LEARNING INVESTMENT LESSONS FROM MOVIE BADLA

previously I have written a post on learning investment lessons from movies such as Chal Man Jeetva Jaiye”, “Dangal”, “3 IdiotsRajneetiand Sanju. Now, I am going to write a few investment lessons from another movie “Badla”. Badla movie has learning which can help us to make stronger our investment decisions.

  • Focus on every detail

Extract from the movie When we see to the movie, Mr.Bachchan put a huge emphasis on each and every detail, though detail is minor or important. And on the basis of those detail, he tries to solve out the entire story. He has collected all detail, data rather to getting emotionally trapped. Further possibilities of different stories, opinion, decision etc. will be based on the detail which Mr.Bachchan has collected.

Co-relation in real life We need to put the focus on the each and every minor detail. We should not avoid any of the detail. We do not know which detail is useful to us, have a huge impact and we have avoided it. When we are analyzing any of the company and avoided a few information, then we may avoid a piece of much useful information too. So that we should make a checklist and keeps on improving our checklist for the covers each and every detail.

  • Never trust anyone before knowing the person or ability

Extract from the movieMs.Taapsee has not put trust in Mr.Bachchan while discussing the entire story and providing detail to him for solving her case. She has made a discussion on the points which are common and given half information only.

Co-relation in real lifeSimilar with the investment field also, we get any information, many tips, etc. but we should not put trust on them before knowing the person and ability of them, otherwise we may end up with losing our entire capital also.

  • Always focus onto the different possibilities -“Kya main wohi 6 dekh raha hu jo tumne muje dikhaya, ya woh 9 jo muje dekhna chahiye tha”

Extract from the movieWe have seen to the movie that Mr.Bachchan has built up different possibilities which might happen during the different situations or different possibilities for the same situation. Also, he has created doubt on the information provided to him. He has connected the different information available with him and created different stories which also can be possible on the basis of information rather rely upon the story which was communicated to him.

Co-relation in real lifeSimilarly with the investment also, we do not rely on the information and story getting communicated to us. But we should check what can be the different possibilities for the similar information provided to us. We try to build different possibilities and check what can happen when other possibilities will occur, what will be the results, does our investment will survive, our original hypothesis will prove right, etc. Whenever we do not think the different possibilities of the prevailing information then we believe whatever communicated to us and we may miss with the scenario which can be totally different from our original hypothesis.

  • Make proper homework

Extract from the movieWe have seen to the movie that Mr.Bachchan has completed with his homework before meeting to the client. He has collected all the information, evidence, prepare different pieces of evidence, etc. Due to his efforts, he has never lost any of the cases, also he succeeds in getting true information from Ms.Tapsee.

Co-relation in real lifeWe also need to do proper homework before making any investment decision. This homework protects us from any of the unforeseen events, losing capital, getting false information, stuck into the trap, etc. Due to the proper homework, we can able to generate an above-average return with minimizing the risk associated with investments.

  • Do not behave as “Tum jo bataogi wohi mere liye sach hoga (I will put trust on whatever you say)”

Extract from the movieMr.Bachchan initially told that he will put trust onto the information which communicated to him through Ms.Tapsee. But after that, he has also created doubt on the information provided by Ms.Taapsee. He has analyzed information rather to blindly believe in the information.

Co-relation in real lifeWe need not put the blind trust on the information getting communicated to us by the management of the company. We have to create doubt on the sayings, information for reaching the proper conclusion and decision. If we believe blindly on the information given to us then we may get trapped into it and end up with making a losing investment decision.

  • Woh murkh hota hai, jo sirf sach ko hi janta hai par sach aur juth ke farq ko nahi janta

Extract from the movieVery well said by Mr.Bachchan. Mr.Bachchan has understood the difference between truth and lie which has helped him to identify what actually the truth is. And a lie is not able to make him a fool.

Co-relation in real lifeIf we just know what truth is but does not know that difference between truths and lie then it has a higher probability that we get trapped to the lie which was communicated to us in the mask of truth. No one can make us fool through speaking a lie in the mask of truth. If we are not able to understand this different then people present us wrong information in the mask of truth and we believe it which impact us very badly.

  • Hume jo sach lagta hai, jaruri nahi ke voh sabko lage

Extract from the movieMs.Taapsee told that she is always speaking the truth but Mr.Bachchan told that it is not necessary that truth is not that what we feel and that is not necessary that everyone else consider it as truth also, the truth is what we can prove. Judge also believe in the truth which we can prove.

Co-relation in real lifeWe believes that truth is what we are believing and everyone else also believes in the same manner. But it not necessary that what we believe is only the truth, but the truth is what can be proved. When we have made an investment to any of the company and we believe that company is good, it will able to perform well, etc. but that does not necessarily work as truth and everyone else also believe the company is good and perform well. But the truth is when a company can able to prove it and perform well.

BIBLIOPHILE: THE MOST IMPORTANT THING BY HOWARD MARKS “RECOGNIZING RISK”

We have seen the process for the identification of risk in the previous article of the same series. In the current issue, I am going to discuss regarding recognizing of the risk.

For the successful investing, we must have to focus on the generating return with having a proper control on risk. And for the controlling risk, we require to identifying and recognizing the risk.

The risk is always being at a much higher where we are too much optimistic towards the particular scenario and also paying a much higher price for the buying particular asset. But we should focus on When odds turn out against us than how we can able to protect ourselves or get out of such scenario with least damage. So, for the protecting ourselves, we need to avoid paying too high prices and also keep ourselves away from the extreme level of optimistic sentiment.

Click for Video — Auction scene

We always forget the real worth of the assets in the bull phase and start chasing that asset class. Such behavior is dangerous for the health of our wealth. This increases the risk while we are purchasing assets more than its worth.

The market always works in a pendulum and people generally forget the nature of the pendulum. The pendulum always moves towards the both extreme directions.

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Whenever pendulum moves towards the bullish extreme, many of us forget that such situations will not stay forever. Many of us forget about the risk which involves during the bull phase. And start taking higher risk for generating higher returns; which invites further huge amount of risk. At bullish sentiment, people generally buy assets at the highest valuations multiple and that invites the risk to the particular asset class. This scenario has a very high chance of getting damage to our wealth compared to generating a higher return.

Reverse to such scenario, whenever the pendulum moves towards extreme bearish phase, then generally people start recognizing the risk and start avoiding to invest in the particular asset class; which take out the risk from that particular asset class. Such scenario is the appropriate time for capturing the opportunities because in such scenario we have very less chance to lose.

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Many a time due to bullish sentiment, we think that the risk is very low, we start taking more risky situations, also start taking leverage and from that time risk starts taking its shape. Our behavior towards particular asset class invites risk.

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Risk will be only low if we as an investor behave in a careful and wise manner. We cannot eliminate the risk, but we can able to control its effect. We have to analyze risk in every scenario. Risk always has its presence, though we are having a bullish sentiment. And according to me, the risk is much higher while having a bullish sentiment.

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At the extreme bullish sentiment, we forget to worry, fear of loss and instead of it, we think about to miss the opportunity. We think that all others will earn the money and we remain without earning money. We start taking much leverage and believe that we are living in a low-risk world.

Click for Video — Bull phase in auction

We have seen in the above video that the person who doesn’t want to purchase a horse for the Rs.5 lakh; same person bought the horse for the Rs.5 lakh due to the influence of the increasing value of the bid for the horse. The person doesn’t want to lose the horse and cannot see others to take that horse.

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Read for more detail: The Most Important Thing Illuminated by Howard Marks