All of us are aware about the excitement and the tension that any Indo-Pak Cricket match brings and more importantly if it’s World Cup. Pakistan has never defeated us in a Cricket World Cup match and the record continues (after yesterday it’s now 7-0 in favor of India).
” Indo-pak match is always a battle of nerves and yesterday was no different. This is starkly similar to investing in stock markets “
3 most imporant lessons that an investor can learn:
Pakistan’s strength is their bowling and not batting. Given that and especially in a high-pressure match, defending the total should have ideally worked more in their favor as against chasing the target.
As an investor, we should always look for investments that suit our strong points. E.g., investing into a sector that we understand better, fundamental or technical based investing depending on our own aptitude, return targets based on our own risk appetite.
Market is full of noises and distractions. The aim is to capitalize on our stengths and mitigate the weaknesses.
India was well aware that rest of the Pak bowling was not that strong and hence there would be sufficient time to catch-up.
As an investor, we many-a-times face situations where we do see the risks/ negatives in an investment but still decide to go contra due to various reasons – inability to accept mistakes, trying to average down or calling the bottom, becoming greedy by comparing the current price with the all time high price, getting influenced by media.
The Market is a discpline where respecting risk is most important. Returns will follow.
As an investor, we should accept that there are periods when we are successful and there are periods when we are not. Our problem is we normally play less during good periods (by becoming greedy and booking profits quickly) and end up playing more during bad periods (by holding loss making investments for too long or trying to average down). Think again, shouldn’t it be the other way around?
“Averaging Up” vs-a-vis “Averaging Down” is the most mis-nderstood concept in investing.
I hope, all of us continue to learn, improvise and become better and prosperous investors. Amen !