A trader's life is full of ups, downs, and changes all around. Case in point: over the next few weeks, we will have to switch to a five-expiries-per-week system. Monday: Nifty Midcap Select. Tuesday: Nifty Financial Services. Wednesday: Bank Nifty. Thursday: Nifty 50. And Friday: BSE's relaunched Sensex and Bankex F&O contracts. While change is the only constant, therapy can help some cope better than others:
1. The 'I hate Friday expiry more than anything' investor: Friday the 13th is a series of horror movies where a crazed villain murders kids who wander into the woods to party. Today the same kids are wandering into the F&O woods to party, believing the foolishness of their youth will protect them from the fallacies of the market. However, even if it is not the 13th, Friday expiry comes to hasten the expiry date of their finfluencer dreams.
2. The 'I am just averaging to hide my below-average investing skills' investor: Rupee cost averaging is one of the most common ways in which over-enthusiastic investors push their savings bank account into below-average territory. For the uninitiated (and wealthier), rupee cost averaging is buying more of a stock you are already invested in when it falls instead of rising in the belief that you will average out your rupee cost. That’s like adding more losers to your already dysfunctional friends circle in the hope that somehow the average will make all of you acceptable. By the end of it, you have below-average friends and a far-below-average bank account.
3. The loss-avoidance investor: This is like hanging on to a bad relationship because you think your significant other will finally become a real-life version of who they claimed to be on Tinder. The RBI just announced an additional 10% CRR on banks to suck out liquidity. Loss avoidance is a CRR you impose on your own portfolio by hanging on to losers who suck out any other profit you could have made on your better calls. Like investing in tomatoes instead of crypto.
4. The passively active-investing investor: Today you have the choice of actively investing in stocks directly or passively investing in ETFs or mutual funds. However, that is not satisfying to the ego. So you mock the losers who do not fancy themselves as Charlie Munger and actively invest in stocks usually by looking at a single quarterly result. But your boss of course sees you as the deluded kid from Charlie and the Chocolate Factory without the golden ticket. Thus, you are too busy to see just how badly your overconfident individual stock bets are doing so you remain passively invested in active self-destruction.
5. The investor who thinks they can time the market: Ask any woman what the worst relationship mistakes the men in their life have made are and they will tell you it’s not the mistake as much as the bad timing of the mistake that is more infuriating. Like telling your wife you just put all your joint savings into a unicorn IPO on the same day she was about to share the news of her lay off. Market timing is living in the same delusion that you know the perfect time to buy that perfect stock at the perfect price. “Buy low and sell high”, you tell yourself. As the market whacks you with reality, you see the highs and lows of your partner’s opinion of you fluctuating.
6. The technical-analysis investor: There will be a lot of “technical experts” on technical analysis. You might find them in the comments section of a stock page. The comment section is a lot like the WhatsApp group for a building society. You will hear statements like “This stock has hit a breakout on the charts. Watch, it will go from 250 to 300 by next month”. As it plunges to 150 by next the week, they will become even more technical with explanations like “I have seen the RSI. An upwards correction is imminent”. Most of these people should be more worried about the upward correction in their BMI.
I hope you will keep this advice in mind every Monday before the markets open. Because if you don’t, it just gives me another Funnycontrol article for Friday.
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