Dhanayush Capital Services Private Limited

There are three ways in which investors can beat the market. One is physically difficult, one is intellectually difficult, and one is emotionally difficult.      1. You can work harder, put in more hours, and outwork everyone else. 2. You can be smarter, see the future differently, and better identify when the market is wrong. 3. You can be better behaved, take a long-term investment approach, and hold on.              Unfortunately, most investors focus on the first two. They try to outwork or outthink everyone while overlooking better behaviour. If they only realized that more effort and intelligence still requires better behaviour to succeed at investing. Every investor walks the emotionally difficult path. ~ Charles D. Ellis

No asset (or strategy) is so good that you should invest irrespective of the price paid. If when buying a house the mantra is “location, location, location,” when thinking about any investment (be it an asset or a strategy), the equivalent refrain should be “valuation, valuation, valuation.” We would argue that one of the myths perpetuated by our industry is that there are lots of ways to generate good long-run real returns, but we believe there is really only one: buying cheap assets. ~ James Montier

Even though most investors see their work as active, assertive, and on the offensive, the reality is and should be that stock and bond investing alike are primarily a defensive process. The great secret for success in long-term investing is to avoid serious losses. ~ Charles D. Ellis

The evidence suggests that fear causes people to ignore bargains when they are available in the market, especially if they have previously suffered a loss. The longer they find themselves in this position, the worse their decision- making appears to become. ~ James Montier

The best financial plan is to save like a pessimist and invest like an optimist. ~ Morgan Housel

If the price of a particular stock is going up, we assume good things are happening; if the price starts to go down, we assume something bad is happening, and we act accordingly. It’s a poor mental habit, and it is exacerbated by another: evaluating price performance over very short periods of time. Not only are we depending solely on the wrong thing (price), Buffett would say, but we’re looking at it too often and we’re too quick to jump when we don’t like what we see. This double-barreled foolishness—this price-based, short-term mentality—is a flawed way of thinking, and it shows up at every level in our business. It is what prompts some people to check stock quotes every day, sometimes every hour. ~ Robert G. Hagstrom

Markets, do recover, so the great risk to individual investors, as it has been so often before and will be again and again, is not that the market can and will plummet, but that investors will get frightened into liquidating their investments at or near the bottom and will miss all the recovery, thus turning the temporary market loss into a permanent capital loss. ~ Charles D. Ellis

Be aware that the market does not turn when it sees light at the end of the tunnel. It turns when all looks black, but just a subtle shade less black than the day before. ~ James Montier

Any investment that has become a topic of widespread conversation is likely to be hazardous to your wealth. It was true of gold in the early 1980s and Japanese real estate and stocks in the late 1980s. It was true of Internet-related stocks in the late 1990s and condominiums in California, Nevada, and Florida in the first decade of the 2000s, as well as bitcoin in 2017. ~ Burton G. Malkiel

The reality of risk is much less simple and straightforward than the perception. People vastly overestimate their ability to recognize risk and underestimate what it takes to avoid it; thus, they accept risk unknowingly and in so doing contribute to its creation. That’s why it’s essential to apply uncommon, second-level thinking to the subject. Risk arises as investor behaviour alters the market. Investors bid up assets, accelerating into the present appreciation that otherwise would have occurred in the future, and thus lowering prospective returns. And as their psychology strengthens and they become bolder and less worried, investors cease to demand adequate risk premiums. The ultimate irony lies in the fact that the reward for taking incremental risk shrinks as more people move to take it. ~ Howard Marks