Investing Rules Based on RANDOMNESS

Investing Rules Based on RANDOMNESS

  1. We often mistake luck and randomness for skill and determinism. The only truth is long term potential. In the short to medium term, don’t try too hard because it can badly backfire
  2. We can never be sure any theory is right – things constantly change and the next observation may prove us wrong. Just maintain discipline and manage your behaviour and be open to accept surprises. Investing has uncertainties but not investing is certain formula of failure
  3. Life is unfair and non-linear: The best do not always win. Ignore star ratings and star fund managers. Simply manage your behaviour and follow discipline.
  4. Our reasoning is context-dependent and mostly based on simple rules. Keep investing as simple as possible because we are not equipped to handle complexities beyond thumb rules
  5. Emotions can help us make decisions, but also overwhelm our capacity for rational reasoning. Please don’t follow the rational advice from those who have been hurt by their past investing experience
  6. In retrospect, we always find patterns, causes and explanations in past events, but they are mostly useless for predicting the future. Ignore the past and keep doing your SIP and look ahead. The windshield will shield you the rear view mirror will show you a view that you are leaving behind in any case.
  7. Both in the media and stock markets, random noise is not worth listening to. Don’t watch portfolio performance from moment to moment. Stop watching CNBC, ET Now, Bloomberg kind of channels. That will keep you happier and will make you a better Investor.

Dharmendra Satapathy

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