No risk no gain.
… I’m sure you’ve also heard…
… “want gain not pain“.
How do we achieve that?
It boils down to the level of risk.
How much risk is too much?
Do we have a measure?
Meaning, without getting into any mathematics?
What’s a hands-on everyday TomDickHarry dumdum yet practical cum successful measure for risk without any hype or brouhaha?
Are we sleeping well?
Is our sleep getting disturbed because of the risk we’ve taken?
The risk we’ve taken is bearable.
It’s not disturbing us enough to disturb our sleep.
Yes? Sleep disturbed? Because of risk?
We’ll, too much then.
Reduce the risk.
By how much?
Till your sleep is not disturbed because of it.
It’s as simple as that.
There we go again.
It’s not going to leave us.
Nicholas Nassim Taleb has coined together what is possibly the market-word of the century.
We want to remain so.
We don’t wish to desert equity just because it is a fragile asset-class by itself.
We wish to make our equity-foray as antifragile as possible.
First-up, we need to understand, that when panic sets in, everything falls.
The fearful weak hand doesn’t differentiate between a gem and a donkey-stock. He or she just sells and sells alike.
Second-up, we need to comprehend that this is the age of shocks. There will be shocks. Shock after shock after shock. Such are the times. Please acknowledge this, and digest it.
To make our equity-play antifragile, we’ll need to incorporate solid strategies to account for above two facts.
We love moats, right?
We’ll keep our moats.
Just wait for moat-stocks to show value. Then, we’ll pick them up.
We go in during the aftermath of a shock. Otherwise, we don’t.
We go in with small quanta. Time after time after time.
We’re already sufficiently antifragile.
Just sheer common sense.
We’re still buying quality stocks.
We’re buying them when they’re not fragile, or lesser fragile.
We’re going in each time with minute quanta such that the absence of these quanta (after they’ve gone in) doesn’t alter our financial lives. We’re saving the rest of our pickled corpus for the next shock, after which the gem-stock will be yet lesser fragile.
Yes, we’re averaging down, only because we’re dealing with gems. We’ll never average down with donkey-stocks. We might trade these, averaging up. We won’t be investing in them.
Thus, we asymptotically approach antifragility in a gem-stock.
Over time, after many cycles, the antifragile bottom-level of the gem-stock should be moving significantly upwards.
Gem-stock upon gem-stock upon gem-stock.
We’re done already.
Mt Gox collapses.
It’s not a mountain.
Mountains don’t collapse.
The largest Bitcoin exchange in the world – gone.
If one reads through the company’s press releases, it seems they themselves are not sure. Or, they’re trying to cover up that they got hacked, big-time.
Company’s claiming a black-swan event. Software goes into a crazy loop. Transaction shows as failed. However, system releases Bitcoin. Do this over and over again. You’re down 750k Bitcoin. Half a billion dollars. Hmmmmmmmmmm. Not buying it.
It’s probably not an inside job. Trail would’ve been too hot.
They’ve actually and probably gotten hacked. Possibly in the earlier days. Perhaps they tried to cover it up for the longest time, till it was no longer possible. There came a time then, it would seem, to throw in the towel and declare bankruptcy, coupled with the release of an unbelievable explanation.
Do the math. Conjecture.
We are down to conjecture, after an abominable event like this, where retail investors along with handlers, dealers and the works get fried.
For heaven’s sake.
Makes you rethink Bitcoin majorly.
Diversification is a safe thing. However, not at the cost of converting your computer into a big red flag.
There are two kinds of computers in the world. Those with Bitcoin or its cousins, and those without.
Currently, those with are targets.
There’s no better system of storing Bitcoin.
Banks aren’t taking it up systematically.
Dollar lobby is too strong.
It’s not letting Bitcoin settle.
Who was behind the possible hack?
You tell me.
Why would anyone sacrifice one’s sleep?
No tension, please.
We don’t wish to lose sleep over the fact that our computer might get hacked in the night. Also, will the cousin’s ever sort themselves out?
If criminals could hack Mt Gox, what are the chances of one’s desktop surviving?
Yeah, where does that leave you?
Till Bitcoin gets accepted more systematically, and till mainstream banks start storing it for you in their cyber-lockers, I’m afraid this leaves you off the Bitcoin demand-list.
Yeah, safety first.
Carrying forward a niggle?
Something that doesn’t stop you from performing, though?
However, something that nags?
Can’t stop to get it out of your system?
