We equate smartness with action, when in most situations, not doing anything is the smartest thing to do. Most common diseases such as flu, common cold, etc get well on their own, yet we prefer the doctor who writes as much medicines as your wife’s grocery list. We are addicted to this bias for action. This preference of doing something just for the sake of it has made us impatient and we pay a heavy price for this tendency in the market.
No amount of hard work is enough if we are not patient enough to allow it to bear fruits. The problem in stock market is that everyone wants to get rich quickly, in the process almost everyone gets poor quickly. The transactions costs, taxes,stress increases with frequent buying and selling and along with that, so does the returns of your portfolio
Almost all the financial entities earn when you transact, so you can imagine why they have never asked you to just “buy and forget”. Frequent buying and selling makes your broker rich at your cost. So if your brokers sends you an email everyday with “pick of the day” tips, do one thing - Don’t fall for it.
Don't make your broker rich at your expense
TRemember, you profit when you keep patience and your broker profits when you don't. In a survey in The United states, it was found that on an average, doctors had the best investing track record and not the people who were finance graduates ! Shocking ? Well the simple reason for the out performance of doctors was that there holding period was the longest. They were so busy with their professional lives that they completely forgot about their holdings. Such buy and forget attitude creates the maximum amount of wealth in the market. Whereas finance graduates assume that they can generate profits all the time. Needless to say, all they end up generating are transaction charges.
Patience and rewards are directly proportional
In the book "Warren Buiffet Invests like a Girl", It is explained why women have a better investing record. Women also excel as managers and a company with more women members on board have a lower number of bankruptcy occurrences so it's a shame that finance is considered as a man's domain in India. I studied at National Institute of Securities Market and in the batch of 60, we had 7 female students, which is evidence enough to suggest that women are discouraged to join a field they are naturally good at ! But why do women excel in investing ? The pervasive factor that makes women more successful in investing is patience. and risk aversion. Also, women are less egoistic and more willing to take expert advise when they found themselves lacking. Whereas, the testosterone charged men often tend to believe that they can manage everything on their own and tend to overrate their skills. While you cannot do much about your testosterone levels, the least you can do is inculcate a bit of patience.
Phew ! Seems like a lot of learning awaits the menfolk
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