This is a killer talk I came across from Hedge Fund manager Mark Sellers, speaking to some Harvard MBA kids on what it takes to make it in markets. Regardless of whether you consider yourself a trader or investor, Mark’s “seven traits” apply.


First of all, I want to thank Daniel Goldberg for asking me to be here today and all of you for actually showing up. I haven’t been to Boston in a while but I did live here for a short time in 1991 & 1992 when I attended Berklee School of Music.

I was studying to be a jazz piano player but dropped out after a couple semesters to move to Los Angeles and join a band. I was so broke when I lived here that I didn’t take advantage of all the things there are to do in Boston, and I didn’t have a car to explore New England. I mostly spent 10-12 hours a day holed up in a practice room playing the piano. So whenever I come back to visit Boston, it’s like a new city to me.

One thing I will tell you right off the bat: I’m not here to teach you how to be a great investor. On the contrary, I’m here to tell you why very few of you can ever hope to achieve this status.

If you spend enough time studying investors like Charlie Munger, Warren Buffett, Bruce Berkowitz, Bill Miller, Eddie Lampert, Bill Ackman, and people who have been similarly successful in the investment world, you will understand what I mean.

I know that everyone in this room is exceedingly intelligent and you’ve all worked hard to get where you are. You are the brightest of the bright. And yet, there’s one thing you should remember if you remember nothing else from my talk: You have almost no chance of being a great investor.

You have a really, really low probability, like 2% or less. And I’m adjusting for the fact that you all have high IQs and are hard workers and will have an MBA from one of the top business schools in the country soon. If this audience was just a random sample of the population at large, the likelihood of anyone here becoming a great investor later on would be even less, like 1/50th of 1% or something.

You all have a lot of advantages over Joe Investor, and yet you have almost no chance of standing out from the crowd over a long period of time.

And the reason is that it doesn’t much matter what your IQ is, or how many books or magazines or newspapers you have read, or how much experience you have, or will have later in your career. These are things that many people have and yet almost none of them end up compounding at 20% or 25% over their careers.

I know this is a controversial thing to say and I don’t want to offend anyone in the audience. I’m not pointing out anyone specifically and saying that you have almost no chance to be great. There are probably one or two people in this room who will end up compounding money at 20% for their career, but it’s hard to tell in advance who those will be without knowing each of you personally.

On the bright side, although most of you will not be able to compound money at 20% for your entire career, a lot of you will turn out to be good, above average investors because you are a skewed sample, the Harvard MBAs. A person can learn to be an above-average investor. You can learn to do well enough, if you’re smart and hardworking and educated, to keep a good, high-paying job in the investment business for your entire career.

You can make millions without being a great investor. You can learn to outperform the averages by a couple points a year through hard work and an above average IQ and a lot of study. So there is no reason to be discouraged by what I’m saying today. You can have a really successful, lucrative career even if you’re not the next Warren Buffett.

But you can’t compound money at 20% forever unless you have that hard-wired into your brain from the age of 10 or 11 or 12.

I’m not sure if it’s nature or nurture, but by the time you’re a teenager, if you don’t already have it, you can’t get it. By the time your brain is developed, you either have the ability to run circles around other investors or you don’t.

Going to Harvard won’t change that and reading every book ever written on investing won’t either. Neither will years of experience. All of these things are necessary if you want to become a great investor, but in and of themselves aren’t enough because all of them can be duplicated by competitors.

As an analogy, think about competitive strategy in the corporate world. I’m sure all of you have had, or will have, a strategy course while you’re here. Maybe you’ll study Michael Porter’s research and his books, which is what I did on my own before I entered business school. I learned a lot from reading his books and still use it all the time when analyzing companies.

Now, as a CEO of a company, what are the types of advantages that help protect you from the competition?

How do you get to the point where you have a wide economic moat, as Buffett calls it?

Well one thing that isn’t a source of a moat is technology because that can be duplicated and always will be, eventually, if that’s the only advantage you have. Your best hope in a situation like this is to be acquired or go public and sell all your shares before investors realize you donít have a sustainable advantage.

Technology is one type of advantage that’s short-lived. There are others, such as a good management team or a catchy advertising campaign or a hot fashion trend. These things produce temporary advantages but they change over time, or can be duplicated by competitors.

An economic moat is a structural thing. It’s like Southwest Airlines in the 1990s, it was so deeply ingrained in the company culture, in every employee, that no one could copy it, even though everyone kind of knew how Southwest was doing it.

