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2 weeks ago, I started reading "Fooled by Randomness" by Nassim Taleb.

WOW, It's been mindblowing!

Thanks to @dvassallo 's recommendation.

Inside, there's a part he talks about how to deal with volatility.

Here’s 6 big lessons that are useful in the current market crash:

 Lesson #1:
Negative emotions of seeing your stocks drop > Positive emotion from seeing your stocks rise.
"A negative pang is not offset by a positive one...

Some psychologists estimate the negative effect for an average loss to be up to 2.5 the magnitude of a positive one)...
... At the end of every day the dentist will be emotionally drained.

If the unpleasurable minute is worse in reverse pleasure than the pleasurable minute is in pleasure terms, then the dentist incurs a large deficit when examining his performance at a high frequency."
Lesson #2:
When we zoom out and check the prices less frequently, we are less affected by negative emotions.

Because over a longer time horizon, the market tends to rise more than it goes down.
"Consider the situation where the dentist examines his portfolio only upon receiving the monthly account from the brokerage house.

As 67% of his months will be positive, he incurs only four pangs of pain per annum and eight uplifting experiences...
This is the same dentist following the same strategy.

Now consider the dentist looking at his performance only every year.

Over the next 20 years that he is expected to live, he will experience 19 pleasant surprises for every unpleasant one!
Our emotions are not designed to understand the point.

The dentist did better when he dealt with monthly statements rather than more frequent ones.

Perhaps it would be even better for him if he limited himself to yearly statements."
Lesson #3:
When we look at something too closely, we tend to mix up the signal with all the noise.

We end up focusing on all the movements that may not carry much useful information at all!
"Over a short time increment, one observes the variability of the portfolio, not the returns.

In other words, one sees the variance, little else.

I always remind myself that what one observes is at best a combination of variance and returns, not just returns"
Lesson #4:
It’s hard to fight our human emotions of fear.

Instead, it’s wiser to just create an environment where we are not exposed to such noise that affect our decision making.
"Finally, I reckon that I am not immune to such an emotional defect.

But I deal with it by having no access to information, except in rare circumstances.

Again, I prefer to read poetry. If an event is important enough, it will find its way to my ears...
My sole advantage in life is that I know some of my weaknesses.

Mostly that I am incapable of taming my emotions facing news and incapable of seeing a performance with a clear head.

Silence is far better."
Lesson #5:
Don't read the news.

It’s full of noise because of how much data it contains.

Instead, spend more time studying history as it’s more zoomed out.
"The news (the high scale) is full of noise and history (the low scale) is largely stripped of it (though fraught with interpretation problems).

This explains why I prefer not to read the newspaper (outside of the obituary), and why I never chitchat about markets."
Lesson #6:
The actions we take after seeing a loss is different from the actions we take after seeing a gain.

This could cause us to make sub optimal decisions
"What economists did not understand for a long time about positive and negative kicks is that both their biology and their intensity are different.

The degree of rationality in decisions made subsequent to a gain is extremely different from the one after a loss."
If you like this, follow me here at @heymaxkoh

I share how I crossed 7 figures before age 30, and achieved my own version of financial freedom.

Stuff I tweet about:

• My investing strategy
• Books that inspire me
• How I built high income skills i.e. public speaking

More from Max Koh

Max Koh
Max Koh
@heymaxkoh
"The best investments comes from the best businesses"

One of the investors who's made a big impact on me:

@JohnHuber72 of Saber Capital

I spent days pouring thru his articles and interviews in my early days...

Even had a doc with 20 pages of notes!

Here's my top 15 lessons:

1. You don't need original or unique investing ideas

You can simply wait for great businesses to be mispriced.

And then pounce when that happens.

In the meanwhile, don't dilute your portfolio with simply "good ideas"

Only accept the "great" ones


2. John's investing criteria for idiots

• Easy to understand businesses

• Generate lots of FCF

• Partner with good management teams

And then...

Sit back and WAIT for the fat pitch


3. Distaste for strikeouts > Desire for homeruns

John is okay with not making 10x returns in a short time.

And he has come to accept that.

Every investment strategy comes with its own features.

The key is knowing what they are and making sure it fits your personality.


