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Choose your Battles

All Roads Lead to Rome is an old saying and in the financial markets all strategies are supposed to lead to the same result – Profits for the Investment (in time and money).

But not all strategies are created equal – what works good at one point of time may not be the best of the time for another strategy.

Don’t catch a falling knife is a valid advice for a momentum investor but a value investor thrives in such scenarios.

Value Investors scoff from buying companies that are seemingly no good on paper and yet get high valuations. Investors of Venture Capital Funds on the other hand love investing in companies only on the gut feel that this could be a game changer decades on even though today its shitty than anything available in the public markets.

Day Traders thrive in volatile markets when the rest of the participants are losing their minds but lose theirs when the market is calm with nothing much to do.

In the movie Avatar, Zoe Saldana who plays the role of Neytiri says to Sam Worthington playing the role of Jake Sully and I Quote “To become “taronyu” hunter, you must choose your own Ikran and he must choose you.”

Similarly for the markets – the ability to succeed only comes if you and method you choose are able to gel together.

I understand fundamentals but never can become a value based investor for my mind always wonders, do I really know all that I need to know. Quants appeal to me by helping me showcase historical instances when it succeeded and failed enabling me to quantify.

One doesn’t become a value investor by reading Buffett or Munger as he wouldn’t become a politician by reading the biographies of successful politicians. The roads they took are different from the roads you shall face. But if you need to start off somewhere, that is a good place to start.

In Facebook, everyone has the perfect life. On Twitter, everyone is an expert in everything. People who may not in real life have invested even 10% of their Networth in Equities can be seen as successful investors by creating a mirage.

Everyone has their own favourite views about the market. Some are perma bulls who see no risks at all while others who are bunched as perma bears see nothing but risks all around. Yet as its most likely the truth lies somewhere in the middle.

Success in markets is fleeting regardless of how high one went at one point of time. John Paulson, a hedge fund manager had his day in the sun when he made it big shorting the housing market in 2007 and then reaping it big. Today, he is having a tough time holding onto his clients as clients have rapidly left what is now seen as a leaky boat.

Quantum Long Term Equity fund, a fund I like and where we have a small amount of money invested is ranked the best among large cap funds on a 10 year period. But drill it down to 1 year and the picture changes entirely. It’s so close to the bottom that one wonders if they have lost the mojo.

While theoretically we should behave as our own fund managers, it’s tough to emulate them when the going gets tougher. If you believe you shall panic when the chips are down, your strategy should be different than one you would wish to follow for the chain is only as strong as the weakest link and here the weakest link is ourselves.

Success can mean different things for different people, in the financial markets, to me they mean being able to stay the course for the longest period of time even if I don’t come anywhere close to the winners.

 

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