If your competitors know your secret and yet still can’t copy it, that’s a structural advantage. That’s a moat.

The way I see it, there are really only four sources of economic moats that are hard to duplicate, and thus, long-lasting. One source would be economies of scale and scope. Wal-Mart is an example of this, as is Cintas in the uniform rental business or Procter & Gamble or Home Depot and Lowe’s.

Another source is the network affect, ala eBay or Mastercard or Visa or American Express.

A third would be intellectual property rights, such as patents, trademarks, regulatory approvals, or customer goodwill. Disney, Nike, or Genentech would be good examples here. A fourth and final type of moat would be high customer switching costs. Paychex and Microsoft are great examples of companies that benefit from high customer switching costs.

These are the only four types of competitive advantages that are durable, because they are very difficult for competitors to duplicate. And just like a company needs to develop a moat or suffer from mediocrity, an investor needs some sort of edgeover the competition or he’ll suffer from mediocrity.

There are 8,000 hedge funds and 10,000 mutual funds and millions of individuals trying to play the stock market every day. How can you get an advantage over all these people? What are the sources of the moat?

Well, one thing that is not a source is reading a lot of books and magazines and newspapers. Anyone can read a book.

Reading is incredibly important, but it won’t give you a big advantage over others. It will just allow you to keep up. Everyone reads a lot in this business. Some read more than others, but I don’t necessarily think there’s a correlation between investment performance and number of books read.

Once you reach a certain point in your knowledge base, there are diminishing returns to reading more. And in fact, reading too much news can actually be detrimental to performance because you start to believe all the crap the journalists pump out to sell more papers.

Another thing that won’t make you a great investor is an MBA from a top school or a CFA or PhD or CPA or MS or any of the other dozens of possible degrees and designations you can obtain.

Harvard can’t teach you to be a great investor. Neither can my alma mater, Northwestern University, or Chicago, or Wharton, or Stanford. I like to say that an MBA is the best way to learn how to exactly, precisely, equal the market return. You can reduce your tracking error dramatically by getting an MBA.

This often results in a big paycheck even though it’s the antithesis of what a great investor does. You can’t buy or study your way to being a great investor. These things won’t give you a moat. They are simply things that make it easier to get invited into the poker game.

Experience is another over-rated thing.

I mean, it’s incredibly important, but it’s not a source of competitive advantage. It’s another thing that is just required for admission. At some point the value of experience reaches the point of diminishing returns. If that wasn’t true, all the great money managers would have their best years in their 60s and 70s and 80s, and we know that’s not true. So some level of experience is necessary to play the game, but at some point, it doesn’t help any more and in any event, itís not a source of an economic moat for an investor.

Charlie Munger talks about this when he says you can recognize when someone gets it right away, and sometimes it’s someone who has almost no investing experience.

So what are the sources of competitive advantage for an investor?

Just as with a company or an industry, the moats for investors are structural. They have to do with psychology, and psychology is hard wired into your brain. It’s a part of you. You can’t do much to change it even if you read a lot of books on the subject.

The way I see it, there are at least seven traits great investors share that are true sources of advantage because they canít be learned once a person reaches adulthood. In fact, some of them can’t be learned at all; you’re either born with them or you aren’t.

Trait #1

Is the ability to buy stocks while others are panicking and sell stocks while others are euphoric.

Everyone thinks they can do this, but then when October 19, 1987 comes around and the market is crashing all around you, almost no one has the stomach to buy. When the year 1999 comes around and the market is going up almost every day, you can’t bring yourself to sell because if you do, you may fall behind your peers.

The vast majority of the people who manage money have MBAs and high IQs and have read a lot of books. By late 1999, all these people knew with great certainty that stocks were overvalued, and yet they couldn’t bring themselves to take money off the table because of the ìinstitutional imperative, as Buffett calls it.

Trait #2

The second character trait of a great investor is that he is obsessive about playing the game and wanting to win.

These people don’t just enjoy investing; they live it. They wake up in the morning and the first thing they think about, while they’re still half asleep, is a stock they have been researching, or one of the stocks they are thinking about selling, or what the greatest risk to their portfolio is and how they’re going to neutralize that risk.

They often have a hard time with personal relationships because, though they may truly enjoy other people, they don’t always give them much time. Their head is always in the clouds, dreaming about stocks.

Unfortunately, you can’t learn to be obsessive about something. You either are, or you aren’t. And if you aren’t, you can’t be the next Bruce Berkowitz.

