The Itch

So, there I was yesterday sitting at a hotel waiting for friends to arrive. One good thing about waiting these days is that you no longer are bored because there is always something on social media to read about. I on the other hand was checking not social media but Kite (Zerodha App) to see what Adani was doing.

After making a low of 1494, the stock was trading around 1620. Is the worst over? I wondered. If that is the case, maybe I should try to dip my toes with a small position. And based on that nudge, I placed an order size which is 25% of what I normally buy in any stock. Kite instantly rejected my order saying, No funds available.

The itch was now over, friends came and we had a good Maddur Vada with Coffee. But on the way back in the evening, this made me think. The buy (it would not have got executed since price did not get back to 1500) would not have really changed anything for me. The small position size meant that even if I made 10% profit, it would have barely budged my bottomline.

Succumbing to the itch though would have meant breaking my current disposition to not doing something randomly no matter how much the appeal.

I have seen various financial advisers say that you should maybe set aside 10% of your capital for these itches. The idea here being that any damage will be limited to 10% which will not ruin the goals much of the capital is being saved for. I, on the other hand, think that is a very bad idea.

Human minds are weak. Most of us are looking for excuses to justify our mistakes. Discipline is tough to enforce. Yesterday when visiting a Doctor, he advised me to sleep early. It’s not just the hours one sleeps that counts but also the time and the quality he maintains. But with so many movies available, it takes a lot of determination, determination I lack, to sacrifice Television for Sleep. 

Netflix CEO Reed Hastings once said, Sleep Is Our Competition. It indeed is and the model they developed for weaklings like me was to provide not one episode per week but put all the episodes out there to watch at a single time. So, earlier while one would have seen a hour of a teleseries and then went back to sleep, binge watching has changed all that. Why stop at one when you can finish the entire series by the time the Sun breaks the horizon.

If social media had listings of say 10 tweets or photos before requiring the user to click the next page, the amount of time spent would not have been as high as it is today when you can scroll to infinity and beyond. 

Much of these is said to be the effect of Dopamine. From the stock market to social media and beyond, we are always looking for the things that give us instantaneous pleasure even if there is a cost to pay. 

Compared to the 90’s when I entered the markets, today there is an explosion of information and knowledge. What earlier was possible to be known only to a select few is today known by everyone in a very short time span. Newspapers carried the latest information then while today they are old by the time they get printed, almost all the news items that merit attention have been discussed threadbare.

But has better access to information, especially in the world of stock markets, made for better investors. The data that one sees seems to show that it has actually made things worse.

In the good old days, I would not have been able to know the price let alone buy something sitting at a hotel waiting for a friend. The ability to execute with a simple click of a button has converted investors into traders and traders into junkies. 

There is a well-known Greek aphorism, “know thyself”. In the world of investing, knowing one’s own weakness and threats that may arise is paramount to survival. Survival, not success is the key for unless one survives, there is no likelihood of Success.