Investing : The art of saying No

It's been a month since I have traded rather transacted in the markets. I have not found a compelling idea to bet on despite browsing over the results of 200 odd companies,  This is not the first time that this has happened & it sure ain't the last. However this temperament to track & not act is crucial to generating superior returns.

Stock markets are projected as a jet setting trade where every minute is precious. A blink & you might miss the trade of your life. There are millisecond countdowns to the market opening & closing, a strange RUSH which puzzles me. My personal tryst with investing is completely different. On most days, I find nothing fascinating about market openings or closings, infact market watching is unproductive & boring. Investing is not about speed, its about conviction which is built on knowledge & sensible research. Say NO to trading in the first hour or RUSH Hour, its impulsive & rash.

News channels have endless data & updates about the market. Off late most anchors & commentators have been focusing on monsoon. Last time I saw someone gauge at the skies with so much interest was Aamir Khan & team in Lagaan. The time & effort spent analyzing the monsoon is an absolute waste as the variables are so many - quantum, location, timing, availability of water, kind of crop etc. Its success or failure will have an impact of few decimal points at best & yet it is being projected as the 'most important' variable. Ironically, the second most important variable as per news channels is the RBI governor Rajan & his career choices which is just as useless. Say NO to attention grabbing, loud, repetitive & debatable news. It's meant to generate TRP's not returns.

If the stock market were a street, it would be the noisiest in the world. Such an environment is not ideal for harmonious & sensible decision making. In the markets you will have an advice/ tip from every participant. The 8000 odd listed companies will be suggested in some way or the other & let alone the investment thesis even keeping track of the name is a challenge. Thus I am never worried about 'missing out' on a trade, that is inevitable. If something seems interesting, one should take time & study it in detail before taking the plunge. Say NO to the market noise. 

We have a tendency of making things complex, be it life or markets. Many a Nobel laureate were bored enough to study the markets in crazy detail & come up with messy conclusions which unfortunately have found their way into financial textbooks. Take for example 'Black Schole Merton' who were awarded the Nobel prize in 1997. They devised a new way to value derivatives, founded a hedge fund Long Term Capital Management which went bust trying to execute their findings in 1998 losing almost USD 5 billion. The Fed Reserve had to step in & the situation was akin to the sub prime crisis when Lehman, Bear Sterns etc collapsed. Investing is a simple exercise, if you do not understand an instrument or idea then ignore it, something simpler will come by. Say No to complexity, keep it simple. 

This brings us to one last question - When does one say Yes ?

Every now & then one does not find valid reasons to say No to a particular idea. Slowly one begins to understand these ideas & occasions well. When one comes across such an investment idea, be bold & bet Big. One Yes ( not bank ! ) can indeed change your life.