Trait #3

A third trait is the willingness to learn from past mistakes. The thing that is so hard for people and what sets some investors apart is an intense desire to learn from their own mistakes so they can avoid repeating them.

Most people would much rather just move on and ignore the dumb things they’ve done in the past. I believe the term for this is repression.

But if you ignore mistakes without fully analyzing them, you will undoubtedly make a similar mistake later in your career. And in fact, even if you do analyze them it ís tough to avoid repeating the same mistakes.

Trait #4

A fourth trait is an inherent sense of risk based on common sense.

Most people know the story of Long Term Capital Management, where a team of 60 or 70 PhDs with sophisticated risk models failed to realize what, in retrospect, seemed obvious: they were dramatically over leveraged. They never stepped back and said to themselves, “Hey, even though the computer says this is ok, does it really make sense in real life?”

The ability to do this is not as prevalent among human beings as you might think. I believe the greatest risk control is common sense, but people fall into the habit of sleeping well at night because the computer says they should. They ignore common sense, a mistake I see repeated over and over in the investment world.

Trait #5

Great investors have confidence in their own convictions and stick with them, even when facing criticism. Buffett never get into the dot-com mania though he was being criticized publicly for ignoring technology stocks.

He stuck to his guns when everyone else was abandoning the value investing ship and Barron’s was publishing a picture of him on the cover with the headline “What’s Wrong, Warren?”

Of course, it worked out brilliantly for him and made Barron’s look like a perfect contrary indicator.

Personally, I’m amazed at how little conviction most investors have in the stocks they buy. Instead of putting 20% of their portfolio into a stock, as the Kelly Formula might say to do, they’ll put 2% into it.

Mathematically, using the Kelly Formula, it can be shown that a 2% position is the equivalent of betting on a stock has only a 51% chance of going up, and a 49% chance of going down. Why would you waste your time even making that bet? These guys are getting paid $1 million a year to identify stocks with a 51% chance of going up? It’s insane.

Trait #6

Sixth, it’s important to have both sides of your brain working, not just the left side (the side that’s good at math and organization.)

In business school, I met a lot of people who were incredibly smart. But those who were majoring in finance couldn’t write worth a damn and had a hard time coming up with inventive ways to look at a problem. I was a little shocked at this.

I later learned that some really smart people have only one side of their brains working, and that is enough to do very well in the world but not enough to be an entrepreneurial investor who thinks differently from the masses.

On the other hand, if the right side of your brain is dominant, you probably loathe math and therefore you don’t often find these people in the world of finance to begin with. So finance people tend to be very left-brain oriented and I think that’s a problem. I believe a great investor needs to have both sides turned on.

As an investor, you need to perform calculations and have a logical investment thesis. This is your left brain working.

But you also need to be able to do things such as judging a management team from subtle cues they give off. You need to be able to step back and take a big picture view of certain situations rather than analyzing them to death. You need to have a sense of humor and humility and common sense. And most important, I believe you need to be a good writer.

Look at Buffett; he’s one of the best writers ever in the business world. It’s not a coincidence that he’s also one of the best investors of all time. If you can’t write clearly, it is my opinion that you don’t think very clearly. And if you don’t think clearly, you’re in trouble. There are a lot of people who have genius IQs who can’t think clearly, though they can figure out bond or option pricing in their heads.

Trait #7

And finally the most important, and rarest, trait of all: The ability to live through volatility without changing your investment thought process.

This is almost impossible for most people to do; when the chips are down they have a terrible time not selling their stocks at a loss. They have a really hard time getting themselves to average down or to put any money into stocks at all when the market is going down.

People don’t like short term pain even if it would result in better long-term results. Very few investors can handle the volatility required for high portfolio returns.

They equate short-term volatility with risk. This is irrational; risk means that if you are wrong about a bet you make, you lose money. A swing up or down over a relatively short time period is not a loss and therefore not risk, unless you are prone to panicking at the bottom and locking in the loss.

But most people just can’t see it that way; their brains won’t let them. Their panic instinct steps in and shuts down the normal brain function.

I would argue that none of these traits can be learned once a person reaches adulthood. By that time, your potential to be an outstanding investor later in life has already been determined.

It can be honed, but not developed from scratch because it mostly has to do with the way your brain is wired and experiences you have as a child. That doesn’t mean financial education and reading and investing experience aren’t important.

Those are critical just to get into the game and keep playing. But those things can be copied by anyone.

The seven traits above can’t be.


Do you possess these 7 traits?


A post every trader should read, especially new traders.

