Arnold Schwarzenegger and the Indian Equity Investor

Suddenly off late, I have started to receive frequent calls from my friends asking for equity investment tips. And me being the boring conservative guy that I am, “Dude, start off with an SIP in X,Y & Z equity mutual funds” goes my response. And most often the response is “Can you suggest me some stocks instead. Mutual Funds are boring!!”.

While I have no issues with my friends going ahead with stocks, unfortunately most of them are first time investors who are looking to shift from their Bank FDs or Real Estate investments. The recent strong returns of the stock market, new found interest amongst their peers about stock markets, bad show in real estate & gold and the extremely low returns from FDs  maybe some of the reasons for this sudden interest.

This post is a summation of my thoughts on what first time investors need to realise before they start investing stocks.

Arnold & Stock Investing

Assume you suddenly realize that you have gained pounds over the years, thanks to your sedentary life style. Now you have decided to become fit. What will be your approach?

Image result for arnold schwarzenegger

You see the above picture of Arnold and you’re like…

Wow..I have to develop a six pack like Arnold!!

But unfortunately, it also means the route to this is not easy

Err.. In fact, the reality is that while most of us want a body like Arnold, we acknowledge and realize that it involves significant amount of discipline, hard work and a six pack is definitely not for the majority of us.

Rather we would set reasonable targets such as to lose a few kilos of weight, become more active again etc. So the initial focus would ideally be to start exercising regularly, improving diet and getting good sleep.

However when it comes to investing in stocks, we seem to take a different path altogether.

In stock markets, the below table is the equivalent of seeing Arnold’s six pack and wanting to replicate it. We get enamored by the “make quick returns” thought process.

top-10-fastest-wealth-creatorsSource: As on 31-Dec-2016, MOSL Wealth Creation Study 2016

While there is no denying that you can definitely become a great equity investor, we need to respect the fact that just like in any other field, the route to being a great investor while maybe simple is definitely not easy.

Image result for investing is not easy - charlie munger

Unfortunately, the discipline, hard work and patience which goes behind successful equity investing is not as vivid and visible as the inspiring Arnold workout video which we saw above. Most often it remains hidden and extremely subtle. And therein lies the problem.

All of us want to be Arnold’s of equity investing without really understanding the effort that needs to go into it.

Recognizing what it takes to be in stock markets

This is what we see and get interested in stocks..


But this is exactly the reality of what it takes to get these returns..


Note: Stocks don’t go up and make new highs every single day. This means most of the time you’re going to see a price which is lower than its previous highest price and you’re most likely to be in a state of “Oh shit I should have sold it earlier” . The drawdown chart is basically used to represent this and plots the percentage fall of the stock price on each and every day compared to its previous highest price

The 62x return is made of several testing moments.

The highest fall that you would have experienced from the previous peak price is 73% during this 10 year period!!

Each and every fall tempts you with the option to “Sell now and Buy later”. But unfortunately this is easier said than done. It is extremely difficult (almost impossible in my opinion) to move in and out at the right time consistently over long periods.

As the great investor Howard Marks puts it ,

“The biggest investing errors come not from factors that are informational or analytical, but from those that are psychological.”

Hence “staying put through testing times and withstanding the volatility” is the first quality that any stock market investor needs to develop and learn over a period of time

But hang on..Before you go all out and decide to stay put no matter how volatile the prices of your stock is, please take a look at the below chart


Imagine being a long term investor in DLF. At one point in time it was the superstar of the 2007 bull run. The stock is 1/4th its original price in the last 10 years.


The highest fall that you would have experienced from the previous peak price is a whopping 93% during this 10 year period.

So while the ability to hold on for the long term is the primary quality that you require, identifying the right stocks is also as important.

In essence, it means you need to get two things right when it comes to investing in stocks

  1. Identify the right stocks – strong fundamentals, profitability and long term sustainable growth
  2. Ability to stay invested for the long term – Staying put despite the extreme short term price fluctuation

This is also neatly summarized by MOSL investment team as

Image result for buy right sit tight

Parting Thoughts

Investing in stocks as seen above is definitely not easy and requires a lot of discipline, patience and research. So in effect if you are someone who does not have the time nor the interest to analyse and research stocks, how do you start equity investing and still ensure you still make reasonable returns from equities.

One of the best ways to start, is in an equity mutual fund where you have experienced fund managers and analyst teams working together to provide you a well diversified portfolio of fundamentally strong stocks.

But again there are 300+ equity mutual funds. How do we decide which one is right for us.

Hang on. We shall explore the world of equity mutual funds in the coming weeks.

