2017 was a year of extraordinary returns. 2018 is a year of staying extraordinarily cautious. Does this mean that you need to stay away from the market and wait patiently for the 2019 Elections Results outcome? Preferably not.
2017 will be remembered as a year when most of us had boarded the Small & Midcap train. Why? To travel the runway as far as possible with a fire of sentiments and emotions. Ignoring the fundamentals, I had never even bothered to analyze the business prospects of a company. Neither its corporate structure nor the governance model. Not even the cash flows and debt levels, let alone the credentials of its promoters.
For the initial 5-6 years, Chinese Bamboo Grass doesn’t grow an inch. It requires a lot of nurture, care, water, and soil fertility to grow slowly and expand within the soil. The visible signs of its growth are not noticeable in those initial 5-6 years.
Years of its inactivity scare us and test our patience level. And then, the growth level it achieves in the next 5-6 weeks, is phenomenal. Our tolerance gets rewarded when it grows by 70-80 feet in just 5-6 weeks.
Hard to observe in the short-term. Difficult to ignore in the long-term.
- Market corrections, which had been happening in the past, will keep on happening in the future too. You needn’t lose your temper as per the market’s behavior. Rather, they should be seen as opportunities to buy more quality companies which are available at discount.
- John Templeton has said – People who try to become rich quickly, lose their capital quickly too. The burst of the year 2000 dot-com bubble proved this analogy right. People were buying internet companies shares ignoring other quality companies available at discount and regretted.
- What I have understood in these many years that the more I keep myself calm when my holdings are down, the more I see appreciation in it once the market recovers from the setback. It’s my temperament & the emotional behavior that works as a strategy, not my brain.
- If you really want to teach your kids something beneficial, teach them to set aside a part of their income and invest it when they start earning. Not only you’ll help them build a secure future but also make them transfer the same attributes to their kids as well.
- Investing is something which you do to build wealth. Jumping in and out of the stocks on daily basis won’t do any justice to it. It may make you small profits but won’t make you rich.
- If you learn to avoid a behavior which leads to poor outcomes, you will always have an edge over other investors. One such behavior is having a blind faith in the company you own. People fell in love with
@RCommCare & Anil and saw their investments getting blown up in smoke.
- During the dot-com bubble, people were rushing towards buying billion dollar valued internet companies. But Berkshire Hathaway was not performing well & Buffet had refused to buy dot-com stocks. Eventually, the internet companies went bankrupt and billion dollars were lost.
- Heard it from
@Raamdeo that in long-term, you tend to witness various cycles with maximum returns, lowest returns, zero returns, and negative returns. People don’t want to see other cycles except for the one with maximum returns and thus try to time the market and lose money.
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I have observed that people have a great fascination for the tips they get from others to invest their money. Without investigating the company’s profile, its financials, management, and growth prospects, they just invest their hard-earned money blindly and regret later when the stock price tumbles down heavily.
Ironically, when they buy a smartphone online, they choose to evaluate its specifications closely, compare its prices on other available platforms, take feedback from the ones who are using it already and then buy it with due diligence. Even if they get a tip that Samsung Galaxy is better than Apple iPhone, yet they choose to do their proper homework before taking a buying decision. Shouldn’t they replicate the same behavior while picking stocks as well?
- Credit Card companies really love it when you buy and don’t pay in full. Interest payment gets compounded & their money earns on your money.
- Just like you stay calm with your investments in FDs, do it with equity as well. The only caveat is you need to stay calm for 10-15 years.
- Your Financial Independence in the future depends on how you treat your money today.
- You can earn huge amount of money only if you tend to wait for decades and let money multiply on its own.
- Never underestimate the power of compounding. It may look small in initial years but gets really huge when given a long time period.
- If you want your money to support you in your retirement, start investing now.
- Investing in the right assets earn you extra money which gets compounded year on year. Keep on following the process. It’ll make you filthy rich.
- Inflation is your money’s enemy. It erodes its value. Invest in assets which give returns better than inflation & FD isn’t that asset.
- Don’t become a servant to your home or car EMIs. Rather, choose to invest in a financial asset and earn more returns in long-term.
- Invest as much as you can if you are staying in your home. Because that’s when your expenses are really low.
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