Greed!

 

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Dear readers,

Thank you for coming here!

Greed bites!

Recently, I purchased two stocks that grew 7% and 13% within two days.

I thought they might grow further with no solid reasoning. 

So I kept them.

Now I am at -6% and 0.5%.

These were among the speculative buys, which I knew I should just let go at some profit.

But Greed still ruled.

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Thinking back, this just did not make much sense.

I would be very happy if my portfolio could achieve 7% or 13% growth over a year. 

Yet I believed that kind of return was not enough over the course of two days.

Totally unbelievable!

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If I have to assign some “reasons” to it, I can think of three. 

1. Affected by recent event — I just let go of a stock at 10% return. Now it is close to 40%.
2. Scale bias — I have been dealing with 40% gain and 60% loss. So 7% and 13% seem pathetically small
3. Illusions — They have grown that much. Why cannot they continue?

None of this is of sound logic, but weakness in our mind.

And that is what Greed does to us, taking advantage of our weakness to get to us.

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Therefore, below two guidelines seem logical:

1. For long-term holdings, just hold them
2. For speculative buys, never worry about the possibility of selling too early. Any return is good.

Happy Investing!

Till next time!

What do we get, besides money, from investing?

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Dear Readers,

Thank you for coming here!

With the “negative” real interest rate which has been going on for as long as 15–20 years, we need to invest to retain the value of our money.

So everyone should and need to invest.

However, I would like to elaborate this need from another perspective, the perspective of personal growth.

Investing is one of the best learning platforms we could ever hope for.

Because the feedback is specific and direct. We know which transaction we did or did not do yielded what results.

Because the consequence is never blur and definitely felt, especially when we lose money.

There is a direct link between our capabilities and the outcome.

Before I go on and elaborate more on this point, I would like to direct your attention to how valuable this “direct link” is.

Just think about our jobs. 

Is our reward directly linked to what we know, what we are capable of, and what we actually contributed?

I am sure there are jobs that do, but most of them do not.

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So in the field of investing, there is a direct link between our capabilities and the outcome.

What we do not know, what we cannot control ourselves on and what we cannot be decisive on will all reflect in the outcome, which is loss or gain of our investment and in turn our net worth and ability to live the lives we want.

Each of these shortcomings is like a hole in our pocket, through which we continuously lose our wealth. 

So we cannot afford to stay still. We need to be running.

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So what are the capabilities and qualities we need to improve to achieve better outcomes?

There are so many! And we will need different subsets of them depending on our investment approach.

Here I would like to highlight three traps from my own experiences of investing. 

Everyone is subject to the risks of falling into them and needs to build the abilities to avoid them.

1. Greed: Making decisions beyond our capabilities

2. Resentment: Feeling hatred for adversity and people who we think caused it, instead of taking rational and well-thought-out actions

3. Sentimental-ness: Following purely our feelings and losing control

Thinking back each of my decisions which proved to be wrong, one or more of these traps were present in the decision making.

As a result, I have experienced “bleeding” multiple times.

But at the same time, I must be thankful. It made me realize the shortcomings within me and that set the stage for further improvement.

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Investing is one of the few options we have to fight inflation and grow our wealth. So from that perspective, it is a necessary journey for us.

At the same time, it is also a challenging, interesting and possibly fruitful journey, not only to our wealth, but also to our personal growth.

Happy investing!

Till next time!