You can also subscribe/follow to the blog if you would like the posts to be delivered directly to your inbox and not miss out on the latest articles.

Thanks for reading. And happy investing as always 🙂


Discover 6 simple hacks to reduce time spent on social media

In our last post here, we learnt about the techniques app designers use to keep us hooked to their apps.

A habit forming app consists of these 4 ingredients

  1. A trigger which reminds us to do the action
  2. An action which is damn simple to do
  3. A variable reward to keep us craving for more and repeat the action (this is responsible for the addictive behavior)
  4. An investment from us into the app which leads to step 1 albeit with a lag

What is the flip side?

According to Gloria Mark, one of the leading researchers on “interruption science” at UC Irvine, unrelated external interruptions cost us 23 minutes before we resume focus!!


So how do we solve this issue?

Since we know how the app designers think, let us invert this and use the same framework to find out ways to negate the above factors and hence develop better control of our time when it comes to using these apps.

The solution..

I personally think as normal humans it is extremely difficult to resist “variable rewards”. As we scroll through our social media feeds in search of variable rewards, a chemical called dopamine hits our brain providing us pleasure. This is the same pleasure chemical that is stimulated when we eat delicious food, make money, have sex or use drugs. This chemical is a strong proponent of addictive behavior and is extremely tough to resist.

The fourth factor which involves our participation in the apps, is again difficult to address. As it simply means you shouldn’t use the app. Abstinence, while might be the best solution, I don’t think is practical enough. 

So, basically factors 3 and 4 – are difficult to address and we are left with the first two to solve our issue:

  1. Triggers
  2. Action


The easiest thing to address is the external trigger.

1.Take control by turning off all your notifications

Image result for notifications social media

Every app designer uses external triggers in the form of notification to reminds us to use the app. Disabling this is the first step from our side to bring back the control and lets us decide when to use rather than the app designer deciding it for us.

However you might want to keep an exception for notifications which indicate that real people (your friends, colleagues, family etc) are trying to reach you i.e apps like Messages, WhatsApp, or FB Messenger etc (but even this is a pain in my opinion)

2.Recognise your internal trigger

Next time you feel like opening twitter, consciously take a note of what is the exact “feeling” or “emotion” that goes through your head before you open the app.

Are you feeling bored? anxious? lonely? depressed?

This linkage to an emotion is what generally makes the app eventually addictive.

Next time you get this feeling. Instead of opening the app, experiment with some other action. Say talk to your friends nearby, call a friend, read a few pages of a book, take a walk, take 5 pushups etc. Check if the craving is satisfied. Else keep experimenting with the rewards till you find a suitable alternative.

The key is to be aware of the emotion which creates the craving. While this is going to be tough. Gradually you will start to have better understanding and control.


The app designers want to make the action as easy as possible to do. Our intent is the reverse and to make it as difficult as possible.

3.Get the social media apps off your home screen in phone


  • The moment you open the phone the sight of these colorful app icons in the home screen, act as sub conscious triggers and make it extremely easy to open the app
  • Keep only the most essential apps you use for quick tasks such as Camera, Maps,Notes, Uber etc in the home screen
  • Move the rest of your apps off the first page and into folders

4.Launch apps by typing

  • When you want to open any of these apps, search for them by typing and then open the app – this act of typing forces us to become conscious
  • This also prevents us from viewing other apps while searching for this app – which might trigger us to open other apps too

5. Log off from social media apps

Log off from all your social media apps. So whenever you want to check facebook, twitter etc, you have created an additional resistance by having to log in each and every time. In effect, we are trying to make the usually easy “action” slightly more difficult.

6. Buy an alarm clock

8 out of 1o smartphone users check their phone first thing in the morning.

The best solution is to use a separate alarm clock and charge mobile phones outside the bedroom. This makes the action of immediately looking at your cell phone after waking up a tad more difficult.

Thus the basic idea is to

  1. Remove the external triggers
  2. Recognise the internal triggers and experiment with new actions (rewards) to satisfy the cravings
  3. Make the action as difficult as possible

Let us also listen to few experts for their suggestions

Tristan Harris – a crusader against tech addiction

Tristan Harris is a former design ethicist at Google who is currently leading the movement to bring moral integrity to software design: essentially, to persuade the tech world to help us disengage more easily from its devices. He is advocating this cause via his Time Well Spent movement.

Nir Eyal – the man behind the “HOOK” framework

Mr. Nir Eyal is the author of “Hooked: How to Build Habit-Forming Products” and lecturer at the Stanford Graduate School of Business and Design School

If you have any ideas that you think can be used to take control of our time when it comes to app usage, do share them in the comments section.

