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D.Muthukrishnan (Muthu), Certified Financial Planner- Personal Financial Advisor

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Nuggets for 25th February

Posted by Muthu on February 25, 2018

Some of my recent tweets:

1)Most of us call ourselves long term investors only till a short term setback start happening.

2) A long term investor needs to learn to live through upgrades and downgrades, buy and sell calls, over valuation and under valuation, multi-bagger and 50% falls, breakthroughs and setbacks. There is no way to avoid this roller coaster ride.

3) May sound stoic. But there is no way to avoid pain and under performance in markets. Even legends have undergone this. None of us would be an exception to this rule. All the more, why we need to be modest during successes.

4) I agree with Lou Simpson who said that lot of people don’t have the patience or temperament to really be investors.

5) Patience has its origin in a French word meaning suffering. To be patient is to suffer. No doubt, investors find patience the most difficult trait to develop.

6) Not having to time the market and keep making frequent buy and sell decisions is bliss. Try it and see.

7) Never done anything bad for clients. But financial independence made me to be completely truthful to clients even overlooking my own interest.

8) Businesses grow on a timescale of years. We want stock prices to move on a timescale of few weeks or months. This mismatch reduces our critical asset, patience.

9) We are not capable of timing bull or bear markets. We don’t know when correction would happen, how far and when markets would rise again. We follow this simple rule: Invest when we’ve money and sell when we need money, ensuring a there is a minimum 10 year time period in between.

10) If we learn to appreciate, uncertainty can be beautiful. We fall for forecasts because they provide us the fallacy of certainty.

11) Don’t keep chasing new ideas. Ideas are dime a dozen. Staying the course even with a mediocre idea would give better results than constant churn due to chasing of new ideas.

12) I’m absolutely convinced that if one can master his behaviour, huge fortune can be made through markets over long run. As Munger says, repetition is the heart of instruction and we would repeat this tirelessly for both your and our benefit.

13) Starting its journey from 1979, Sensex has made innumerable new highs in the last 4 decades. It would continue to be so. If you think the current market level is high, wait and see where it would be after 10 years.

14) We fear both rises and falls, peaks and valleys, highs and lows. We are seldom at peace. You can never avoid these swings in markets. Develop and stick to a strategy which would keep you grounded all times.

15) Anything and everything may work in a bull market. The benefits of having a well defined investment philosophy and strategy would be evident only during deep corrections and bear markets.

16) Financial independence not only allows you to control your own time, it also helps you to buy others time (say employing a driver). Time is the most finite and precious wealth.

17) Why we focus mainly on behaviour and emotions? Because mis-behaviour and lack of emotional control cost us lot of money. Losing money is losing time. We just don’t realise it.

18) Corrections and bear markets are regular occurrences. Nothing unusual about it. It only becomes a problem when we sell during these times converting notional into permanent losses.

19) Agricultural income is 100% tax free. Do we take farming as occupation because of this? All investment decisions need to be taken on fundamental merit and not tax arbitrage. Fundamentals would last and tax arbitrage may not.

20) Financial independence is a state where instead of you working for money, money works for you.

21) If you’re feverish about building wealth; would leverage, chase fads and make many other mistakes. Have wealth goals without being feverish. You’ll then make fewer mistakes and build sustainable wealth.

22) Google and go through what experts predicted about effect of demonetisation, Brexit and Trump presidency on markets. The more you read old forecasts; you would not take any present forecasts seriously.

23) Completely ignore all forecasts. Have a broad brush view that our country and hence corporate India would do well over long term. If you don’t have this belief, avoid equity. Equities are only for those who have faith in future.

24) I started learning in a right way only when I started teaching my clients. The best way to learn is to teach. To rephrase it better, the best way to learn is to share.

25) Everyone act based on their self interest. Advisors are no exception. But just be sure that his and your interests are aligned. Don’t believe anyone who says he is acting solely on your interest.

4 Responses to “Nuggets for 25th February”

  1. Nithin lakshmanan said

    Reading this once every few months makes me relaxes me. Thank you Muthu

  2. As ever, the nuggets are actually written in pure gold.
    Agree : “Fundamentals would last, tax arbitrage may not”; so finally no cursing and losing breath over LTCG.
    Sensex has given more than 17% CAGR since its inception. So no heart to lose.
    Just invest, have patience and enjoy money multiplier game.

  3. Aditya Malpani said

    Great points !! Discipline and patience will always help you in long run. Will share this article with all my friends.

  4. […] 25 nuggets of financial wisdom (Muthu) […]

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