the 1st one ...

The title is so bcuz this is my first post of a new blog dedicated to 'Finance'...

As most of us who decide to study finance go through the books of many legendary investors and traders who made it big in the world of finance, I did go through some of them myself. One of the quotes that I remember distinctly from an investment guru 'Warren Buffet' read .."It doesnt matter if you lose my money, though, never lose my trust". I decided to mentioned this word 'turst' in first blog bcuz today being a fund manager I realize that most important for me to do as a person who manages money for investors is not to lose their trust ... and let me now explain what did Buffet mean when he said that sentence.

Trust; when comes to managing money is a term pharsed to distinguish 'Mistake' from 'Irrationality'. We are all humans and we all tend to make mistakes, no one can be perfect isnt it. There is no shame in making mistakes, what matters though is to understand if you behaved irrationally when you made that mistake or whether that mistake was an outcome of irrationality. There is a thin line of distinction between Mistake and Irrationality and its very difficult to prove the absence of other if the first one is proved. Essentially irrationality is an outcome of continued mistakedness and failure to accept the condition when one is wrong.

One quality about all good investors and traders I found in the books I read was their ability to realise their mistakes quickly. And most important the courage to accept their mistake and go ahead with the next trade. Some how they all are mechanical, they accept that the world is smarter, have a low ego when it comes to trading / investing, stop loss and profit taking is a religion to be followed, greed is matched with the level of caution, have tremendous wit to decide the risk reward ... they all made mistakes, however, they could distinguish it from irrationality.

So here's the first lesson of finance: No matter how good you are, you cant avoid mistakes.. just dont be cynical to make that mistake turn into irrationality.