Step 7:  the  power of  faith

Posted on by under Bibliophile: Cashflow Quadrant

It may be possible that we might not be good at academic studies but it does not mean that we cannot do good in our later life. We all have different skillsets which help us to grow.

Sometimes the fun of ourselves can push us towards success. Money does not stay with us if we do not have trust in ourselves. Let people say anything about us but what we thought about ourselves is always matters. Our thoughts become a reality. We have to face our self-doubt, personal criticism to achieve success. There is a saying in Hindi – “Sabse bada rog, kya kahege log.”

The reward from the journey is not only the freedom that money buys but the trust we gain in ourselves. Taking action is to start believing in ourselves that is what one thing, we can do for ourselves. Believing in ourselves can bring high confidence as well as give us the courage to enter the untapped area and accept a challenge to grow well.

Read for more detail: Rich Dad’s Cashflow Quadrant: Guide to Financial Freedom

WHY WATCHING AND WAITING IS TORTURE Action Bias

Posted on by under Behavioral Finance

This is the action bias: look active, even if it achieves nothing. There are many situations where we do not know what will happen but we just act to show our active behavior in eyes of others.

When penalty kick in football kicked to goal. The goalkeeper just has 0.30 seconds to think where the ball will fall right, left, or center. It is difficult to guess in much less time so they jump either side which creates an illusion of doing something to stop the goal.

Investment – Similarly, when a fund manager knows that he cannot beat the market, then many fund manager keeps on churning stocks in a portfolio or they keep on buying one and other stocks which creates an illusion among their clients of doing something to beat the market and create wealth. Also, I have seen many fund manager who keeps many books with them so that when clients meet them, they can just create an illusion of avid reader.

‘All of humanity’s problems stem from man’s inability to sit quietly in a room alone,’. We need to learn the skill of patience because we cannot produce a child in a month by doing sex with nine women or with the same woman nine times a month. When the situation is not suitable with our philosophy and process then we have to keep patience to wait for the loose ball to hit a home run. We do not need to hit a home run on every ball and if we try to do that then remember, we cannot survive till a loose ball comes for a homerun.

This entire series will be reviewed with various examples from books which are “Thinking, Fast and Slow” and “The Art of Thinking Clearly“.

Step 6:  Make  Disappointment Your Strength

Posted on by under Bibliophile: Cashflow Quadrant

When we face disappointment, then our emotional disappointment pushes us to blame others. We should try to learn from our failures rather than blame others. We should be preparing for meeting a disappointment.

If we are trying something new then it has higher possibilities to face disappointment. We have to be emotionally strong to accept the disappointment.

We should have a mentor to whom we can discuss every aspect. Now, we can understand that if we do not have a mentor then on whom we can rely during a disappointing time. And who will pull us from such time?

We should not be hard with ourselves. If we are hard with ourselves then we stop ourselves from taking the risk, doing something new, accepting new ideas. Because if we face failure, we give punishment to ourselves which can be harmful to us. The difference lies in how we process that disappointment. Our size of success matters with the strength of our desire, the size of our dream, and how we handle our disappointment.

Read for more detail: Rich Dad’s Cashflow Quadrant: Guide to Financial Freedom

THE DECEPTION OF SPECIFIC CASES Conjunction Fallacy

Posted on by under Behavioral Finance

Kahneman believes that two types of thinking exist. The first kind is intuitive, automatic, and direct. The second is conscious, rational, slow, laborious, and logical. Unfortunately, intuitive thinking concludes long before the conscious mind does.

Conjunction Fallacy means – the false belief that a conjunction of two events is more probable than one of the events on its own. – fs.blog

When we have a more detailed situation or more options available then we think that occurrence of it is higher. Compared with a situation that does not have details available.  

Investment – When we have a problem then our intuitive brain run for a solution without knowing the problem well but the conscious brain thinks all aspects and makes decisions. As we have seen about system 1 and system 2 if we rely only on system 1 for making an investment decision then it has a higher probability to meet a loss or have to get huge support from luck. When we received any tips or stories about stock from family or relatives then we tend to believe it without thinking further.

Conjunction fallacies continued to occur dominantly when the observed pattern of frequencies resembled conjunction. We should always focus on statistical evidence which helps us to make a rational decision.