5 CHECKS TO ENSURE YOU MAKE SMART INVESTMENTS |
Posted: August 21, 2020 |
This goes back to 2007, markets are going crazy, everyone is making smart investments and my friend Sonika is opening the doors of this fascinating world to me. She introduced me to the world of yahoo groups and the money control groups. People with nicknames discussing trades, ideas, concepts and in just killing it. People with 100x returns on stocks It left me hooked with just one look. In a weeks time, I had my broking account opened and I went all in. I moved fast, I listened, I copied tried to grasp all. Then out of nothing 2008 happened. The rooms were becoming much quieter, hushed. I was getting scared with each loss. And yet there were few of these nicknames which were wholly relaxed and going on as usual. For them, the game never stopped; in fact, they were upping the ante. All of them got supernormal returns over the next 3-4. Awestruck, I slowly started getting acquainted with them. Over the next few years, I began to notice that all of them had a pattern of playing this game. Understanding this pattern This would eventually help me start reinvesting in 2011, and since then I have compounded money at > 25% CAGR. The Big PatternThere was one common and distinct pattern that consistently stood out among many others. No matter the investing style, this pattern stood above all. That process ensured that they made smart investments consistently. It ensured that they were always sane when markets were going crazy. Below I try to share some of the processes. Think of it as a game with each checkpoint leads to the next one and the only way to progress in-game is to cross each checkpoint in sequence.
Check Point 1: Are you ready to be an investor?See where you fit in the grid The effort would mean reading books, reports, charts, journals to learn continuously. Time would expect if you can put in at least put in 1-2 hours daily Check Point 2: To cross this rubicon answer this question. Is your aim from investment to get maximum gains?If the answer is yes, you will get hurt. Your Northstar is not maximizing gains but maximizing gains per unit of risk. Joel Greenblatt says “My largest positions are the ones where I don’t think I’m going to lose money.” Any stock can go to zero, but some have a higher probability of hitting that. Check Point 3: You are skilled, ergo you make money
You find a crap stock and are ready to lose money deliberately by buying it. A perfect case of skill doing magic Check 4: Do you quickly learn from your mistakes?This is a story about Gary Kasparov, which he told in his book. Check 5: Are you happy being a smart investor?Are you happy after doing well?
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