Why ‘Right Knowledge’ is not enough for successful investing?

Dear Readers,
We are sure, you have been reading and following our Stock Shastras. Let’s go back a little and take a quick recap. We started with, why you should take charge of your investments and dispelled the myth that stock investing is a rocket science! We told you how to find a strong & wonderful company through the assessment of its financial track record, different types of moats and a respectable management. We also told you how to find the right price to buy and sell stocks. Now with 13 Stock Shastras, we have covered a complete methodology, that is critical to investing in stocks the right way.

Yes, this methodology directs you to investing in the right way, but just knowing the right way isn’t enough. Acting in the right manner is most important for successful investing; because knowing doesn’t give you money, acting in the right way does.

So, what is it that prevents you from doing this? The main cause is – Your very own mental traps! – the emotions/ biases that prevent you from acting on this method; in the right way. James Montier in his book – ‘The Little Book of Behavioral Investing’ has covered these traps and has very rightly said that “You Are Your Own Worst Enemy”

These mental traps bind you in 2 ways;

  • They prevent you from taking the plunge into stock investing
  • And for those of you who have started investing, lead you into taking incorrect stock investing decisions.

So, what are these mental traps?

For those who have yet not taken the plunge in the stock investing world, the lack of confidence is what haunts them. This usually leads to being dependent on experts/brokers and being satisfied with meager returns and then rationalizing that, that’s the best that could have been done. This, is a mental trap you have set for yourself.

And for those who have started, but haven’t managed to gain much success, are trapped in many biases. An example is checking the portfolio too often (which can be as often as every 2 minutes). This shows excess focus on the short-term which results in taking the wrong buying and selling decisions and then of course, tons of regret!

These and many others prevent us from taking the right actions. Thus, it is important to know and accept, that we are victims to these traps and is essential to have simple routines to overcome them. Our next few Shastras will deal with these very traps, giving out guidelines to overcome them. So, what can you expect, as you read these Shastras? Those of you who haven’t started investing, can expect that you will now start investing directly and successfully; and those of you who already invest, will take better decisions that can give far superior results

So, see you next week on Tuesday with our first Stock Shastra on these Mental Traps

From now onwards, we will be sending our Stock Shastra on Tuesday and Company Shastra on Thursday.

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