4. One years results don't mean much

This was taken from John's 2016 letter...

1 year results can be random.

Don't feel too sad if you underperform...

Or get too confident when you outperform.

Zoom out and look at your performance over multi year periods instead.
MENTAL MODELS
Max Koh
Max Koh
@heymaxkoh
One thing I'm always most excited about as an investor:

Watching CEO interviews.

Over the years, I’ve watched over 100s of them.

Here’s 25 traits I’ve seen in the very best leaders.

You can swipe these into your own framework to evaluate management teams:

1. They don’t rely on external motivation

Not status or money.

Instead, they seem to be driven an inner fire.

Sometimes it’s to make the world a better place.

Other times, it’s to prove themselves right.

And that's why they can keep going even after they're already rich AF.

2. They're not human

They don't see the world like 99% of us

Whether it’s creating a culture that’s a sports team vs a family...

Or thinking of everything from first principles…

They have a different modus operandi.

This helps them see solutions that 99% of us muggles miss.

3. They enjoy founder-company fit

The great leaders are great because:

They’re in a company that plays to their unique personality.

The stars have to align for a great leader to be made.

The product + business model + personality of the leader must match.

4. They give lots of freedom and autonomy

They know how to unleash the potential in their team

They know how to paint an exciting vision…

And then give their team the space to roam free.

They understand that people flourish when you give them room to explore and experiment.
STARTUP
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Max Koh
Max Koh
@heymaxkoh
10 super simple steps to research a stock.

In just 3-4 hours:

Overview:

1. Find a sexy angle
2. Analyze the financials
3. Read the annual report
4. Get skin in the game
5. Read earnings calls
6. Understand the leader
7. Understand value prop
8. Read analysis by others
9. Monitor execution
10. Maintenance due diligence

Lets go!

1. Find a sexy story or angle

This is how I begin my research.

It starts with either:

• a product
• a story
• a founder

... that gets me curious.

I think stock screeners are helpful...

But I don’t use them.

I prefer to research companies that genuinely excite me.

2. Analyze the financials

I then proceed to analyze the numbers for the last 2-3 years.

Which is about 8-12 quarters.

Stuff like:

- Revenue growth
- Gross and EBIT margins
- Key customer metrics
- Free cash flow

Seeing the numbers tells me a story.

3. Read the annual report

If the numbers and story are exciting...

I dig deeper into the business through the 10K.

I want to understand the business model...

How they make money...

And the customers they serve.

A step by step guide for
ALL
Max Koh
Max Koh
@heymaxkoh
This is value investor, Allan Mecham.

He dropped out of college at age 22 to start his fund, Arlington Value.

From 2008-2016, they did a CAGR of 30% over 8.5 years!

And in his fund letters, he shared his best frameworks for investing in companies.

Here's a breakdown of each:


1. Adopt a mindset for longevity

He focuses on variables that affect a business' durability.

Stuff like valuation doesn't matter if the business quality is misjudged.

Since a company's value is determined by its future cash flows...

Hence evaluating its future is key


2. Stay within your circle of competence

Allan is aware that his CoC is tiny!

Thus, he rarely buys companies that he:

• Hasn't researched
• Hasn't followed for at least a few years.

Because the best way to study a business is to observe its execution overtime.


3. Embrace volatility as a gift

Public markets offer you amazing deals you will never get in the private markets!

It's all about being patient.

The underlying value of a business is much more stable than the stock.

So you can buy great businesses that are mispriced!


4. Avoid noise and news

More information can give you a false sense of confidence.

It can create an illusion of "knowledge", and make you think many things are important.

The key is to know what are the 3-5 main variables in the company, and focus on those.

Ignore the rest.
FINANCE
Max Koh
Max Koh
@heymaxkoh
I'm lucky to attain financial freedom before 30.

I credit Fintwit for my learnings.

Here's 10 key concepts every investor must know:

1. $$ needed to retire
2. Researching a business
3. Reading annual reports
4. Reading earnings calls
5. Criteria of a multi bagger

(Read on...)

6. Holding a multi bagger
7. Economic moats
8. When to buy a stock
9. Earnings vs cashflow
10. Traits of quality companies

Here's my 10 favourite threads on these concepts:

1. How much $$ do you need to retire

Before you start, you must know the end game.

