The Hindu Business Line : Face the bear with guts

When fear begins to overtake reason, investors fall prey to the ‘do something’ reflex, cautions Michael J. Hanson in 20/20 Money: See the markets clearly and invest better than the pros ( www.wiley.com ). “Our Stone Age minds were made to react to fear – any sign of threat and our bodies get ready for action. That’s great for living in the wild with a sabre-toothed tiger on your heels, but it makes for horrible investing decisions.” In fearful times our minds get warped, Hanson describes. “It feels like implosive market dives have lasted forever when, in truth, it’s only been a few months – fleeting in the scheme of things. Perversely, a recovery also seems distant or impossible.”

What is the financial definition of risk and fear? ‘Movement,’ the author answers. The best thing, during turbulence, is to sit tight and wait for it to pass, rather than try to navigate through volatility and get whipsawed, he counsels.

Navigating bear markets requires guts, and it is directly linked to discipline as self-knowledge, says Hanson. “The vast majority of bear market folly is emotion based, not fundamental. An emotion-based error is always your fault.”

“Sometimes a perfectly good strategy will be wrong. The fact is, no strategy will always be right – that’s foundational to managing based on probability.”

On ‘self-knowledge,’ the author’s suggestion is that you must be comfortable being alone, despite having your neighbour tell you you’re insane, reading headline after headline that’s contrary to your view. “We take comfort in being with the pack and get anxious when we stand alone. Humans are communal animals. Couple that with the pressure of seeing your life savings sink, and it’s near impossible for most folks to make rational decisions in bear markets.”

Recommended addition to the serious investors’ shelf.
Self-manage finances

As a small or medium-sized business, one of the simplest ways to control costs is to look after your finances yourself, says A. P. Dash in Financial Wisdom: Finance for non-finance executives ( www.biztantra.in ).

Among the commonsense tips he lists in this regard are: “Open your own mail so you see all cheques, complaints and prices. Sign all cheques yourself and balance company accounts with your bookkeeper. Personally approve all change orders and purchases over a certain amount.” Another rule to control costs is to be frugal. “Even though your gross revenue may be high, don’t fall into the trap of committing to high fees that carry over to leaner times… Get three bids for almost everything.”

He describes ‘cost management’ as a philosophy, an attitude and a set of techniques to create more value at lower cost. “Cost management is not practised in isolation. It is an integral part of general management strategies and their implementation. Examples include programmes that enhance customer satisfaction and quality as well as programmes that promote new product development.”

Helpful read.
Learn to rest

Busyness comes at a high price, observes Don Colbert in The Seven Pillars of Health: The natural way to better health for life ( www.magnamags.com). And his antidote is simple: Learn to rest, because rest helps to maintain our strength, energy, and youthfulness. So, begin taking off one day a week for rest, he encourages.

Another health tip in the book is about taking power naps, after unplugging phones, making the room as dark as possible, and getting in a comfortable position on a couch or recliner. People are designed for two sleeps a day – the main one at night and an afternoon nap – Colbert says, citing the findings of a research. “A study at NASA on sleepy military pilots and astronauts found that a 40-minute nap improved performance by 34 per cent and alertness by 100 per cent.”

Alertness can also get help from ‘mindfulness,’ a topic discussed elsewhere in the book. To be mindful, you must slow down, do one activity at a time, and bring your full awareness to both the activity at hand and to your inner experience of it.

Mindfulness trains your mind to let go of any thought that is unrelated to the present moment and to find something to enjoy in the present – continually – Colbert adds. “As you practise mindfulness, your muscles will relax, your body unwinds, and your stress is relieved.”

Helpful takeaways.
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D Murali

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