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Top 4 lessons for a trader from the life of Shri Ram on this Deepavali

May this Diwali bring to each a renewed vigour for actively managing risk.

October 27, 2019 / 12:18 PM IST

Sushil Kedia

Diwali is the festival of unprecedented illumination. We celebrate this grand festival each year on the same date as Shri Ram returned to his kingdom upon achieving triumph over Ravan.

This illumination marks the anniversary of a collective migration from gloom and unhappiness into active life.

Investors or traders have the onerous duty to be aware and active every day in the markets. May this Diwali bring to each a renewed vigour for actively managing risk.

The virtue for a man of the markets is in avoiding gloom, fear, greed or any external emotions and, thereby, actively be in an illumined aware state.

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Trading success is found in something beyond intellect

Shri Ram faced uncertainties and managed the unending twists, turns, and spirals of fortitude. Let us all be clear that no one knows the future completely. Anyone can, at the most, anticipate future better than some others.

Uncertainty is the hallmark of the experience of being human. To forecast is to imagine the future. All forecasters study the past to moderate the imagination of the future. Past cannot fully provision the future.

Forecasting ends up as the perilous by-product of unrestrained intellect if it is not done with the purpose of choosing appropriate action in the present moment.

Almost everyone is intelligent enough. Thus, the edge for investing or trading success is found in something beyond intellect.

Traders must identify with 'Maryada Purushottam'

For the self-preservation of each of us, nature has provided us with a sense of identity or ego. Excessive ego makes us susceptible to all the external emotions.

Nature has also designed us to minimize the data processing load on the physical brain by creating an intangible entity— the mind. Edward de Bono has explained best what the mind is. According to him, the mind is a self- organizing pattern-seeking system.

The stronger the mind is, the stronger is the tendency to cling to the past. The decisive difference between those who make better projections of the future and those who generate actual wealth is the ability to suspend the creative, imaginative and problem-solving faculties of intellect and respond to the present moment as it is.

Shri Ram is called the 'Maryada Purushottam'. “Maryada” is the boundary of virtue.

It also means the glory that comes from virtue. Shri Ram is celebrated as the 'Purushottam' — the best among men. As traders or investors, we must identify our 'Maryada'.

Aim for a life of an 'Uttam' investor

Our virtue is only if we have fulfilled our duty to respect capital by adventuring within our limits so as we achieve the life of an Uttam Investor. That limit is a deep understanding of what is our entitlement to lose and not defined at all by how much each wishes to or needs to gain.

Uncertainty is the only certainty in being human. Variations and, thus, losses and profits both will arise. If we do business resolutely to never lose more than our entitlement to lose, we multiply our prospects of surviving at the peril of those who have an unrestrained behaviour in markets.

Entitlement to lose sounds strange. Well, all entitlements are strange. Life in the markets requires deep awareness to check if we are losing more than any sense of entitlement to lose. So, how do you estimate the entitlement to lose? Loss-entitlement is the amount of loss that is unlikely to disrupt one’s duties.

The surplus from expected cash inflows from business and profession over the expected cash outflows required for fulfilling your duties to your family, society and the government is the risk capital at disposal.

Removal of Ego: The sense of attachment to 'I'

Once the total risk capital is adjusted for the level of uncertainty in your style of market adventure, you can estimate position size acceptable within your loss entitlement.  A sense of duty is the only tool to help overcome attachment.

If you are investing or trading for any other goal, you will be only magnifying your ego rapidly. How smart I am to make so much money! How cool I am to forecast so well! How lucky I am to make so much money!

It goes so on and so forth, bereft of a sense of duties only ego will bloat. The sense of attachment to I, me and mine create a bloated ego.

While celebrating Diwali in 2019, I beseech each to recall and remember that Ravan was an Avatar himself. He is one of the two dwarpalaks and confidantes of Bhagvaan Vishnu. By a curse of the Sages, he had to undergo the experience of being human as the most infamous demon.

Ravan Avataar came as the most scholarly and learned mind ever in our history. Yet, it is his massive ego that caused Ravan to be treated not only as a demon but the biggest demon of all times. Knowledge itself or intellect by itself is no relief in life or in markets.

Conclusion

Intellect is like a horse that can only take you faster to your destination. If you are not discrete in choosing your destination from hell to heaven, the horse of intellect will take you faster to hell also.

Kaikeyi, the step-mother of Shri Ram, succumbed to excesses of her motherly emotions. The emotions of a mother are pristine. Yet, Kaikeyi succumbed to the patterns of her mind and indulged in excessive ego incurring all-round opprobrium.

Diwali is the finale of celebrations of the victory of virtue over the evils that ego and mind can become!

Let us decide on Diwali to dilute ego and to restrain our mind and intellect with virtue. A sense of duty helps in achieving these key goals most easily.

Finally, as one structures one’s mind to be a custodian to fulfill the duties for the worldly needs of one’s family and fulfill commitments to the society and provide for the government to function one is eventually serving God.

To obtain returns appropriate to the level of risk you are entitled to undertake, you must act prudently.

Our clean and organised homes and offices at Diwali each year are an invitation for the ultimate guests, Shri Ganesh and Goddess Mahalaxmi.

Those with a clean and virtuous attitude along with clean homes and offices receive many more guests more frequently. Such hosts find their guests choose to stay longer with them and more merrily.

May each find a fabulous attitude that is refined by virtues of respect for uncertainty and uplifted by a sense of duty.

Happy Diwali!

(The author is the founder of KEDIANOMICS. He may be reached on twitter @kedianomics)

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.



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Moneycontrol Contributor
first published: Oct 27, 2019 12:15 pm
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