Three Must Have Traits for Successful Investing

life_successfulIn order to become good in your art and succeed, one needs to keep an open mind, commit to continuous learning, and reflect back to check your tracks and direction. In investing and individual portfolio management, while it is important to understand PE ratios, correlations, book values, etc., it is also equally important to focus of our behavioral characteristics. Discussed below are three characteristics that I have learnt play big role in our investment success.

(1) Need to have well defined strategy
Individual investors who want to manage their own portfolio must have their own strategy. This should include investing style, time period, and diversified asset allocation. In addition, you also need to determine how you are going to manage it. If is based on sound investing principles, you will get good results. The well defined strategy will allow you to keep your emotions out of the picture.

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Managing Trading Process for Income Generation

photo.cmsThere are numerous ways to generate an income and make a decent living. I have observed that many folks consider it a panacea to discussing about investing and trading with little bit intelligence. Irrespective of whether there is substance behind it or not, it at least creates an impression of smartness and being intelligent. At personal level, I respect every style of investing and trading. But I remain skeptical in the context of applying to my own situation. I want to follow method or style what works for me. There are different styles, methods, and strategies for investing in stocks.

Readers of this blog are already accustomed to my approach of investing in stocks and remaining focused on dividends. The investment management process I use includes qualitative and qualitative analysis and asset allocation based risk management process. This works for me. And I keep tweaking and adapting if there is a need to make changes. Out there, there are many individuals who focus on trading (swing, positional, technical, momentum, etc.) and some other folks focus on opportunistic or speculative trades. Like every coin has two sides, I believe there are pros and cons of every method. It really boils down to how one chooses to look at depending upon your personal situation. Every individual has to figure out what works best for them. I always keep asking this question, what is wrong in trading if one can generate income with consistency using trading strategies. It doesn’t work for me, so what, it may work for some other smart guy!

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Start Running Only After Knowing the Finishing Line

1132907_finish_directionFew weeks back I read an interesting comment to an article on seeking alpha; Investor’s sole objective is to maximize capital appreciation (or returns) and in doing so follow a path of minimum risk. This is not a quote but essentially what it meant. I pondered over it and came to conclusion that comments section is not a place to divulge or express the target and goal. In essence, it does sound right.


So I talked to few other folks about their investing objectives and almost everybody had a similar thought process. Maximize your returns within minimum risk, devoid of any target or methodology. Even after few probing questions, it was clear to me the lack of a target. I even gave examples like, I have 100K to invest, now what should I do and how should I grow this capital. With few exceptions, the response I got was; do this for x% return; do that for xx% return; or wait for this opportunity and then invest to xxx% in three years, etc. I was pretty surprised by this.

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Shake the Dirt off and Take a Step-Up

Recently I came across few words of wisdom from Azim Premji (CEO of Indian’s top outsourcing firm). He narrated small story which goes like this:

One day a farmer’s donkey fell down into a well. The animal cried piteously for hours as the farmer tried to figure out what to do. Finally he decided the animal was old and the well needed to be covered up anyway; it just wasn’t worth it to retrieve the donkey. He invited all his neighbors to come over and help him. They all grabbed a shovel and begin to shovel dirt into the well. At first, the donkey realized what was happening and cried horribly. Then, to everyone’s amazement he became quiet.

A few shovel loads later, the farmer finally looked down the well and was astonished at what he saw. With every shovel of dirt that fell on his back, the donkey was doing some thing amazing. He would shake it off and take a step up. As the farmer’s neighbors continued to shovel dirt on top of the animal, he would shake it off and take a step up. Pretty soon, everyone was amazed as the donkey stepped up over the edge of the well and trotted off!

Life is going to shovel dirt on you, all kinds of dirt. The trick is to not to get bogged down by it. We can get out of the deepest wells by not stopping. And by never giving up! Shake it off and take a step up.

It is no wonder that when everybody is crying horse on outsourcing, this company is happily shaking of dirt and stepping up. He is not only employing thousands of workers in his country, but also help companies in developed world reduce their operational expenses. You clap with two hands! Outsourcing exists because somebody wants it!

Similarly, I will continue to shake off the tag of non glamorous investor, conservative investor, and investing for dividend pennies. I plan on accumulating my dividends (dirt to financial engineers!) and someday I will also trot off the financial pit.

Getting on Presidential Bandwagon

Today I watched our President’s press conference with an expectation that he will say something about our economy. I was expecting some journalist will grill him on projected 6% shrink in US GDP. Alas! That was not the case. There were few responses and contextual mention about few elements like auto industry and banks. However, I am not here to critic the press conference (who am I and how can I?).

One particular question that caught my attention was when one journalist asked about troubling, surprised, enchanted, and humbled. All through when The President was responding, I was thinking about how would l respond to those questions in the context of investing?

Troubling: It is troubling to see that free money caused the problem. And we are continuing to try to solve it with free money. We are trying to solve it with the very same tool that created it in first place. We have filled the lake with water, for it nowhere to go. This standing water is now getting polluted. We are continuing to pump in more water in a hope that it will start flowing. Flowing where? Won’t it burst out of the embankment? Burst will result in spreading of polluted water. Let it dry off, or get vaporized, or drain it slowly, only then it will get cleaned. continue reading rest of the article….

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