Most people appreciate the role of patience while one is an investor. I have seen portfolios where the holding has really been ‘forever’ as suggested by Warren Buffett, but the role of patience in trading is not something many of you would have seen.

Day trading is a kind of a ‘voluntary contribution to the broker’s welfare fund’ – and I used to love such traders. To trade smartly you need to have some information advantage in scrips where there is no institutional traction. Not too many traders could do that , but yes there were people who did it very well. So if you’re the kind of person who can’t wait to buy the latest must-have gadget, and would rather charge to your credit card than wait a month, probably best you stick to index funds. You are not cut out for trading or investing.

Find contrary views: If you like Icici Prudential Discovery fund and have it in your portfolio, when you walk into a crowd say loudly “Icici prudential Value discovery fund’ is past its prime..and one should come out of it. Suddenly you will start getting views which you did not have about this fund..and people will attack you and you at least see that angle. Learning to look for views exactly opposite to what you think is not easy, but it is worth cultivating as a habit. I know one big fund manager who does that.

Mental accounting: another way of lying to ourselves! we (mentally) keep money in various pockets. In case of trading we expect to lose money -but while investing, we think we should not. So while we may have a quick stop loss in trading, we may allow our investing losses to run really deep. So a person who buys a GMR for trading at 71 will quickly sell off at 68, but the investor who buys at 71 will either average or ‘wait out’ the share even if it is down to Rs. 11.

Inertia bias: sheer laziness in moving the money from SB account to liquid fund. Keeping an unnecessary amount of money in the bank ‘Just in case’. Then you find that you, your parent, sibling, spouse, children all of them do that!! So the emergency fund (not calculated, just happens to be) is a huge Rs. 1 crore!! Bring in the concept of ‘family’ emergency money so that one of you holds money and the others know that they can draw on that – just in case!!

and there are more…..

 

 

 

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  1. Subra Sir

    How to judge if a fund like Value Discovery is past its prime?
    I am asking for my own analysis and knowledge.

    I mean there is no way to know when the fund manager has bought
    what shares and also the strategy thereafter?

    If we wait to see when the 5 yr performance starts to consistently
    go below its main peers then we might be too late.

    Is there another matrix to judge that?
    Are there some key points you look at when you judge a
    Top performing fund like Value Discovery to decide whether you
    should stick or switch out?

    Regards

  2. “Find Contrary View” – try telling people LIC is bad and they will start stoning you…
    And if you say LIS is good, they will be behind you to purchase policy from them 🙂

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