What to buy in a bull run?
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After a long break, I am back to writing this newsletter. Through this break, I quit my job at one of the largest investment banks in the world, backpacked through South India, shifted cities, and have recently joined the business team at Groww - a place where I can actively contribute to making the next generation financially literate. This move was much awaited and really close to the heart. This space will cover more insights on financial markets and long-term financial management going forward!
Goal setting has lately become a crucial component of my new life. For each of us, goals can be very different - for me, most goals have to do with my involvement at work, improving my fitness, and of course, my finances. However, goals can be very diverse for different people - from aiming to be the CEO of a Fortune 500 company to be the best dad to his daughter.
I have been pondering over the recipe of making a long-term goal more achievable. Most studies suggest that setting long-term goals isn’t effective. Based on human psychology, it’s more constructive to set short term goals that are SMART (Specific, Measurable, Attainable, Relevant and Time-Bound)
Good Short-Term Goal Setting:
I want to run 5km within 25 minutes by 31st October. My current best is 5km within 30minutes. I will do this through 2 long runs/week and 2 strength workouts/week.
Execution is an important element of achieving your goals, yet is seldom discussed. Execution takes days and years of patience, sweat, sacrifices, and daily motivation to be able to reach that short-term goal. Often, initial results are not linearly correlated with the efforts put into achieving them, leading to disappointment and demotivation. The book, Atomic Habits, brilliantly covers this through the below chart -
I have my own funda for making this work. The latter part of the graph assumes that good results are accompanied by satisfaction and dopamine and are hence, self-sustaining to keep the user motivated. However, the initial journey isn’t. In which case, I believe that it is the duty of the goal seeker to reward him/herself through external dopamine sources through the initial journey. Celebration is key at which step of the journey and not just at the end.
Celebrate at the start of the run, cause the end will anyways be celebrated. More importantly celebrate at the start, cause its the version of you at the start of the run that got off the couch and started it, and it’s your duty to praise and celebrate with that version of you
- Coach Bennett, Head Coach of Nike+ NYC Run Club
As a runner, I often send my friends a screenshot post each run, to feel the praises and motivation. Other friends of mine, post the covers of their favorite books on completion on social media. Some tweet their chess rating, while others give themselves a cheat day! When it comes to execution, rewards vs demotivation is an underestimated struggle. I can’t think of my “long-term goal” of being a great runner when I’m snuggled in thick blankets on a cold rainy morning. Only when the daily validation exceeds the demotivation and discomfort, does the goal eventually get achieved.
What does this have to do with bull runs, man? You freaking said bull-runs!
Well, the struggle to hold a stock in your portfolio for the long-term is no different. It’s tough to buy a stock, but it’s tougher to not sell it, while a dozen of other friends are making money while your stock has only moved by a few percent. Money is made in the long term, but stock prices fluctuate in the short term - where your trading apps allow you to rashly sell your stocks in a couple of seconds. Decisions are driven by news, fear, greed, and jealously in the short-term end of the graph.
It is your duty as an investor to seek validation in the short term. For example.
I have realized that momentum is an important component of my stock holding. Graphs create stories where a certain person held a stock for 5 years after which it gave him 500% returns in a month. I would rather go for a 30% move each year for 5 years than a 0% move for the first 4 years and a 500% move in the 5th year. For I am certain that I will definitely lose conviction, and eventually move my capital to another stock before the 5th year. Regular validation from my stock picks is important to me.
Validation can come from better financial results, management commentary, and price movement. Validation can come from an investment thesis that still holds true. Validation can from your continuous use of the product itself. Or, confidence can from your collectively holding the same stock as your friend.
So, yes! What to buy in a bull run? Buy anything YOU have the confidence to hold. That is the golden rule.
DM 🚀
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