Monday 7 September 2009

Learn from your mistakes to master the art of investing

The Thirukkural is an ancient non-religious literature that guides people on better living. Though written over 2,000 years ago by Thiruvalluvar in Tamil, the way of life advised by Thirukkural is still relevant today.

This article is an attempt to bring the wealth of knowledge embedded in Thirukkural about finance; accessible to everyone. Thirukkural is composed of 1,330 kurals in 133 sections of ten each.

A Kural is a couplet and each Kural is composed of 7 words spread across 2 lines [4 + 3 words]. The work on wisdom is divided into three major chapters - those that speak about Virtue, Wealth and Love.

Kural 411 says "Chelvathul chelvam sevichchelvam; achchelvam Chelvathul ellem thalai"

The translation of the Kural goes like - "The best wealth among wealths is that got by listening; this wealth is the leader of all wealths."

Learning from experience, may many times prove to be very costly in terms of the time, emotions and cost involved in the learning. So it is better if we could learn form the others too. Among the many ways to leverage learning of others including proper education, reading, listening is said to be best by Thiruvalluvar.

The philosophical meaning

The meaning of this Kural in a philosophical sense is that, one should not depend only on the material wealth. The wealth of knowledge got by listening to others' experiences will be ours for ever; whether we have material wealth or not. That way the wisdom that we have received is indestructible and hence is the best wealth one could get.

Role of listening in investing

Active listening is said to be one of the best ways to be a good communicator. It is also one of the best ways to make good investment decisions. Robert G Allen author of 'Nothing Down' a book that talks about acquiring real estate without putting any of our own money as down payment, talks of one of his ways to buy a property.

The rule is 100-20-10-1. The rule in detail goes like this, when we want to buy a property, we need to visit and see 100 properties; take quotes from 20 of those properties; enter into negotiation for 10 of those properties; ultimately buy one.

Effect of leveraging listening

The effect to our wisdom related to buying property is that, by listening to 100 people talking about their properties, we get to know how property is valued. What could be problems in managing those? Which type of neighbors is better for us? Are we paying for the built-up area or the living area?

How good is the ground water, sun shine, noise, dust, etc? Will the walls bear the effect of banging long nails or drilling needed for putting the wiring? Is the government having any plans for acquisition in that area? Is the new electric crematorium planned for the area next our apartment? Does the cat in the opposite house love to measure the length of roots in potted plants (We have 25 highly valued Bonsais)?; so on and so forth.

If we had not done the 100 to 1 act of painstaking listening, we may be a victim and may have to endure a period of life-long education on how not to buy a house. How many people have we seen buying a house just because some relative or colleague said the property has 'good value'? Are they all happy?

Leverage wisdom before investing in stocks

We have a lot of people giving us tips for investing in the stock market. Some of them are from good intensions of friends, relatives and colleagues. Some of them are from our brokers and some from professional paid tips providers. The leveraging of listening to gain wisdom applies also to the stock market.

The way to learn and to some times pull the tipster himself/herself from trouble is to ask the question-WHY? If the answer is that some one reliable said so and that is WHY? Probably the reason for the buy or sell is already past its time. So please do not do anything.

If however the suggestion to buy or sell is substantiated by a set of reasons, there may be some substance for buying. But again we need to do our own reasoning and searching to make the decision to buy or sell a stock.

Skepticism vs listening

The above argument is not to be skeptical to whatever the other person says. Rather it is not to be carried away by what ever others say. The active listening way to creating wealth is to be empathetic to the other person's words and derive knowledge. This wealth of wisdom that we get from others becomes ours and no one can take it away from us - come what may.

Kural 421 says: "Arivuatram kakkum karuvi cheruvarkku Ulazhikkal aha aran"

It means "For the king (head of the family, manager) wisdom acts as a tool for protection and also as wealth that the enemy cannot destroy". Listen better so you can learn better. Learn better so you can invest better.


Source:
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