The market is similar to an ocean, there is just too much information to assimilate, process and analyze, an investor needs to make sure he/she is on the right kind of a boat while traversing the rough ocean waters.
Recently, I was re-reading some of the very insightful interviews of reputed investors which Vishal (Safal Niveshak ) has been gracious enough to share with. This gave me an idea to conduct a small experiment
So my friend and I decided to conduct mock interviews of each other, to better understand our thought process, I have listed some of the questions we covered:
- Why do you invest in the stock markets? Isn’t it too risky?
- What stocks do you usually invest in?
- Where do you find good investment ideas?
- How do you decide which ideas to buy and which ones to let go?
- What are your return expectations from the markets?
- What???? Just 20% P.A, don’t you think you should be making more, at least wanting more?
- What percentage of capital is allocated to each idea of your portfolio?
- Do you buy into the full position at one go or in stages?
- How do you decide when to add more to your existing holdings vs adding new positions?
- When do you sell? What factors do you consider before selling?
- Do you sell the entire holding together or in stages?
- How do you handle your emotions when stocks you own are losing or appreciating in value ?
- How do you develop conviction to hold on to stocks in spite of a huge up/down move?
- What is your typical holding period?
- Do you meet management of your portfolio companies?
- What has been the worst performing stock idea for you?
- How do you ensure downside protection, prevention of capital loss?
- How do u handle and process the constant stream of information? How do you cut down the noise and clutter?
And so on…
To my utter disbelief I flunked this interview big time, I realized, I had no objective and concrete answers to most of the questions above.
This was a great learning experience, it forced me to think these questions through, I sat over the following weekend and wrote down the answers to each and every question, not only did I feel more confident but it made me more aware of my temperament and inherent personality as an investor.
The future is unknown and unpredictable, however managing risk is something we can control and influence, writing and documenting in detail, your entire investment philosophy and process can take you one step closer to that, it forces you to acknowledge the chinks in your armor and rectify the errors in your decision making process.
Go ahead, see if you can pass this interview, if not introspect. Repeat.