Does your Exit hurt you?

Good. 

Good? 

Yeah. Good. 

A proper exit – hurts. 

Huh? 

What about exiting on a high? 

Sure. 

Go ahead. 

Exit on your high.

Who’s stopping you? 

However… 

… who’s to say that the high won’t become higher? 

Exactly. 

No one knows. 

So, while the uncertainty about the high becoming higher is still out there – smarty – why are we going to not let it play out? 

Exactly. 

We are going to let it play out. 

Purpose? 

A new high might be posted. We then make more profit. 

Or, trade starts going against us, and we start to lose some of what we’ve gained. 

Hurt starts. 

When you can’t stand this hurt anymore – exit. 

That’s a proper exit. 

It’s leaving a bad taste in your mouth in the end. That’s when you know it’s a proper exit. 

You’ve stomped out the possibility of a new high. 

You’ve taken what the trade has to give. 

You’ve let the hurt set in. 

You’ve let the trade arrive at its logical conclusion. 

Now, you are exiting. 

Congratulations, you are exiting properly. 

Continue like this and you’ll become a great trader. 

What, have I let the cat out of the bag? 

Don’t worry, one can say it a million times and 99% of all traders will still continue to exit improperly. 

It’s human nature. 

Human nature works against the mindset of a winning trader.

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Nath on Equity – make that a hundred

Long-term equity is 81). brought low.

The idea is to, if required, 82). sell it high.

Otherwise, 83). it is sold when you no longer believe in the stock concerned, for strong fundamental reasons. Or, it is sold when something more interesting comes along, and your magic number is capped. Then you sell the stock you’re least interested in and replace it with the new one.

84). Attitudes of managements can change with changing CEOs. Does a new management still hold your ideology-line?

Is the annual report flashy, wasteful, rhetorical and more of an eyewash? Or, 85). is it to the point with no BS? Same scrutiny is required for company website.

Your winners 86). try to entice you to sell them and book profits. Don’t sell them without an overwhelming reason.

Your mind will 87). try and play tricks on you to hold on to a now-turned-loser that is not giving you a single good reason to hold anymore.

If you’re not able to overcome your mind on 87)., 88). at least don’t average-down to add more of the loser to your folio.

89). High-rating bonds give negative returns in most countries, adjusted for inflation.

The same 90). goes for fixed deposits.

Take the parallel economy out of 91). real estate, and long-term returns are inferior to equity, adjusted for inflation.

92). Gold’s got storage and theft issues.

Apart from that, 93). it’s yielded 1% compounded since inception, adjusted for inflation.

Storage with equity is 94). electronic, time-tested-safe and hassle-free.

Equity’s something for you 95). with little paperwork, and, if you so wish it, no middlemen. In other words, there’s minimal nag-value.

Brokerage and taxes added together 96). make for a small and bearable procurement fees. Procurement is far more highly priced in other asset-classes.

One can delve into the nervous system of a publicly traded company. Equity is 97). transparent, with maximal company-data required to be online.

As a retail player in equity, 98). you are at a considerable advantage to institutions, who are not allowed to trade many, many stocks because of size discrepancies.

All you require to play equity is 99). an internet connection and a trinity account with a financial institution.

If you’re looking to create wealth, 100). there’s no avenue like long-term equity!

🙂

Nath on Equity – almost there

Market being down 61). should not pinch you. If such condition does pinch you, you might react accordingly, and do something painful. 

You make market-downs not pinch you by being 62). miniscually committed at any given time. 

Also, 63). you continue committing your miniscule quanta during market downs. 

That’s because 64). you’ve made sure you have lots more to commit, by defining such an approach for yourself. 

You are 65). happy that the market is down, because it is giving you an opportunity to enter. 

You 66). switch off market TV. You don’t wanna know from them, because they themselves don’t know what works for you. 

All 67). useless emails and smses are put on block. 

That’s because 68). information overload is your nemesis. 

You 69). learn from everything you experience. 

However, you 70). don’t follow any market-person. 

That’s because 71). you are unique. Only you can benefit yourself, ultimately. 

You are going to 72). teach yourself to become a strong hand

Thus, you will 73). not get affected by the behaviour of weak hands, ie. the masses.

Instead, you will teach yourself to 74). take advantage of the behaviour of weak hands. 

Market players 75). commit the same blunders again, and again and again. 

That’s because 76). every few years, a whole new batch of market players starts behaving unreasonably. 

This proves to us 77). that the only real learning comes first hand from market-play, to you and you alone, and only from your market-play.

This also pretty darn well insinuates that 78). theoretical learning from books or universities has zilch value in the markets.

You’re lucky 79). if the market knocks you around during your first seven years of market-play, when the kitty is small. 

That’s because 80). exactly that learning from 79). is going to earn you big as the kitty increases during your meat-years of market-play. 

Nath on Equity – Some more DooDats 

Yawn, the story goes on… 

Let’s 21). not think about our folio at night. 

We’re also 22). only going to connect to the market on a need-to basis, no more. 

If there’s a 23). doubt, wait. 

24). Clarify doubt. If it goes away, proceed with market action. If not, discard action. 

Don’t spread 25). too wide. 75+ stocks means you’re running a mutual fund. 

