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What I learnt from Ray Dalio

Ray Dalio is the founder of BridgeWater, one of the largest hedge funds in the world

What I learnt from him:  Discuss your investment ideas with smart folks and ask them to find flaws in it. 

From his interview in the Book The Hedge Fund Wizards :

Most school education is a matter of following instructions-remember this; give it back; did you get the right answer?

It teaches you that mistakes are bad instead of teaching you the importance of learning from mistakes.

It doesn’t address how to deal with what you don’t know.

Anyone who has been involved in the markets knows that you can never be absolutely confident.

There is never a trade that you know you are right on. If you approach trading that way, then you will always be looking at where you might be wrong.

You don’t have a false confidence. You value what you don’t know.

In order for me to form an opinion about anything involves a higher threshold than if I were involved in some profession other than trading.

I’m so worried that I may be wrong that I work really hard at putting my ideas out in front of other people for them to shoot down and tell me where I may be wrong.

That process helps me be right.

You have to be both assertive and open-minded at the same time. The markets teach you that you have to be an independent thinker. And any time you are an independent thinker, there is a reasonable chance you are going to be wrong.

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What I Learnt from Colm O’ Shea

Colm O’ Shea runs one of the largest hedge funds in the world COMAC Capital.

What I learnt from him: How to place stop losses 

From his interview in the Book The Hedge Fund Wizards

First, you decide where you are wrong. That determines where the stop level should be.

Then you work out how much you are willing to lose on the idea.

Last, you divide the amount you’re willing to lose by the per-contract loss to the stop point, and that determines your position size.

The most common error I see is that people do it backwards.

They start with position size. Then they know their pain threshold, and that determines where they place their stop.

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What I Learnt from Mr. Suresh Shetty

Mr. Suresh Shetty was the first CFO of Hero Motocorp.

He used his domain expertise of the auto industry to invest in the auto and auto ancillaries space.

Now his stake in Motherson Sumi alone is worth around Rs.550 Crores

What I learnt from him:

Use your domain knowledge not only to do your job well but also invest

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What I learnt from Raamdeo Agrawal

Raamdeo Agrawal is the Chairman of Motilal Asset Management Company and a well known investor.

What I learnt from him: Great investors speak to other great investors about their investments

From Raamdeo Agrawal’s interview:

We did buy 5% of initially of Berkshire Hathaway initially .

The amount was small but still it was $10-15 million.

I spent one full day researching Berkshire Hathaway as an investment then I changed my role and I actually did the research

 I went and met a guy who is one of the largest holders with $3-$4 billion worth of Berkshire Hathaway stocks.

His job is only to take care of Berkshire Hathaway 24×7.

Saturday, Sunday you will get appointment to talk to him.

 I went and met with him with a help of a friend and then we discussed and we figured out that best possible growth rates cannot be more than 8-10% if you are lucky.

Then I said the gap is too much for me and so I must not put my money and then we withdraw that.

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Trading Advice:What Soros taught me

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