An Investor or a trader in
stock market has to be very much disciplined, organized, and should have the
ability to pay rigorous attention to details. As warren Buffet once said,
“We don't have
to be smarter than the rest. We have to be more
disciplined than the rest”. The
above-mentioned attributes should hold good even in your personal life, not
just professional life. Otherwise, you will be unable to give complete focus to
your investment or trading-- and you will fail.
Majority of the people are
attracted to market with the sole object of
making a financial killing within a short span of time. They merely
participate in market with this aim (hope rather) only and start spending lot
of time on daydreaming about it, instead of focusing more time on developing a
process or a system or a set of rules, which might actually help them realize
their goal at least in the long run. In addition to the unrealistically set goal, their own unwillingness to work (may be, out of ignorance) makes them fail. They start blaming the market for
their failure and in the process refuse to realize this is a marathon, not a sprint
and it takes strength, endurance and good health to stay the course and win the
race. They gradually start feeling bad about themselves, start losing
their confidence and may even end up with an unstable mind. Unfortunately, they
may remain unconscious to these developments for a long time until they are
made to realize by some kind of upheaval in their life.
There is absolutely no
such thing as a sure thing in stock market (or in life). This is a game of
probabilities, and the goal is to make more than you lose. You should develop
tolerance for down ticks and draw downs as there is absolutely no room for
perfectionism (everything has to work every time) in stock market. This is not
to say you should risk your entire capital. Your process or system should help
protect your capital as and when necessary. It
is equally important to be cautious even when you are consistently making money
as there is a high probability of being carried away by your success. The way in which a winner and
a loser view or experience the market is dramatically different. The
winning investor will have proactive approach while a losing investor a
reactionary approach. Benjamin
Graham, considered to be father of value investing, has said "Individuals who can't
master their emotions are ill-suited to profit from the investment process."
After a slew of successful
investments, it may so happen you are unable to identify any good opportunity
in market but still you force yourself into some trades which in all
probability can lead to losses. You should always remember the distress that each lost
rupee causes is twice as high as the pleasure we get from each rupee gained.
So, it is equally
important to avoid the highs that come from success just as the lows that
appear after failure. The skill of knowing when not to invest is as
important as knowing when to invest. You should avoid investing or trading for
excitement instead of making profits. To put it in Seth Klarman’s words: "You can wait for
opportunities that fit your criteria and if you don't find them, patiently
wait. Deciding not to panic is still a decision." By overindulging in market you will be
risking your psychological
capital as you will be emotionally drawn down. This
may result in, you missing the real big opportunity as and when it comes by
which time you would have drained your energy levels completely and hence
unable to participate in market although you have the required financial
capital.
You should be able to
assess and ascertain at all times whether your profits or losses are by design (your system or process) or
by chance (luck
factor, good or bad). There is a possibility of you earning profits without
your true knowledge because you just happen to be with the flow of the market.
Similarly there is a possibility of making losses when you are against the flow
of market. So, it is very
important to be with the flow of market as far as possible by design to better
your prospects of making profits.
In the
current environment, media (social media, in
particular) has become
an integral part of our daily life. So, it has become important to understand the
role of media and its perceived influence on markets. Media can at
best influence market on an absolute short term basis and can have zero
influence on a sustained basis It is very important to develop a
kind of skill to separate news from noise, because media keeps on
transmitting endless stream of cacophony under the guise of news. You can come under its influence
if you monitor it too closely. We should be thankful to
media though, as it provides us exposure to some of the best and brightest
minds of the world thereby giving us the opportunity to gain valuable insights
from them. At the same time, we should realize they are
in business for profits and hence they would try to make money out of us and
may not make money for us. So, you
have to bear this in mind and take a balanced and judicious view while
following media.
Finally, you should learn to accept total
responsibility for all your actions irrespective of their outcomes.
Some of your actions may be indirect like, you acted upon a recommendation of someone
whom you believed to be an expert, and you should accept
responsibility for such actions too even when the result of such action goes
against you. It is normal
human tendency to attribute success to one's intelligence and failure to
circumstances or someone else. But,
when you start accepting total responsibility for all your actions you are improving your self-accountability and a chance to learn from your failure. You learn almost nothing from your success. You should always remember you are the only person
who can truly control you and you cannot control anything else or any one else.
I am concluding with a Peter Lynch quote wherein he has aptly put together all
the qualities required for an investor to be successful.
"The list of
qualities an investor ought to have include patience, self-reliance, common
sense, a tolerance for pain, detachment, open-mindedness, persistence,
humility, flexibility, a willingness to do independent research, an equal
willingness to admit mistakes, and the ability to ignore general panic."