Don’t spread 26). too thin either. Just 5 stocks in the folio means that risk is not adequately spread out. Choose your magic number, one that you’re comfortable with. 

Once this number is crossed, 27). start discarding the worst performer upon every new addition. 

28). Rarely look at folio performance. Only do so to fine-tune folio. 

Don’t give 29). tips. Don’t ask for them either. 

You are you. 30). Don’t compare your folio to another. 

Due diligence will require 31). brass tacks. Don’t be afraid to plunge into annual reports and balance sheets. 

32). Read between the lines. 

Look 33). how much the promoters personally earn annually from the underlying . Some promoters take home an unjustified number. That’s precisely the underlying to avoid. Avoid a greedy promoter as if you were avoiding disease. 

Is 34). zero-debt really zero-debt?  Look closely. 

Are the 35). promoters shareholder-friendly? Do they regularly create value for the shareholder? 

Are 36). strong reserves present? 

Are the 37). promoters capable of eating up these instead of using them to create value? 

Is the 38). underlying liquid enough to function on a daily basis? Look at the basic ratios. 

Is any 39). wheeling-dealing going on with exceptional items and what have you? 

40). Is the company likely to be around in ten years time? 

Yeah, things in the equity world need to be thorough. 

We’re getting there. 

🙂 

Nath on Equity – Yardsticks, Measures and Rules

Peeps, these are my rules, measures and yardsticks. 

They might or might not work for you. 

If they do, it makes me happy, and please do feel free to use them. 

Ok, here goes. 

I like to do my homework well. 1). DUE DILIGENCE. 

I like to write out my rationale for entry. 2). DIARY entry.

I do not enter if I don’t see 3). VALUE.

I like to see 4). MOAT also. 

I don’t commit in one shot. 5). Staggered entry.

I can afford to 6). average down, because my fundamentals are clear. 

My 7). defined entry quantum unit per shot is minuscule compared to networth. 

I only enter 8). one underlying on a day, max. If a second underlying awaits entry, it will not be entered into on the same day something else has been purchased. 

I’ve left 9). reentry options open to unlimited. 

I enter for 10). ten years plus. 

Funds committed are classified as 11). lockable for ten years plus. 

For reentry, 12). stock must give me a reason to rebuy. 

If the reason is good enough, I don’t mind 13). averaging up. 

Exits are 14). overshadowed by lack of repurchase. 

I love 15). honest managements. 

I detest 16). debt. 

I like 17). free cashflow. 

My margin of safety 18). allows me to sit. 

I pray for 19). patience for a pick to turn into a multibagger.

I keep my long-term portfolio 20). well cordoned off from bias, discussion, opinion, or review by any other person. 

There’s more, but it’ll come another day. 

🙂

Making Friends with Poison

You’re thinking cruise control… 

… when life asks you to step in. 

What just happened? 

Is cruise control a myth? 

Life in the ’10s is about variables. 

Balance arrives, to become imbalance. 

Body-chemistry. 

Most of us are far away from equilibrium because of our inner and outer environments. 

We exist for the longest time in a poisonous state of pseudo-equilibrium.

It’s become a game of how well we cope with such state.  

What’s the fine line here? 

Shying away is not an option. 

To achieve, one delves deep into the world. 

One becomes habituated to body-chemistry being regularly out of whack. 

One makes friends with one’s poisonous state of non-equilibrium. 

One achieves. 

Simultaneously, one keeps killing accumulated toxins, or pumping them out. One doesn’t let them overflow. 

Exercise. Metabolizes toxins at a fast pace. 

Anti-oxidants. Straight-away attack and break-up cancer cells. 

Water. Dissolves water-soluble toxins and flushes them out. 

Smoothies. Micronutrients. 

Fruits. Micronutrients. 

Veggies. Micronutrients.

Sleep. Recuperation.

Meditation. Recuperation. 

Chanting. Recuperation. 

Family. Rejuvenation. 

Harmony. Rejuvenation. 

Recreation. Rejuvenation. 

Etcetera. 

Do what you’ve come to do. 

Make sure you do this stuff too. 

Cheers! 

🙂 

Satisfaction

Satisfied?

No?

Why not?

Trading badly?

No.

Investing badly?

No.

Then what?

Can’t pinpoint.

I see. 

I’ll tell you what.

What?

I’ll tell you what I think it is.

How would you know?

It’s an educated guess. 

Ok, go ahead.

Are you doing what you’ve come to do?

Meaning?

You’re in finance, correct?

Correct.

Do you feel happy about being in finance?

Yes. 

In finance, how many things are you doing?

Many.

How many?

Nine. Maybe ten. 

What do you think is the reason for your dissatisfaction? It’s not results, you said. Look in the ten things. Is there one thing amongst them that you’ve come to do?

Yes. 

Are you doing enough of it?

No. 

Why not?

I’ve just started developing it. It’s risky. I’ve started slowly. 

When’re you going to scale up?

Over the next twenty years.

Huh?

Yeah, because sky’s the limit. I’m going to scale up very slowly, and always as a single digit percentage of my total networth.

So over the next ten years, will you have reached a substantial level.

Yes, of course. 

Do you think you’ll still be dissatisfied?

No. 

There you go.