The below post is a follow-up article on lessons from the book The Most Important Thing by Howard Marks - Uncommon Sense for the Thoughtful Investor.
You can read the previous posts here - Part 1, Part 2
In this post, I have discussed 5 most important things as follows;
In the next and final post, I'll discuss the following Most Important Things:
Aaditya is the founder of Aaditya Chhajed Financial Advisory Services, a financial planning and wealth management firm in Pune.
Investors should seek the advice of their financial advisor prior to making any investment decision based on this report or for any necessary explanation of its contents. Future estimates mentioned herein are personal opinions and views of the author. This post is not a recommendation to buy or hold or sell securities. Investments are subject to market risks. Please read all scheme related documents carefully.
You can read the previous posts here - Part 1, Part 2
In this post, I have discussed 5 most important things as follows;
- Combating Negative Influences
- Contrarianism
- Finding bargains
- Patient Opportunism
- Knowing What You Don't Know
1. Combating Negative Influences
- The desire for more (i.e. greed)
- The fear of missing out
- The tendency to compare against others
- The influence of the crowd (i.e.herd behavior)
These factors have a negative impact resulting in mistakes, which are frequent, widespread, and recurring.
Weapons to marshal on your side to increase your odds:
- A strongly held sense of intrinsic value
- A thorough understanding of the insidious effect of psychology on the investing process
- Willingness to look wrong while the market goes from misvalued to more misvalued
- Like-minded friends and colleagues from whom to gain support (and for you to support).
2. Contrarianism
Sir John Templeton:
"To buy when others are despondently selling and to sell when others are euphorically buying takes the greatest courage, but provides the greatest profit."
The core of Warren Buffett's advice:
"The less prudence with which others conduct their affairs, the greater the prudence with which we should conduct our own affairs."
3. Finding Bargains
The best opportunities are usually found among things most others won't do. Since bargains provide value at unreasonably low prices - and thus unusual ratios of return to risk - they represent the Holy Grail for investors.
4. Patient Opportunism
Warren Buffett says, investing is the greatest business in the world because you never have to swing (in the context of baseball!). You stand at the plate; the pitcher throws you HDFC Bank at INR 833! TCS at 1776.15! And nobody calls a strike on you. There's no penalty except opportunity. All-day you wait for the pitch you like; then, when fielders are asleep, you step up and hit it.
Standing at the plate with the bat on your shoulders is Buffett's version of patient opportunism.
5. Knowing What You Don't Know
Mark Twain put it best: "It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so.".
Ask yourself how many forecasters correctly predicted the global financial crises of 2007-08. You might think of a few. Then, how many of those few correctly predicted the economic recovery which started in 2009. I think the answer is "very few".
Actions of investors who feel they...
...know what
future
holds will act assertively by: |
...don’t know
what the future holds will act quite differently by: |
|
|
- Parameters to assess the market
- If you can think of any parameters, feel free to share the same in the comments section
- Appreciating the Role of Luck
- $10 million earned through Russian roulette. $10 million by careful work of dentistry. Do both of them have the same value? Why? Feel free to reply in the comments section.
- Investing Defensively
- Here I'll discuss similarities between investing and sports. If you can think of any similarities, feel free to share the same in the comments section.
- Avoiding Pitfalls
- Can "quant funds" alone manage the investments? Feel free to reply in the comments section.
- Adding Value
- Here I'll discuss, how often is it essential to beat the market? Feel free to reply in the comments section.
- Pulling It All Together
- How to achieve superior investment results?
You may contact me in case you need to ask or tell me something. I am waiting to hear from you.
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Stay home! Stay safe!
Thank you very much for your time!
With respect,
Aaditya Chhajed
CA, CFA(US) All Levels Cleared, MCom
Aaditya Chhajed
CA, CFA(US) All Levels Cleared, MCom
E: chhajedaaditya@gmail.com
M: +91-9404055222.
M: +91-9404055222.
Aaditya is the founder of Aaditya Chhajed Financial Advisory Services, a financial planning and wealth management firm in Pune.
He loves helping family, friends, and, clients make better financial decisions. He believes learning is perpetual.
He loves reading books, traveling around the world.
He is a commerce postgraduate and Chartered Accountant. He has also cleared all levels of CFA(US) in the first attempt.
Disclaimer:Investors should seek the advice of their financial advisor prior to making any investment decision based on this report or for any necessary explanation of its contents. Future estimates mentioned herein are personal opinions and views of the author. This post is not a recommendation to buy or hold or sell securities. Investments are subject to market risks. Please read all scheme related documents carefully.
Comments
Initially let us consider both have same value.
Earned by roulette is SPECULATION.
Earned by dentistry is SKILL & HARDWORK.
Well, if we ask the person who played roulette to earn $10M again by same?
The result may be uncertain,
Speculation can wash off his earnings.
But if dentist is asked to earn $10M again?
The result will be sure.
Because CAREFUL DENTISTRY is his skill. He knows the process.