Reading habit is very important for investing success. Warren Buffet and his partner Charlie Munger spends most of their time in reading. [Read more…]
Choosing stocks for investment is not an easy task. You have to read years of annual reports, study the industry in which the company is operating and then we need to do the valuation. It requires a lot of study and research. Things can be made easy by filtering the stocks on certain parameters suggested by some great investors. One such stock filtration formula is the magic formula. [Read more…]
SEBI has introduced the new ASBA system for IPO and it is now difficult to apply for IPO online from the brokers end. But you can easily apply online through your Bank’s netbanking facility. Here are the step that you need to follow to apply for IPO from SBI net banking. [Read more…]
When some company acquires another company we generally feel that it creates value for shareholders, but this doesn’t happens always. [Read more…]
Joshua Rogers in Forbes says
“The art of investing is not about figuring out what has already happened. It’s about anticipating the future and creating the future that others will read about. In order to create something new, to invent a new product or idea, you need to anticipate where things are headed. That requires a mixture of certain habits of mind. You need to foster imagination, thoroughly understand the origins of past ideas, learn from others’ mistakes, talk to lots of people about ideas and test your hypotheses against people both alive and dead”
Creativity doesn’t come from glancing quickly at your Twitter feed. It comes from deep thought. It comes from voraciously reading books – long books that require focused attention.
Reading books is a way for you to communicate with and learn from the best thinkers that are writing today and that have ever lived. Reading is a time machine that allows you to acquire wisdom from the past and to analyze and imagine another person’s vision of the future. This is the fuel for the creativity engine. It helps a great investor anticipate, analyze and avoid missteps. “
Reading habit is very very important for success in investing. There is no investor without habit of reading who made his fortune in the stock market
Warren Buffett’s business partner Charlie Munger once said,
“In my whole life, I have known no wise people over a broad subject matter area who didn’t read all the time – none, zero.”
Below are some of his more comments on reading
You don’t have to pee on an electric fence to learn not to do it. Learning from other people’s mistakes is much more pleasant. The best way to do this is simple: When in doubt, read so you can learn vicariously.
We read a lot. I don’t know anyone who’s wise who doesn’t read a lot. But that’s not enough: You have to have a temperament to grab ideas and do sensible things. Most people don’t grab the right ideas or don’t know what to do with them
You could hardly find a partnership in which two people settle on reading more hours of the day than in ours
In my whole life, I have known no wise people who didn’t read all the time — none, zero. You’d be amazed at how much Warren reads — at how much I read. My children laugh at me. They think I’m a book with a couple of legs sticking out.
I don’t think you can get to be a really good investor over a broad range without doing a massive amount of reading. I don’t think any one book will do it for you.
Neither Warren nor I is smart enough to make the decisions with no time to think. We make actual decisions very rapidly, but that’s because we’ve spent so much time preparing ourselves by quietly sitting and reading and thinking.
“Go to bed smarter than when you woke up.”
Warren Buffett says,
“I just sit in my office and read all day.” When asked how to get smarter, Buffett once held up stacks of paper and said “read 500 pages like this every day. That’s how knowledge builds up, like compound interest.”
What investors should read ?
- Books on investing
- Industry reports
- Annual reports
- Econonomic surveys and reports
- Books on human psychology
Not getting time to read ?
Charlie Munger says “go to bed smarter each day” Why not start with reading 20 pages everyday before you go to bed. Try saving some time you spend watching TV, Movies, Shopping etc
Warning: Side effects of reading more may include (1) increased intelligence; (2) uncomfortable silence when someone asks you what happened on the cricket match last night ? (3) better ideas and (4) increased understanding of yourself and others.
Stock has given breakout from 2 months consolidation pattern.
Breakout from bullish flag pattern with rising volume.
Breakout from bullish double bottom formation
Ashok Ley land
breakout from rectangular consolidation pattern with rising volume.
