Regret: The Longest Lasting Human Emotion

Regret is the most enduring emotion in the lives of most equity investors. Because sooner or later, they make the mistake of getting out of a falling equity market, only to see it turn around and rise, three years out of four, and for the rest of their lives. Some get back in much higher; others never get back at all.

This process gets repeated during the next bear market and the next. No matter: the pain of regret is with them forever. Nor does the passage of time heal the pain. If anything, time and relentlessly higher prices make it worse.

There are, after all, only two master emotions: love and fear.

• When markets are falling, investors fear permanent loss;
• When prices go up, investors fear missing out, and envy (another face of fear) those who seem to be getting rich.

I say again: that isn't "greed". It's just a different form of fear.

Don't envy the harvest of the rich. Envy their planting. - Bo Sanchez.

Many years ago, there was a detergent advertisement that went:

उसकी कमीज़ मेरी कमीज़ से सफ़ेद कैसे? (How come his shirt is whiter than mine?)

Do not be influenced by that advertisement when you invest.

A particular stock or mutual fund (or even equities as a whole) should not be chosen merely because your friend/colleague/neighbour has become rich by owning and you are envious of that fact.

Their circumstances, goals, or investment horizon may be far different from yours. Also, what was a good investment a while ago, may not be the same today.

Hence, choose an investment based on your situation only, not because someone else has chosen it.

The idea of caring that someone is making money faster than you are is one of the deadliest sins. Envy is a really stupid sin because it's the only one you can never possibly have any fun at. There's a lot of pain and no fun. - Charlie Munger.

I'm not working to maximize your short-term returns. I'm working to minimize your long-term regret.

The author is the Founder and Catalyst at Aaditya Chhajed Financial Services and can also be reached at aadityachhajed@acfas.in.