Nath on Equity : have stuff – will talk

Behind Equity, there’s 41). human capital. 

It’s human capital that keeps 42). adjusting equity for inflation.

43). No other asset-class quotes on an inflation-adjusted basis. 

That’s good news for you, because 44). equity takes care of the number one wealth-eater (inflation) for you. 

All world equity ever quoted, whether currently existing or not, has 45). returned 6% per annum compounded, adjusted for inflation. 

46). All equity ever quoted that still exists has yielded 11% per annum compounded, adjusted for inflation.

Equity selected with good due diligence, common-sense and adherence to basic rules listed here and in previous articles is 47). well-capable of yielding 15%+ per annum compounded, adjusted for inflation. 

However, equity is 48). a battle of nerves, at times. 

This asset-class is 49). more about creating long-term wealth. 

It can be used, though, to 50). generate income through trading. 

51). Trading, however, is burdened with more taxation, commission-generation and sheer tension. 

Trading equity 52). eats up your day. 

Investing in equity 53). gives you enough room to pursue many other activities during your day. 

Trading strategies are 54). diametrically opposite to investing strategies. 

55). It takes market-players the longest time to digest and fully comprehend 54).

For long-term players, 56). up-side is unlimited. This is a vital fact. 

Also, 57). downside is limited to input. Factor in good DD, and that very probably won’t even go half-way. 

58). Thus, 56). and 57). make for a very lucrative reward : risk ratio. 

Equity needs courage, to 59). enter when there’s blood on the streets. 

It also needs detachment, to 60). either exit when required for monetary reasons, or when everyone else is getting ultra-greedy and bidding the underlying up no-end. 

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Patience and Nerves Anyone?

As someone I look up to put it recently – “It’s a game of patience and nerves!”

What is?

The stock-market. 

For whom?

The long-term investor. 

Do you have any?

What?

Patience, or nerves, or both?

You do?

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. 

How?

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. 🙂