Breakout from downward sloping channel
Vijay Kedia is a successful name in the investment world. His investing success could be inspiration for those who are thinking to have success in investing career. [Read more…]
Do you remember how sky rocketing onion prices becomes the buzzing news in the media. Prices going up is the news going down is not the news. As media focuses on negative things more. [Read more…]
Most of us think that we are smart, and take logically rational decisions. But this is not true all the times. Even if we think that we are making rational decisions we occasionally fall for the sunk cost fallacy.
What is Sunk Cost Fallacy?
Sunk cost is any cost that has already been paid and cannot be recovered. It becomes a fallacy when you remains stick to it just because you have paid for it, even though sticking is going to be totally fruitless. You buy a advance movie ticket. On the movie day you catch fever. Even though you are sick, you still want to go for the movie as you have spend money on the ticket. You feel if you don’t go the money will be wasted.
People continue wasting their three hours in the theatre, when the first few minutes tells that movie is worst, not entertaining and is a waste of time. You continue till the end because you don’t want to throw away the money spend on tickets. Whether you stay or leave, the money spend on tickets is gone. We forget that we bought ticket for entertainment purpose, which the movie is not serving. We become the victim of sunk cost fallacy and stay in the theatre just to make yourself feel that you are utilizing the money you spend.
Managers continue their fruitless advertising campaign, just because they have invested some amount in the initial phase. People continue bad relationships just because they invested so much energy in the relationship, it would be wrong to end it.
“I might as well keep eating because I already bought the food.”
“I might as well keep watching this terrible movie because I’ve watched an hour of it already.”
“I might as well keep going to a bad/useless class that I paid for.”
“I might as well continue dating someone bad for me because I’ve already invested so much in them.”
Are some of the examples of sunk cost fallacy
Even government and organizations falls to sunk cost fallacy. Britain and France invested heavy amount in the supersonic passenger aircraft Concorde. Even though both parties, long realized that the supersonic aircraft business would never work, they continued to invest enormous amount of money in it. The project was scrapped only after it became a financial disaster. That’s why psychologist often call sunk cost fallacy Concorde effect. US government extended involvement in Vietnam War because of this. George Bush continued bombing Iraq even on knowing there are no chemicals or nuclear weapons there. Just because they had made investments in it. This extension of Vietnam and Iraq war wiped out billions of dollars for nothing.
Rolf Dobelli says in his book The Art of Thinking Clearly: Better Thinking Better Decisions
The sunk cost fallacy is most dangerous when we have invested a lot of time, money, energy or love in something. This investment becomes a reason to carry on, even if we are dealing with a lost cause. The more we invest, the greater the sunk costs are, and the greater the urge to continue becomes.
How investors fall victim to the sunk cost fallacy?
Investors or traders often anchor their trading or investing decision on the acquisition prices, the price at which they have made position in the stock. I often hear “ I lost so much money with this stock, its down too much from my price, I can’t sell it now,”
This is irrational. The price at which you bought the stock should not be the reason to continue holding. What matters is the stocks future performance. If the probability of good performance in the future is low, then you should be exiting, no matter how much amount of loss you have to bear.
People continue with the debt laded loss making company which has next to zero chances of doing well in future, just because its trading at much lower price than their entry price. They continue in the hope that someday it will recover, which they also know won’t happen.
Book the loss and investing the rest amount in something else can be more fruitful. But sunk cost fallacy prevents investors from doing this
How to overcome sunk cost fallacy?
Don’t try to continue something for wrong reasons, such as to justify non-recoverable investments. Forget about the costs, no matter how much you have already invested, only your assessment of the future costs benefits should count.
Thoughts like We’ve come this far… I have invested too much in this stock … I have waited so long in this stock , I can wait some more , Its falling from years , it won’t fall much now, I will wait for higher levels to exit etc etc are the thoughts which shows that you are becoming victim of sunk cost fallacy. When such though hits your brain, it’s time to get rational.