A post every trader should read, especially new traders.
December 18, 2017
Return to Blog Home Page
Having a 34 career as a stock trader, I’ve experienced some incredible times in the stock market, good and bad. Today I’m going to talk about a few of the more tumultuous times.
For those of you that think it’s different this time around or that the market simply won’t go down 5 or 10%, let me offer the following bit of perspective:
In 1987, the Dow Jones Industrials fell 22.61% in a single day! It was the worst one-day decline in history known as Black Monday.
I was there.
I saw the carnage, and fortunately I was out before it occurred. But many weren’t so fortunate. I remember seeing on the news people jumping out of windows committing suicide and investors walking into brokerage offices and shooting their stock broker. Oh yeah! This actually happened.
Now think about that for a moment in today’s terms. That would equate to a 5,800 point drop in the Dow in one day! What do you think would happen if that occurred?
To say it is amusing that some investors actually get offended from a Twitter post about a possible 5% market pullback, would be to put it very lightly. Actually, it is the most comical, complacent, arrogant, neophyte sentiment I have ever witnessed in my more than 3-decade trading career. And I’ve seen some bubbles.
Remember the flash crash back in 2010, when the Dow Jones Industrial Average dove 1,000 points in a few minutes. It appears many of today’s traders don’t, probably because many of them were wearing diapers at the time (at least metaphorically in terms of market experience).
I was there. I saw the carnage. Fortunately I was out before it occurred. But many investors weren’t so fortunate.
The 2000 bear market took the NASDAQ Composite down more than 75%; the average tech was down 80-90%! And just when you thought it was safe to go back in the water, just five years after the conclusion of one of the worst bear markets in stock market history, the 2008 bear market came along and took the Dow down more than 50% with many of the largest companies on earth (like GE, Citgroup, AIG) shedding more that 90% of their value and some even going bankrupt.
I was there. I saw the carnage. Fortunately I was out before it occurred. But many investors weren’t so fortunate.
So, here we are in 2017. And the bullshit is starting all over again. Bitcoin is going to a million. The market can’t go down 5%. People I haven’t heard from in 20 years are calling me to ask if they should quit their day jobs to trade. Folks, if you don’t see the writing on the wall, then you deserve whatever is coming to you.
I think we are likely in a secular bull market. But I also know from experience (like 1987) that those cyclical swoons can be real doozies. Like 1998 for instance; a 512 point slide on the Dow or 8.5% on the NASDAQ Composite in just one-day! That turned out be right in the middle of a cyclical bear market a year before the secular top was formed in 2000.
This market seems to have all the makings of a mania. Could it go higher? Sure. Most manias go further than everyone expects. But will there be a price to pay if you don’t respect risk? Absolutely!
Just remember, those who fail to study and learn from history are doomed to repeat it. And, a fool and his money eventually part.
If you don’t have a plan for dealing with the opposite side of your long trade, then all I can say is good luck, because you’re going to need it.




I’m expecting NIFTY50 will cross 10500 level by November expiry. And as per economic calendar few events will be in December like…


5-6 Dec – RBI Policy
9 Dec – Phs 1 Gujarat Election
12-13 Dec – US FED Policy
14 Dec – Phs 2 Gujarat Election
18 Dec – Gujarat and Himachal Pradesh Results

So I’m assuming, all come outs will be positive from these all events and in that case, market may touch the mark of 10800 level on positive cards (And may Hold few days for buildup positions). So at that time may be all OUTLOOKS will be positive and very pinky.

But, as we aware market had started journey from 6955 level to reach 10500 and above level. As per me, “if we are talking 6955 as a point A and 10500 is a B than NIFTY50 moved around 50% within 22 months (Feb-16 to Dec-17)”. So, NIFTY50 will take a RETRACEMENT for next journey. Above 10500 will be for SELL and DISTRIBUTION ONLY.

And I believe, main game is in derivatives market not in Equity Market. So, I’m expecting and assuming that, F&O position will provide indications and hopefully we can understand that properly AND at on right time. SO, *BE READY FOR ROCKING DECEMBER.*

I think this is also a big indication, *BIG TRADE HAPPENED (21-11-2017)*: Nifty Dec 9800-PE traded 18.15 lac shrs @ 31.25 with NIFTY-NOV-FUT reference of 10350.

I’m expecting market is likely to give a big fall in December month around 10-15% from the High (around 10800 (10650 is a benchmark level) + or – 100 pts).


NIFTY: Looking For Insights & Wisdom!

