Ben Graham is credited with the discovery of a character called Mr. Market, a maniac depressed character which is either euphoric in joy or dismayed beyond repair. He experiences wild mood swings and throws erratic prices at you, quoting Reliance at 2500 one day and 900 a month later. The best investors are those who take advantage of this behaviour and make money in the longer term. Those who react at every wild swing go bankrupt in no time. These are the punters or our intra-day traders as we call them.
So I realised that having an investor’s mindset is key to success in the stock market. You buy when the prices are most favorable and sell when you believe that it’s your best chance to exit. For the intervening period, you go for a walk and watch movies. The quotational loss and gain might be a good source of entertainment but you don’t take it to heart and sleep peacefully.
This is the basic principle behind this blog that compounding is a slow process rather than a destination and it takes its own sweet time. It is referred to differently as being patient, delayed gratification, holding one’s cards to chest, etc etc. Now this principle is the same as Karmayoga in Hindu culture. One does his duties as a way of bhakti and lets God decide what the outcome is. If you get panicky everyday for your deeds are not delivering the desired outcome, you are not discharging your duties righteously.
So I’ve earlier propounded this belief that personally, slow growth has led to massive compounding for me in reading, physical fitness and investing. From where I began the respective journeys to where I’ve been able to reach is like night and day. I surely couldn’t have imagined the progress I’d be able to make in the intervening period.
But why limit this behaviour, this investor’s mindset to only words, wealth and wisdom. Why not apply this to every part of my life and see if it works for of course it will. If you believe that in office, your bosses and colleagues represent the larger players of the stock market and they will cry and shout in unison for no better reason than they’ll praise and love you and all you’ve to do is to switch off the TV and let the day pass, you can outlast many a bear markets and enjoy the fruits of an eventual upswing. I personally have been a culprit of being an F&O trader in my dealing with my bosses and have certainly have had more than my fair share of bad margin calls.
Similarly, if you treat your spouse as another case of Mr. Market and start to see the larger picture and not react to her every mood swing, you’ll enjoy the true fruits of long term compounding without any short squeezes or a false breakout. Apply this to anything and it works- you want to attract a girl and you hit on the first one you see in college instead of hanging on to get the best available opportunity! You eat the first thing you see and it’s generally a pizza and have a fatter belly than you like. Imagine yourself driving through a bad traffic route and either you abuse your way through it or quietly focus on the way forward.
Having an investor’s mindset is crucial and I believe the key to it is self-discipline. Discipline is not some esoteric idea or a punishment but the price one pays to get rewarded multiple times over in future. It works in markets and so does it work in life. Hence I said, investing is life. True investing is investing in yourself and the key is self-discipline!
Life is all about Compounding! 