To meet your retirement goals...

How much $$ do you need in your portfolio?

10-K Diver does a good job explaining what's a safe withdrawl rate.

Hint: It's NOT


2. Research a business

Your investment returns are a lagging indicator.

Instead, your research skills are the leading predictor of your results.

Conclusion?

To be a good investor, you must be a great business researcher.

Start with


3. Reading annual reports

This is the bread and butter of a good business analyst.

You cannot just listen to opinions from others.

You must learn to deep dive a business and make your own judgments.

Start with the 10k.

Ming Zhao explains it
FINANCE

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BookQuotes
BookQuotes
@Daily_bookquote
10 Powerful Lessons From The Book "101 Essays that will Change the way You Think"

//Thread//


1. More Is Not Better✅

Happiness is not about experiencing more of something.

It's about experiencing what you love in new and interesting ways.

2. Embrace Fear✅

You assume happiness is good, and fear is bad.

Fear is an indicator that you're doing something worthwhile.

Change your story around fear. Bad feelings are not always bad.

3. Seek New Experiences✅

It's difficult to change your beliefs through thought alone.

Seek new and novel experiences that make new beliefs real to you.

4. Problems Are Pathways✅

You view problems as roadblocks to your success. Truth is, they're pathways.

"What stands in the way becomes the way."
- Marcus Aurelius
BOOKS
Plan On FIRE \U0001f1ec\U0001f1e7
Plan On FIRE 🇬🇧...
@PlanOnfire
9 Lessons from 'The Compound Effect' By Darren Hardy

THREAD 🧵


It is Choice, not Chance, that determines your destiny.

The decisions that you make on a daily basis are the building blocks of your reality.

Good Habits Are The Key To Success

If you want to emerge successful, you need to create habits that enforce ethics, discipline and persistence in your life.

Success is achieved through positive, constructive habits.

Failure is the result of negative, destructive habits.

When you get tempted to engage in destructive habits, ask yourself if the thing you want to do is contributing to your success.

If not, replace it with something constructive.

Patiently Pursue Your Goal

Everyone wants overnight success, but that's just not how the compound effect works.

The truth is, we have to be patient.

Maintain your vision, work towards your target and with patience, you shall ultimately achieve your goals.
BOOKS
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Marina Amaral
Marina Amaral
@marinamaral2
Best non-fiction books you’ve read on womanhood?
BOOKS
Seek Life Mastery \u269c\ufe0f
Seek Life Mastery ⚜️...
@SeekLifeMastery
72 books to read before you die:

1.


2.


3.


4.


5.
BOOKS
Deep Develop \U0001f9ec
Deep Develop 🧬...
@deep_develop
10 Top Lessons From the Book
"Chatter"

📚Book Review (THREAD)


1. Introspection is a double-edged sword

💭Introspection—the ability to observe one’s own mental processes— is a valuable tool for reflection and decision-making.

But rather than make people feel better, introspection often leads them to experience something else.

2. Chatter

🗣️Chatter is the cycle of negative thoughts and feelings that turn our capacity for introspection into a vulnerability rather than a strength.

If you can master the art of introspection without the chatter, you can get your internal conversations back on track.

3. Talking to yourself can be helpful

👉Many people wonder how they can control their chatter. One way to do so is to talk to yourself using your name and the word “you,” as if you were advising someone else, a technique called “distant self-talk.”

4. Distant self-talk capitalizes on this idea

✍️Silently talking to yourself like you’re someone else—using “you” and your own name—helps you take a step back from your experience and put your problems in perspective.
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4) Also on backstop the EU is unlikely to cave in to favour a relationship with a leaving member state (UK) against the explicit wishes and ignoring the deep concerns of a continuing member: Ireland.

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Nikita Poojary
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One of the most successful stock trader with special focus on cash stocks and who has a very creative mind to look out for opportunities in dark times

Covering one of the most unique set ups: Extended moves & Reversal plays

Time for a 🧵 to learn the above from @iManasArora

What qualifies for an extended move?

30-40% move in just 5-6 days is one example of extended move

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Example 2: Booking profits when the stock is extended from 10WMA

10WMA =


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Too many green days!

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