Mar 21, 2012|
What's common between Rahul Dravid & value investors?
Legendary Indian batsman Rahul Dravid announced his retirement from Tests and first-class cricket recently. A 16-year long international cricket career came to a graceful conclusion. But why are we writing about Rahul Dravid? What does his cricketing career have to do with investing in stock markets? Well, we have all seen his on-the-field performance. But recently, we came across a candid article by his wife which gave some amazing insights into his off-the-field persona. If Oxford dictionary were to ever define Rahul Dravid, this is what it would read like:
Loves cricket; highly focussed, disciplined, consistent, methodical, thoughtful and organised; solid temperament; constantly seeking to improve; leaves nothing to chance; perfectionist...
We realised that the qualities that characterise Rahul Dravid are also the ones needed to become a great value investor. So here are some very basic and vital lessons that all investors must learn from the great cricketer:
Temperament and endurance
Rahul Dravid may not draw a fan-following the way more aggressive and fiery batsmen do. He is not the one to enthrall the crowd with his 'fours' and 'sixes'. Some even find his batting style boring. But it would be a massive error to take that as a weakness. While he may rank low on entertainment quotient, what is noteworthy about him is his consistency and reliability. Dravid is not called 'The Wall' just like that. Dravid has a temperament as solid as steel. It's close to impossible to provoke him. He is known to keep his cool during tough and critical situations. On several occasions, he has emerged as India's crisis man and has taken the team through remarkable victories.
In investing too, temperament plays a very crucial role. The high level of volatility that is inherent in stock markets often tends to give investors an adrenaline rush. The financial history of the world is filled with booms, manias and crashes. That's enough proof that any decision made in a heightened emotional state fails more often than not. A famous quote by the famous investor George Soros comes in very handy in this context: "If investing is entertaining, if you're having fun, you're probably not making any money. Good investing is boring."
Focus on the game
At the heart of Dravid's success is his undivided love and devotion to his game. He follows strict routines and spends hours practicing regularly. Known to have priorities set very clearly, he never whiles away time and energy in trivial matters. For instance, his wife points out that Dravid doesn't care much for brands, cars, gadgets, etc. For 20 years, he has used just one type of moisturising cream. But if the weight of his bat went off by even a gram, he would immediately notice it and get it fixed.
We are living in times when there is an explosion of information through so many media. The stock price ticker goes swinging every few seconds to the constant influx of news and reports. With so many sources of distraction, if investors are not well-focussed they can easily be tempted to make wrong investment decisions. So it is important to set priorities correctly and then to focus on them. Concentrate on the business dynamics, and filter away all that is petty and irrelevant.
Discipline and technique
Discipline and consistency are the cornerstones of Dravid's persona. He is highly methodical and thoughtful in his approach, leaving nothing to chance or accident. His ability to accept reality is another great strength. He very well understands that complaining is futile. So instead, he focuses on ways to constantly improve himself.
Investors must remember that Mr Market is fickle. His mind changes every day. Why most investors fail is because of a severe deficiency of discipline and consistency. Many who make money during bull runs lose it all when the tide turns. The reason for such turn of fortunes is that there was no clearly defined investing process in place. If money is made by fluke, chances are, it will go away just the same way. Many times, investors change their investing approach to justify the ongoing trend. Then of course, things go awry and they blame it on the markets. But blaming never serves one's purpose. It is imperative to reflect on past mistakes and refine the investing process to avoid such mistakes in the future.
||Ankit Shah (Research Analyst) is the editor for Equitymaster Insider and Vivek Kaul's Inner Circle. A journalism graduate turned Research Analyst, Ankit joined Equitymaster when he was just 23 years old, right after getting his MBA from NMIMS, Mumbai. Having been an avid reader of Equitymaster's research through his college years, Ankit knew he would fit right in!
In his seven years with Equitymsater, Ankit rose quickly, leaving his mark on almost everything from: Travelling thousands of miles to find the next small cap stock, as part of the Hidden Treasure team... Designing Equitymaster's Secrets, an online value investing course based on the company's 20-year journey... Bringing global investing ideas to Indian readers through Vivek Kaul's Inner Circle... Right to launching his brand-new service, Equitymaster Insider.
Ankit is a firm believer in Charlie Munger's multidisciplinary approach on juggling between various disciplines...He is not just a research analyst, but also a voracious reader and an avid traveler...Born and brought up in Mumbai, he now prefers to keep away from the noisy megapolis as much as possible. In any given month, you could find him exploring the ancient ruins of South America, the beaches of South East Asia, or the organic cafes of Pondicherry.
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