Momentum doesn’t allow you?
When you do stop to get it out, it doesn’t go away?
Is it more mental?
Or more physical?
Don’t know what to do?
Who to ask?
What if the hospitals grab you?
Make your wart into a cancer?
Are they then ever going to let you go?
We’ll, I’ve got something for you.
Are your ears standing up?
Can’t believe your luck?
Could Nath be bee/essing?
How does he know about all this stuff?
What makes him an authority?
Why should I trust him?
Is it costing you to listen?
Well, then listen. No harm.
So, as I said, I have something for you.
Are you ready?
Yeah, embrace the niggle.
Make it drive you on.
Make its mild pain give you quality output.
Make the niggle your advantage.
What if it goes away?
What if it doesn’t?
It then becomes your secret weapon.
That’s like buttering your toast on both sides.
As someone I look up to put it recently – “It’s a game of patience and nerves!”
The long-term investor.
Do you have any?
Patience, or nerves, or both?
Well, then you’ll do well in the markets, over the long-term.
We look for complication. Meanwhile, we forget the basics.
These are basics.
If you’re not patient, you’ll for example jump into a stock at the wrong time, or you’ll jump out of it too early, or what have you.
If you don’t have patience, well, develop it.
If you can’t, do something else instead. Trade. Don’t long-term-invest then.
If you cannot develop patience, you are not cut out to be a long-term holder.
One method to cause the tree of patience to grow in you is to create the correct environment.
Just don’t do anything that will make you jump.
Invest your sur-sur-plus, money that is then pickled away, money that you won’t miss, yearn for or require over the very long-term.
Go in with margin of safety.
Stay in a stock you’ve singled out and entered until there’s a glaring reason to exit. Try to exit upon a high. This is the market. Highs are its nature. So are lows. That means that highs come. Wait for them to come, to exit from anything you need to exit from.
Nervers, well, they come into play if you’ve not invested with margin of safety.
I do remember two instances though, where everyone’s nerves were tested. October 2008, and March 2009. At these times, stocks sold for a song. Good ones and bad ones alike. Fear did the rounds, extreme fear. That’s what fear does. It creates once-in-a-lifetime opportunities. Take them. Maintain a clear head. Your nerves of steel will do that for you. Create an environment for your nerves to become strong. Or, perhaps expressed another way, create an environment where any weakness in your nerves is not required to show itself, and gets subdued into extinction.
Again, just go in with your sur-sur-plus. You’re not going to miss this money even if the sky is falling upon your head. And you’ve gone in with margin of safety. Your nerves will stay intact.
Ensure your basics. Allow them to shine.
The rest will take care of itself.
Good investing. 🙂
Holy moly, what are we talking about?
Let’s say you’ve done your homework.
You’ve identified your long-term stock.
Fundamentals are in place. Management is investor-friendly. No serious debt issues. Earnings are good.
Valuation is not right.
Till the price is right.
What happens if that doesn’t happen.
You don’t pull the trigger. It’s difficult, but you just don’t pull.
Let’s say the price is becoming right.
You are looking for an extra margin of safety.
You are waiting to pounce. How long?
What’s your indicator?
Many things have been said about the gut.
It does feel fear.
Look for that fear.
Scrip is near a very low support, but holding. You are afraid that this last support might break and that the scrip might go into free-fall. Look for that fear. There goes your buying opportunity, you are probably saying. Intraday, support is broken. You are now sure it’s gone. Look for that feeling. Intraday, scrip comes back. Closes over support. Large volume. This chronology is your buy signal. You pick up a large chunk. Scrip doesn’t look back.
You don’t have to go through this rigmarole. You don’t have to bottom-pick. This exercise is for those who want that extra margin of safety.
Now invert the situation.
You’re sitting on a multibagger.
Lately, you’re not agreeing with the company’s business plans. You want out. Best time for you to exit would be now, sure. But, scrip is in no resistance zone, and is going up and up and up. What do you do?
Look for greed within yourself, when you start saying “Wow, this is going to be the next 100-bagger!” Look for the moment during this phenomenal rise when you’re getting attached to the scrip and don’t want to get rid of it, despite having concluded that you don’t agree with the vision of the promoters. Look for the time you start going “My Precious!”
This chronology is your intrinsic sell signal.
Sure, I’m combining trading techniques to fine-tune my investing.
I’ve stood on the shoulders of giants.
I’ve seen from their heights.
It’s time I start contributing.