Minimizing the number of decisions improves your yield.

1 decision to buy a good stock in 2014 would have given you double digit CAGR compared to dozens of algorithmic buy/sell trades executed on a daily basis.

There is sophistication in simplicity.
Subsequent averaging in a stock you've bought once doesn't count as a decision. It's just the reinforcement of the initial decision, as and when fresh salary becomes available to you.

Trimming on rise, booking partial profits, re-entering these gymnastics counts as a decision.
Take 1 good decision & keep reinforcing it through the decade. Don't play bull and bear at the same time. Be a buyer throughout the decade.

If you feel like the market is in a bubble, sell everything and exit, that's again 1 decision. Don't take that decision on a daily basis.
"I bought stocks in 2008 and moved it all to risk-free bonds in 2030 when my retirement corpus was met" is the clean execution of just 1 decision.

Don't turn it into a thousand micro decisions throughout these 2 decades, by trying to buy/sell/switch stocks repeatedly.

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More from @techlunatic

26 Dec
The paradox of momentum stock picking is that it performs when it doesn't matter i.e when the rest of the market is already rallying.

Backtesting shows that any momentum strategy will have given 50% in the past 6 months, when the Index itself gave 82% from 7500 to near 13700.
Although 50% seems a lot in absolute terms, but in relative terms, it has still underperformed the Index in the same time frame.. THE INDEX; Not even comparing it with exceptional cases like Bajaj Finance.
This happens because the BUY signal will be generated on moving-averages crossover only after the initial 20% rally is missed, and the SELL signal will be generated at a trailing stoploss that is hit 20% below peak, so 40% of the rally is lost by design.
Read 5 tweets
26 Dec
@KumarBhatia1806 Taking good advice is also an art. People who ask for advice then obliquely undermine the advice giver like "pakka na?" are not in a state of mind to act with conviction and benefit from the advice that is given to them.
@KumarBhatia1806 Someone asked, I said "Colgate". This was in 2018, at a CMP of 1000. Next day he comes back "Economic Times is saying fiscal deficit... debt restructuring, structural reforms, capex..". I said Ram Ram and moved on...
@KumarBhatia1806 Last week he was saying, Nifty ka top lag gaya, I said congrats on the gains. He's like "kaheka gains, kuch liya hi nahi tha".

Neither stock selection nor perfect timing, it's people's behavior that limits their growth. This comes from initial 20Yrs of grooming; Hard to unlearn.
Read 4 tweets

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