Who do You Blame?

Since stock choosing is a solitary activity, winning streaks are exhilarating while losing streaks are agonizing. What positions us for long-term success is how we handle both extremes.

No One to Blame

You'll sell winners too soon. You'll keep losers around for too long. You'll purchase stocks that you shouldn't. Don't blame others. Blaming others demonstrates that you did not complete the task at hand. Take full responsibility for your investments so you may grow, learn, and move on.

Basketball, cricket, and football are all team sports. Even if the team has key players, everyone on the team is given credit and blame. Yes, you can point the finger at the player who missed the game-winning goal, the kicker who missed the penalty kick, or the goalkeeper, but even in these cases, everyone knows that the team initially placed the player in that position. The team is at fault.

Tennis, boxing, and golf are examples of individual sports that are distinct. The top athletes in individual sports may have coaches, trainers, agents, and other supporters, but in competitions or tournaments, it's just one player against the other or the entire world. The player bears the blame for the defeat and receives the credit for victory. It's why individual sports are agonizing even for the best in the world.

Stock choosing is an individual game. Whether you are a Portfolio Manager/Fund of 100 crores or a retail investor overseeing a few lakhs in your broker account, it makes no difference. It makes no difference if you are surrounded by a team as a CIO or PM. Your investors are unconcerned. Both the credit and the blame fall on you. There is nowhere for you to hide. The result is centered on you.

As a result, the wins become intoxicating. You can't wait to write your annual letter, reflect on yourself, relive your accomplishments, journal, and modestly boast to the world. Bull markets are enjoyable. It takes less than 1 minute for your most recent purchase decision to be positively reinforced, and stocks rise four out of five days. Everybody sees the positive side of things. You're a great analyst.

Losing hurts so much. The bear begins to bite, and the bull stops running. Because investors sell equities that are down 5% to purchase more of the scripts that are down 10%, market drawdowns are a cascade, until everything is down, they keep doing this.

We lose our confidence when stocks stop rising. Four days out of five, stocks decline. When everything turns into an excuse to sell, stocks stop responding favorably to the news. The stock doesn't rise even after the "catalyst" you've been waiting for hits. You now hesitate to purchase lower-priced stocks that you once adored. Everyone considers the negative aspects of things when markets are down.

We stop looking in the mirror and begin blaming everyone and everything when equities decline.

We blame others

As a retail investor, you enjoy blaming others. You point the finger at analysts, other investors, recommendation services, and your friend's boss for letting you know about the hot stock. Intentionally or unintentionally, retail investors harm themselves. They aren't serious about the result as they weren't serious when they invested. They have to defend their lack of effort in the investment by pointing the finger at others.

Are you an amateur investor?

We blame the stock market, market conditions, or anything macro. Investors who buy undervalued stocks have been punished for their prudence. People are wondering. How can the index be up 20% and my stocks are down? The answer is that a few stocks in the index are propping up the averages." This is an abstract of quotes by Peter Lynch in 2000. You likely thought it was a real story from NEPSE in 2024.

For decades, investors have been complaining and placing blame on the same things, and they will likely continue to do so for decades to come in every market around the world.

Blame is a problem because it prevents us from developing into the stock pickers we were destined to be. Each of us is made up of two individuals, the self we want to be and the self we are now. Making sure they meet as soon as feasible is your responsibility.

Whether in life, work, or your portfolio, unexpected events frequently take us by surprise. We search for someone or something to blame, yet there is no one to blame. It just happens sometimes, a Black Swan Event. Allowing these experiences to transform you from a joyful person into a bitter one is the worst thing you can do. The lesson is to keep moving forward and understanding the market cycles better.

-Astitwa Sharma