- Be clear of the time horizon for which you want to stay invested. There is a lot of noise around, build a strong conviction and high signal-to-noise ratio, this takes time to build but being conscious about it helps.
- Don’t be emotionally attached to any company/stock once you have bought it. Confirmation bias is your biggest enemy.
- Decide what percentage you are willing to lose in stock before you enter it and make sure you accept it when it happens.
- Think of gains and losses in percentage not in currency value.
- Its a loss only when you book it. Notional loss has no meaning but only helps you to look into your conviction for why the market is signalling otherwise and calls for deeper analysis. Ignoring signalling from quarterly reports is a choice
- Obsessing on financial ratios eg eps, roe, roce, pe and others is as good as the numbers reported by auditors, promoters, boards and c-suite. Obsess about the people running the business instead and their holdings %, skin-in-the-game is a real phenomenon!
- Buying valuable businesses cheap and selling them at a reasonable valuation is great but this is very difficult. Buying expensive business at a higher value and selling it even higher is non-intuitive and underrated. Buffet follows value investing but momentum investing is one of the most successful strategies ever. Awareness is good but you don’t have to follow, as there is a thin line between trading and investing when you resort to momentum investing, especially to my 25 yr old self.
- Fundamental analysis is good and sufficient. But it’s worth knowing various chart types as technical analysis is all about how humans have reacted to certain market conditions in the past 100 yrs. Most algo-trading is computers reacting to these charts.
- FOMO is real, do not chase.
- There is no alternative to doing extensive reading across various parts of running a business, human biases, annual reports, balance sheets and quarterly transcripts before building a position for your planned horizon.
These were my top of mind lessons, will add more in the future.