1. Cloak of patience, eschewing greed, conquering fear

INVESTING

  1. Stock trader —> Buy and trade, Long term investor —> Buy and hold, Short seller —> Sell and Buy
  2. Every financial vehicle (stocks, real estate etc;) has it's ups and downs. Invest when it's in down

INVESTMENT STRATEGY: INVESTMENT AND SPECULATION

  1. Looking for dividends, bonuses are more important than share price hike as we are not going to sell it in near future. Dividends etc (Cash Flow) will be our primary source of income and hike in share price (Capital Gains) will be secondary source of income (use only when needed by selling). Always good to follow Cash flow model i.e buy and have cool dividends for long run
  2. Capital Gain Model —> Sell when high, buy when low. Not suitable for me
  3. Market Cap ≠ 100Revenue when it's a very large cap. For small caps, this might be possible because Market Cap (No of sharesshare price) will be small and revenue (sales growth in financial statements) will also be comparable

THREE WAYS OF INVESTING

  1. Intellectually difficult —> Opportunities always come. So, don't worry. When they come, make sure you have money to invest.
  2. Physically Difficult —> Overloaded with information, continuously checking news, trying to time the market and give importance to rumors
  3. Emotionally Difficult —> Don't get swayed by anything. Stick with your plan
  4. Learn to think with our emotions rather than have our emotions do the thinking. Emotions shouldn't overrule us

INTRODUCTION TO BEHAVIORAL FINANCE

  1. Tips —> To insure prompt service. So, logically we need to give tip at the start of meal so the prompt service is insured. But no one does that 😂
  2. Goal is to reduce the gap between how we make decisions and how we should make decisions.
  3. Behavioral finance strategies —> Find the cognitive error before several others recognize it and use it for your leverage

Prospect theory by Daniel Kahneman (Read in detail later). Check the book with same title

Prospect theory by Daniel Kahneman (Read in detail later). Check the book with same title

LOSS AVERSION AND SUNK COST FALLACY

  1. “I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful” —Warren Buffet lecturing to a group of students at Columbia University