We don't like change. We try to repeat what we had done in past and stay in that comfort zone.
Sow a thought and you reap an act, sow an act and you reap a habit, sow a habit and you reap a character, sow a character and you reap a destiny
Lazy, greedy, Ambition, Self-Interest, Ignorance, Vanity —> Some of our psychological factors
Expediency factor or E factor —> Brian Tracey. Everyone tries to achieve the same thing (see image below) and look for the fastest path to reach there i.e refusing delay gratification. Looking for short term gains resulting in long term loss
Avoid the pull of E factor to be successful
Earnings in Equity —> Fundamental (Performance of company, dividends), Speculative (Entering and exiting timings by various calls, expansion and contraction of PE because of our irrationality)
EPS = 10, PE = 20, So, stock is at Rs.200. After an year, assume earnings had grown over 20% i.e EPS = 12. Now, 3 scenarios
Calculating fundamental and speculative components of Sensex
Despite EPS growing continuously i.e fundamentals growing, the PE got reduced thus speculative returns reduced —> Overall returns reduced. If EPS growing continuously and PE reducing, that means that's a good bargain
Corporate performance (EPS) and Shareholder's price can move diagonally opposite. That indicates it's a good bargain i.e though company is good, people are afraid and thus selling thus price reducing.
Stock price reflects not only the fundamental return but also the speculative one