big stock market declines. But they can’t model the feeling of coming home, looking at your kids, and wondering if you’ve made a mistake that will impact their lives. The economists wrote: “Our findings suggest that individual investors’ willingness to bear risk depends on personal history.” The New York Times wrote in 1955 about the growing desire, but continued inability, to retire: “...

I recently read the book- The Education of a Value Investor by Guy Spier.   This book is about Guy Spier’s journey from that dark place toward the Nirvana where he now lives. This blog post includes  my top learnings from the book.  8 Rules developed by Guy Spier to be followed while investing: 2.        1. Stop Checking the Stock Price o    As Buffett has said, when we invest in a business, we should be willing to own it even if the stock market were to close the next day and not reopen for five years. o    We also know from behavioral finance research by Daniel Kahneman and Amos Tversky that investors feel the pain of loss twice as acutely as the pleasure of gain. o    The Rule: Check stock prices as infrequently as possible. 3.        2. If Someone Tries to Sell You Something, Don’t Buy It o    As Charlie Munger has joked, “All I want to know is where I...