*NIFTY: Looking For Insights & Wisdom!*

Yesterday, NIFTY50 bounced back from 9687 in spot level and that was a good support also for market before crossing 10K mark. There is no any good data in domestic front right now, agreed on that. Despite domestic flows, people believe, these flows may not able to hold NIFTY50 because; FIIs are aggressive sellers as valuation wise and on weak Rupee. But I believe, we need to focus on long term story or stock specific story, like government spendings on Infrastructures, housing for all, Rail Infra developments, lithium batteries and electric vehicles and defense. I also believe, people are looking historical data to predict weakness or weak months for stock markets. I read somewhere, *”We’re looking for insights and wisdom, not hard laws and proofs”*. So, I am expecting something different from everyone, If institutions having cash (MFs have approximate 48500 Cr. cash on ended of Aug-17) because, lack of investments ideas or valuation issues. Market came down around 4.75 % (Nifty50 High 10170 to Nifty50 Low 9687) on FIIs heavy selling of around 22,423 Cr till in this month. And if any further down fall will be the best opportunities for institutions to deploy cash in market and they will definitely supports the good story base stocks.

We are positive on our fundamentals stocks MOIL, TRIVENI ENG, WEST COST PAPER.

And, looking some stocks good at CMP Ashok Leyland, JSW Energy, HUDCO these all have good story or technical view.

Happy Investing!!!

Kind Regards,

Nifty Likely to Surprise Again?

Nifty50 is trying to hold above 9600 levels from last 3 days, GDP numbers were surprising for all bulls.

As I am trying to read all data from expiry, whole last week of May-17 expiry was full of negative news and FIIs were seller at every level. Than after Nifty had given strong expiry closed at 9500.

FIIs had sold out around 30 Lacs Nifty50 Future in last 3 days and currently options side, around 59 Lacs OI in 9500-PE option and after that highest OI 60 Lacs at 9400-PE. And call sied highest OI 45.43 Lacs in 9700-CE and 41.79 Lacs in 9600-CE. So data is very clear and indicating that, this is a fight between bulls and bears. So market may take some time and clear the trend on events. As per me currently Level-1 9550 and Level-2 9450 are most important for market for up move. FOR June is a long month for expiry; all companies had provided their results so no negative balance on results, monsoon likely to normal as per estimates.

So, I believe, Nifty50 likely to surprise again all of us and likely to touch 10000 by this month. But, this is my personal view only. Hope for the Best with finger crossed.

Opinion: “Situation Is Better Than A Statistic!!!”

Opinion: “Situation Is Better Than A Statistic!!!”

I was trying to write from last 4 to 5 days, I tried very hard to find this, putting your thoughts in front of others with direction are also hard. I understood that from this. But, I found this. I am really very surprised; people are still waiting for down fall because numbers are not giving indication. I heard from many people they are asking, where are the numbers? And saying Market can’t go up without numbers, may fall like same as earlier 2008 & 2001. And market is going up without hearing that negativity.

But I am really very positive on market not because of I am running with trend but, remember those situations. Those both falls in 2001 and 2008 were different situations. Those situations are not here. I would like to share something which I read in 100 Baggers. I think this is the best match with current situation. “There is a Wall Street saying that, a situation Is Better Than A Statistic”. Relying only on published growth trends, profit margins and price-earnings ratios is not as important as understanding how a company could create value in the years ahead. India is growing faster than among and even can grow faster if policies problems can removed which are coming from old government from many years. We have a big domestic consumption story among the all others. Government have full power to clear all problems. And I have a faith that, government is on right track and if right track is there than numbers will be come out not today but tomorrow surely.

My last option was after FED hiked March (16-03-2017). I am trying to read again & match that with current momentum. (Opinion​: NIFTY may touch 10000 to 10500 level in 4 months. http://wp.me/p7kWKP-64 ). Now I think market is really waiting for some big trigger and that will be a big move and may be in range of 9850 to 10000 by end of June or first week of July and by the end of August market will be in range of 10200 to 10800.

But, Approach should be conscious and must stay optimistic. Don’t react as a blind. Need to check, Company can grow for longer periods. Management should be stronger for good growth and focus should be clear on business and aware about all changes in domestic and global technology and environment. We don’t want KODAK till bankruptcy or SATYAM COMPUTER with us. We need same like Amazon & Google. Our market can pay as same like “Baahubali”. Just focus and find out growth stories and faithful managements.

(Note: This is just my personal opinion only)

Kind Regards,

Atul Vitha