Investor psychology in times of crisis | Lessons learned

“Fearful when others are greedy and greedy when others are fearful.” – Warren Buffet

The last week has been an interesting view on my own psychology, on how all the best-made plans aren’t worth anything if you don’t have conviction and resolve. Fintwit talked about keeping a trading diary and here is my attempt to keep myself intellectually honest!

I am not a trader. I strongly believe that on a really long term horizon stocks will outperform every asset class. I also believe that the best opportunity to purchase assets is when everyone else is scared. In my lifetime I’ve seen two recessions – dotcom and GFC. I had just started my career during the dotcom boom and didn’t know anything and right before the GFC, we bought a house (great timing right :). So never had any cash to capitalize on the downswings in markets. I’d always thought that in the next downswing, I will be prepared and buy in-size!Read More »

Fear and loathing on Wall Street

Warning: Stream of consciousness follows! This week has been wild in the markets and I wanted to put my thoughts on paper and #timestamp my thinking. Standard disclaimer applies; none of this should be taken as investment advice!

RIP good times again?

Sequoia published version 2.0 of its RIP good times memo, catchily titled Coronavirus black swan of 2020. Taleb is furiously deadlifting somewhere right now 🙂 What was public stock performance since RIP good times? Looking back it looks like the S&P ripped up since its publication in October ’08. Is this the ultimate contrarian indicator? Are VC’s the last group to point at markets crashing? Is it all upside from here?Read More »

The traumas that define us

The brilliant odd lots podcast had Richard Koo on to discuss his theory of a balance sheet recession. The central idea is that when a credit bubble bursts and the private sector and consumers both start to deleverage it causes the economy to go into a demand loss spiral, which is a counterintuitive result. If excess leverage caused the bubble then deleveraging and repairing your balance sheet is the most rational individual choice, but this de-levering in aggregate is the wrong choice for the economy as a whole. I would highly recommend reading this paper that goes into some details and also reading his book.

130829jobless

Read More »

Investment products are counter-intutive| do conventional engagement metrics matter?

Product engagement is a hot topic. As a product person, you are always looking for the quantifiable metrics that indicate that your product is solving your user’s problem and that you are on your way to product market fit.

The conventional metrics for product market fit usually sound like the below with the trend line going up and to the right

  • User engagement measured by DAU MAU
  • Time spent on your product (Session time)
  • Core loop (# of times your core customer value transaction is executed)

An area which I’m deeply interested in is – do these same metrics hold true when we are dealing with anything related with money? Our relationship with money is very complicated. In silicon valley we see everything as a technology problem, is that true with money? is the success of digital products that deal with money more of a behavioral finance problem than a technology problem?
Read More »

Rule of half

All markets are at *all* time highs. What is an average investor to do? Is it too late to get in? Is it time to take profits if you are fully invested? In the last 15 years there have been two spectacular crashes, the hard memories still linger, which makes these decisions even more gut wrenching.

What to do? How to break the break the cycle of inaction?

Read More »

529 Plans – Are they worth it?

One of the biggest expenses to hit households is college education for their kids. 529 plans are the most common vehicle available for parents to save for their kids education. Via the SEC

A 529 plan is a tax-advantaged savings plan designed to encourage saving for future college costs. 529 plans, legally known as “qualified tuition plans,” are sponsored by states, state agencies, or educational institutions and are authorized by Section 529 of the Internal Revenue Code.

Read More »

Some truths for the individual investor Part 2

In a previous post there was tough love, lets move on to happier things, what are the things that are going well for the individual investor?

Indexing
Index funds are pretty prevalent and everybody knows about them. Indexing  leads to lower fees and fees are the biggest killer of your portfolio. Lower the fees, less the hit. Today’s investor has many more low cost choices available. You can construct a good diversified portfolio with minimal cost yourself without needing a Phd.

Read More »