By Tanisha Sharma
Life is the largest stock market!
The analogy may have a philosophical tint, but the similarities are hard to miss — you don't know what will happen or when will it happen.
Plus, markets are run by people — with same shortcomings that any other human being has. That's what makes the market place exciting.
By extension, life lessons can be valuable for the market, and vice-versa. In fact, the world of literature can throw up some interesting nuggets of wisdom for investors and traders alike.
We laid our hands on some popular literature for those tricks on how to survive in financial markets? See what we got.
1. I understand what youre saying, and your comments are valuable, but Im gonna ignore your advice. – Fantastic Mr Fox by Roald Dahl
The Magic Land was filled with players — some seasoned, some raw and some in between. But everyone had something to share with the man.
“You should buy the seeds with the best shine,” said one. “Oh no! You should buy the ones sold by the richest farmer,” said another.
“Thats crass,” countered another. “The seeds which look unattracted are the key to growing the forbidden fruit”.
The words continued to come in — left, right and centre.
Moral: Its pretty natural to be overwhelmed with multiple suggestions from fellow investors. However, its essential to cut the noise out and plan your own strategy. What has worked for the masses may also work for you, but its essential to have your own unique plan. Its crucial to strike a balance between learning from experiences of others and at the same time, not losing your own thought process.
2. When someone leaves, its because someone else is about to arrive. – The Zahir by Paulo Coelho
It had been a while ever since the man arrived on The Land and made it his home. He woke up every morning, appreciated the tree. But his eyes would stop at the small buds and he would lovingly gaze at them, hoping that they would soon bear fruit. With immense gratification, he would water the beautiful tree that had been growing in his backyard.
One day a terrible storm struck The Magic Land, causing a massive devastation. The catastrophe uprooted the tree and it lay in the backyard, lifeless. Tears rolled down the mans eyes as he hopelessly fell to his knees lamenting a loss so sudden.
A few spaces away, a tiny sapling had started to grow…
Moral: Its essential to look at the bigger picture. If one plan fails, there are other opportunities waiting to be discovered. Persistence and stubbornness to succeed goes a long way. Continue to be on the lookout for news opportunities.
The markets are intensely volatile. Accept that things will sometimes go wrong. But they will also eventually go right. Investing in the market is indeed filled with innumerable emotional roller-coasters. Sometimes, its ok if you let go and work on plan B or C.
3. We must all face the choice between what is right and what is easy. – Harry Potter and the Goblet of Fire by J K Rowling
That one storm embedded a fear so deep that the man did not want to witness yet another heartbreak of seeing a fallen tree. So, every morning, he would water his saplings in the backyard and before they could grow any taller, he would sell those off to others.
The fear of another storm lay heavy in his dreams and continued to blur his vision to earn the forbidden fruit.
One day, news came that someone has finally found the forbidden fruit. The Magic Land brimmed with activity, everyone huddled to catch a glimpse of the one who got lucky. The man went there too, he stood there frozen, his face drained of all colour, only to discover the trees that were once saplings in his own backyard.
His wish: Only if he had held on to those longer and not given away his saplings.
Moral: At the end of the day, its a major gamble. As an investor, you must know your vision. Every action is tied up with its long term consequences. While there is nothing wrong in trading stocks on a short- or medium-term basis, it is absolutely vital to ensure the bulk of your portfolio is invested in longer-term holdings.
This requires a lot of tolerance, which is not easy to come. Quick money and shortcuts are major pitfalls every prudent investor should avoid.
4. The strongest of all warriors are these two — Time and Patience. War and Peace by Leo Tolstoy
For the next few days, The Magic Land continued to buzz with the success story of how someone had successfully secured the forbidden fruit. People speculated while a few tried to debate on what must have worked out. Was it the seeds, was it the meticulous nurturing, was it the time, or was it knowing how to spot the right sapling… all that and much more.
Days passed and every morning, the man continued to water his saplings — just like daily routine. He was disappointed when he tried to evaluate his journey so far, but remained hopeful of finding the right moment.
Moral: The above quote throws light on one of the biggest mistakes made by many investors — the inability to fight off the craving for selling shares right at the first sign of profit. Its necessary to understand the value of patience and let winning stocks play.
Furthermore, its essential to know when to swiftly jump out of a losing trade and avoid mis- allocating a lot of money. Yes, its okay to lose some money as perfection is not always attainable, but remember your ultimate goal: making profits in the long run. Patience would enable you to make far more on the winning trades and eventually allow you to outnumber the losing trades.
5. The goal isnt to live forever, the goal is to create something that will.– Diary by Chuck Palahniuk
The seeds had been good, and so were the saplings. The man had done all that he could to the best of his capacity.
“If nothing more, at least Ill have a shade to cover my head under the sun,” he smiled to himself.
The Magic Land was finally raining magic.
Moral: This is the biggest pearl of wisdom quoted by many seasoned market experts — Quality. While going with a company, one needs to critically evaluate its quality. This requires homework and many efforts at your end — from exploring balance sheets to getting in touch with the management.
What is needed is your own strong yardstick for selection. For example, whether its strong market capitalisation, a steady debt level, or perhaps robust EBITs, find your strategy and stick to it.
Once you have confidence in the company, you must evaluate the price. Great quality companies won't come cheap. At the same time, dont settle for lesser quality stocks just because they are coming off cheap in the market.
Finding a bet that provides value for money should be the goal. Results would eventually follow.