Discover more from Intelsense
Your dose of weekly wisdom
Today’s piece is triggered by an article I read. A group of investors have sued three large US-based investment firms, Sequoia Capital, Paradigm and Thoma Bravo, and are arguing that these firms publicly hyped FTX, giving it an "air of legitimacy," and thus are liable for the consequences of its misdeeds. You can read the article here.
There are so many things that are wrong with this.
The investors who lost money are now trying to blame an external party for their bad choices. This is one of the most classic cases of denial. One of the most important factors is a denial of responsibility and attempts to justify their behaviour.
An important aspect of being a good investor is to accept reality as it is. Poor investors, on the other hand, deny reality. They try to wish away reality. The first and most important step of progress is when you accept reality, analyse and understand the reasons for the mistake and take mitigating action.
Conflict of short-term versus long-term outlook
The second thought for the day is about the conflict of short-term versus long-term outlook while investing.
Investing in equities is a difficult game. Investors face a timeframe dilemma. And this is very prominent now. In the short-term things look uncertain. Stock price movements are random and no one knows what tomorrow will bring. But in the longer term, things tend to work out well. All analyses of ten years or more demonstrate that investing in equities beat all other asset classes in general.
But in the effort to be short-term happy (or smart) investors tend to sacrifice long-term returns. The best antidote to this that I use for myself is to mentally prepare for some dips along the journey of a long-term upmove.
If you cannot stand volatility, then you have two options. Firstly, don’t invest in equities. Go with fixed-income assets or real estate. Secondly, invest in some funds that you cannot easily redeem. Or which does not allow you full visibility of your portfolio (although that is very difficult with the current regulations in place).
Remember that the price of long-term gain is to live through short-term pain.
Thought of the Week
You become what you study, so choose your study materials carefully and do read a lot. ~ Robert Kiyosaki
In today’s world, you can perhaps supplement reading with listening to audiobooks & podcasts and watching documentaries and videos. But the flow of input information from credible sources is critical. That is why sometimes a good curation service or recommendations from someone you trust is very important. Also, keep some time to digest the input information. It should not be just a continuous flow of input data with zero processing happening at your end :-)