Learnings/ Inspirations Markets

3 action points to overcome obstacles and achieve success in stock markets

Stock market is all about being conscious and focused. So let's try to cut through the noise.....

My humble request – please don’t rush through this post. Few minutes of your attention would surely make you think hard !

Let me first request you to have a closer look at the illustrated cover photo – when I saw it on Pexels, I found it intelligent, thought provoking and very apt for the purpose of this post.

The photo conveys ignorance, confusion, foolishness – which, I believe are key obstacles to achieve success in the stock market.

All of us have these qualities (pun intended), only the extent vary, which in turn determine our investing performance.

We are ignorant, when we are not aware about our own strengths and weaknesses

This can be in relation to the sectors we should invest into, the extent of capital that we can commit and our own aptitude towards the timeframe, risk and return expectations.

We should ideally be playing on our strengths and defending against the weaknesses, though rarely are we so mindful.

E.g., if I don’t understand a sector, why should I be even looking at it at all? Whether I am over or under committing capital towards a particular trade based on my own risk appetite? Whether the subject investment meets my own risk and return profiling?

We are confused, when we are not able to cut through the noise and get influenced quickly
We as investors are exposed to lot of information, news, opinions and tips. There are numerous TV anchors, journalists, web portals, social media, pundits, analysts, investors and our own friends providing diverse, exciting and convincing information.

Result – there is information overload and most of the times we end up acting in haste. Fear of Missing Out (FOMO) syndrome.

E.g., think how many times have you entered or exited a stock based on the market noise and ignored your own strategy? 

I am in no way downplaying the importance of knowledge and learning here. The more we read and hear, the more we learn. However, the key is the ability to differentiate good from bad and using the good to improvise our own strategy.

We are foolish, when we become arrogant, revengeful and try to outsmart the market
Have you ever met a successful stock market investor who is not humble? I bet not…… and if you have, kindly share the name in the comments – I would be very keen to learn more about him !

Stock market is unique – it has the uncanny habit of making the sharpest of minds humble. We all are aware about this, but still rarely do accept our own mistakes.

E.g., How many times have you entered a transaction just to recover losses from your previous transaction? How many times have you attributed loss in a particular investment to overall market movement and didn’t even bother to challenge your original analysis?

The key is the ability to accept that market is supreme and we mortals can also be wrong !

If we agree on the above obstacles, let’s then focus on mitigating their impact. Following is my staretgy for myself – checkout if it makes sense to you……

3 ways to overcome obstacles
1. Decide your startegy and follow it with discipline
This is the single most important factor to achieve success in the markets. The other two are improvisers and can not work in isolation.

Over the years, I have realised there is no strategy in stock market that is foolproof – every strategy is right as well as wrong. What really matters is – whether the strategy suits our own skillsets, aptitide and how are we mimimising losses and maximising profits.

One can be a pure value investor or a pure technical investor or a cross between the two, can be a day trader or a swing trader, can be a cash investor or a F&O trader. The approaches and strategies are limitless. I have seen successful and unsuccessful investors/ traders with every approach and strategy.

What differentiates success from failure is discipline, discipline and only discipline !

The real problem arises when we try to follow multiple strategies to satisfy our own ego and inability to accept mistakes.

E.g., when prices are increasing, we act as traders (booking small profits) and when prices start declining, we switch to become a value investor (and sit on big losses).

I am not saying that we should not work on improvising our startegy or adopt different strategies in different market conditions. We surely should, as investing is an ever learning activity. However, the issue is when we do it without discipline.

2. Keep your eyes open and be a keen observer

This is important both from the perspective of identifying opportunities as well as mitigating risks. We should be a keen observer of what is happening around us and act accordingly.

Sometimes the most obvious opportunities/ threats are right in front of our eyes and we resist to recognize and/ or accept them. 

Let me try to explain it with few examples.

Think about Havells, Bata, TTK Prestige, Bajaj Finance, VIP Luggage, Dmart, Jockey, Dominos, HDFC Bank – many of us have been their customers and over the years have witnessed them growing quarter on quarter. Our friends and relatives were increasingly using their products but still many of us failed to capitalize on many of these opportunities and consequent multi-baggers.

We were instead busy investing into some Pharma Company – whose products we had minimal information about. I personally can not even pronounce most of the molecule names !

Likewise goes for identifying trouble points. E.g., all of us have been witnessing slowing auto sales in our neighbourhood over last one year. Still, many of us kept on investing into auto stocks looking at how much lower we were getting them compared to their all time highs.

3. Try to put yourself into the shoes of professional fund managers
They are the big guys, controlling significant amounts of money and move the stocks up or down.

Being aligned with their thinking will minimise our risks and disappointments.

I agree, its impossible to track them perfectly. However, we have to realize that they are also mortals like us and have similar emotional and behavior patterns. Greed and fear is equally applicable to them as well.

The key differences between them and us – they are managing external money, are accountable, have easier access to companies and have a tendency to work in groups.

So how does one think like them?

Firstly, ignore their interviews on TV, newspapers and magazines. Instead, focus more on their actions. E.g., –

  • Checkout filings by Companies wherein they disclose meetings with analysts and fund managers. The more interest a Company generates, the more likelihood of some action by the fund managers.
  • Compare periodical disclosures by mututal fund schemes to determine what they are adding and what they are exiting.
  • Technical analysis (volume and price action) of stocks can also be very helpful to analyse this behaviour.

I sincerely hope that my humble write-up did make you think and you were able to relate with the above points based on your own experiences. Please do comment for any agreements or disagreements and share the post if you found it helpful.

I personally continue to work upon these 3 points to improvise my own stock market behavior and performance.

A successful stock investor is aware, thinks clearly and acts intelligently. Click to Tweet

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About the author

Nitin Jain

A finance professional with around 20 years of investing experience in Indian markets both on buy and sell side, equity and debt, private and public with some of the best organizations globally including Goldman Sachs, ICICI Group, ICRA and others. He is a All India Silver Medalist CA by qualification.

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Amit Lodha

very succinct and to the point Nitin. Brilliant

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