A blog which periodically revisits evergreen investment principles!

Category: Investing Page 7 of 9

Productivity Tools for Investors 2.0

Exactly four years ago, I wrote about Productivity Tools for Investors. You can read it here. This post is an attempt to update it with new productivity habits I’ve picked up over the years.

After the demise of Google Reader which used to aggregate alerts & news items via RSS feeds, Feedly and other such tools have taken over that role. Although I’m not a huge fan of RSS anymore & you’ll know why soon. I’m still a devoted Evernote user which helps me remember stuff & organise it the way I want. I also use mind maps but I have found the softwares a bit cumbersome & the maps difficult to remember. So I went low-tech & now draw my mind maps by hand. I remember them much better. Updating them is a pain, but it was worth the effort. (But this works for me & may not for others).

Measure Twice, Cut Once

“A lot of shavings don’t make a good carpenter.”

My carpenter said to me as I watched him work, perched on a stool. He was shaving a wooden panel from my work table. I had been complaining to him for over a week about one of the drawers that creaked as I pull it out. This is really odd for a brand new, custom made table. Usually these issues creep up over years when changing weather and moisture take their turns to age the wood. Now that he was here and identified the problem, he got right to work.

He made me empty the drawer and observed what had gone wrong. To my untrained eye it was all straight lines, but he spotted something and pulled out a tiny wood shaver and shaved a small portion. He said that “the apprentice in my shop who made this drawer shaved some part of the drawer far more than necessary. Maybe he was not confident with the cut.”

I wanted to tell him I did the same thing with my portfolio when I started investing. I was not confident about my ideas and therefore allowed the price movement to control my decision making. I acted more often than necessary and expected better results due to my “nimbleness”. More activity doesn’t always mean better results. Sometimes doing less & being decisive is a better choice.

He bent down to check if the wooden strip on which the drawer rests, fits properly or not. He didn’t even need a torch. He just ran two fingers down the strip and immediately found another problem. The strip that was supposed to be one single piece of wood was two pieces joined together. The seam was cleverly concealed but nevertheless it was not a single strip.

The carpenter told me again that he was sorry but there seems to be another problem. The apprentice also made another basic mistake that he shouldn’t have made in the first place. I was more curious to know what wisdom he was about to offer. He hit me with it, “Sir, he broke the first major rule of woodworking – Measure Twice, Cut Once.”

He pulled out a plain strip of wood made careful measurements & marked it for cutting. He pulled out the previous two strips and nailed the new one in. He put the drawer back in and it slid back in place like it rolled on butter.

I was blown away. I never thought a skill like wood working would have so many teachings for an investor. The table is supposed to last for at least 15 years. The responsibility of the person who makes it to last that long, is enormous. The same for any investor who invests for the long term. We should always investigate the basic premise and act decisively once we have made up our mind. Any other factors like price movements in between shouldn’t shake us from our long path.

“Measure twice, Cut once.”

Why Should Companies be Well Behaved? – Part 1

By Raunak Onkar | [email protected]

Normally when we think of a word, our mind creates a mental image of it. We realise if we associate some strong meaning / feeling with that word. The word ‘corporate governance’ doesn’t invoke any of those things. It’s a bland, technical word which only seems like a good filler in an otherwise boring conversation about stocks.

If we wish to really create a mental picture for good corporate governance, first we need to create a good picture of the business world in general. Good governance, in simple terms, is being treated fairly when not in power by those who are in power. It applies as much to governments as to companies.

How our use of language can twist reality

By Raunak Onkar | [email protected]

We use language to think. The grammatical elements of any language help us express our thoughts better. That can pose a problem while thinking with incomplete information. In that case our emotional state can sway us into believing our own thoughts.

Take investing in stocks for example. It is a guarantee that no matter how well researched the investment idea is we are bound to have some gaps in understanding. We have no choice but to allow for some margin of error to protect us from any temporary setbacks.

One way would be to know our biases but that’s a theoretical solution. To reach a more practical solution we need something that is easy to test & which applies across all our thinking.

The art of Bad-vising

By Ankur Mahajan, [email protected]

“We’ve done a lot of stupid things but we’ve avoided a small subset of stupidity and that subset is important. It’s about avoiding the dumb things” – Warren Buffet

There have been a considerable number of arguments and an equal number of blogs and posts written about the plight of a retail investor. One of the prime subjects have been the many grounds where a typical investor conks out to make returns in the market. “Market makes returns, but the investor doesn’t” has become the slogan of the Aam Investor (on the lines of aam aadmi). And there have been umpteen reasons attached to the same. Some of them being getting carried away by greed and fear, investing after the bull run, redeeming during the bears, chasing fancies, investing without understanding, etc. While it is easy to blame the investor on the lines of an aam aadmi who pay taxes but abstains from voting, there is a compelling need to question the role of your advisor and his ability to avoid deviating from the fundamentals.

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