The secret techniques app designers use to get us addicted

Nowadays most of us end up spending a lot of our time on social media apps such as Facebook, Twitter, Instagram, Whatsapp etc. In the future, this trend is only expected to get worse.

Given this backdrop, I think it is extremely important that all of us get to understand some of the habit formation techniques that app developers deploy in these apps. It might give us a fair chance to still be in control of our social media usage. More so especially, if your are a parent, as the apps have their most vulnerable target in the form of your precious ones.

Let us begin with a simple question:

Why the heck are some of these apps so addictive ?

To find out the answer, we will take the help of our friend Mr. Nir Eyal, the author of “Hooked: How to Build Habit-Forming Products” and lecturer at the Stanford Graduate School of Business and Design School. Thankfully for us, he has spent a good part of his life figuring out the secret ingredients that go into habit-forming apps and products.

Related image

So without reinventing the wheel, let us first understand what Mr. Nir Eyal has found out.

According to Nir Eyal, habit-forming and engaging apps generally deploy a combination of these 4 concepts

  1. Trigger
  2. Action
  3. Variable Reward
  4. Investment

He calls it the “HOOK” model.

Image result

What the heck!! 

Err I understand. You have no clue and these definitely don’t sound exciting by any means. But hang on and soon you will be able to connect the dots to get your “Aha” moment.

1.Triggers (“the reminder to use the app”)

Just take a count of the apps in your phone. Mine is currently at 25. Phew.

But how many do you actually use regularly?

Umm.. Maybe around 5-6!

Ever wonder why?

Incomplete office work, bike to be repaired,  electricity bill to be paid, vegetables to be bought blah blah…Long story short – All of us are busy. Period.

So how in the world will we remember to open and use the app.

In comes our hero Mr Trigger.

Triggers are essentially “cues” which remind us to take the necessary action i.e to open and use the app.

These are typically the notifications, beeps, buzzes, rings, flags, pushes, pings, SMS, email etc. that your app keeps sending in order to make you use the app.

Image result for social media notification

Almost all apps start encouraging usage by alerting users with these simple triggers.

But the addictive apps, take the concept of triggers to the next level.

Think about this. Do you open facebook only when you receive a trigger from the app?

No right. We most often also check facebook when we feel bored or lonely.

So the trigger in this case is not only the typical external one designed by the app designer. But rather it is also the much more powerful internal trigger which is basically your own emotions or feelings that you go through.

Sample this:
You are feeling bored. You check Twitter!

You are unsure of something.You check Google!

You fear missing out on your groups’ conversation. You check Whatsapp!

While all apps start with simple external triggers, the successful ones gradually figure out an internal emotion or feeling which will act as a perennial and powerful trigger for using the app. So from then on, each and every time you get that emotion you will check out the app eventually creating a habit. Isn’t that a killer.

And here is something even more interesting – between positive and negative emotions, the negative emotions are proven to be more powerful internal triggers.

People  who  are  DEPRESSED  CHECK  EMAIL  MORE  OFTEN.     Source:  Kotikalapudi  et  al  2012

So the next time you decide to check an app. Pause for a second. Was it an external trigger or an internal trigger. If it’s an internal trigger – what is the emotion or feeling which is causing you to open the app?

This transition from an external to internal trigger is the first sign of an addictive killer app.

But hang on. The trigger is fine, but will it always lead to the desired action?

For eg:
I get a notification from Myntra informing a discount sale is on. But I am least interested. So it doesn’t lead to action.

So an external trigger, unless it matches with my internal motivation doesn’t lead to an action.

What about internal triggers?

I get really bored (internal trigger). But will I open the intended app?

So now we come to the next question –

When does a trigger really become effective and lead to action?

To decipher this, let’s move on to the second part of the HOOK model

2.Action (“using the app”)


The trigger driven by internal and external cues has essentially reminded you to do the action (i.e opening and using the app). However, if you don’t take action, the trigger is useless.

So for the trigger to work i.e the action to happen, there needs to be two more additional things apart from the trigger

  1. Motivation: A person must have sufficient motivation when the trigger occurs. That is basically there must be some reward (either extrinsic or intrinsic) which motivates you to do the action. Eg You open facebook to see who liked your picture – you get a social reward in the form of appreciation, recognition. We shall explore this in detail under the topic of “variable rewards”.
  2. Ability:  The person must have the ability to perform the behavior when the Trigger occurs. Think of someone trying to use the photoshop app to edit images. Unless he has the ability (the know how) he wont be able to use it.

So apps primarily work around these two levers of “motivation” and “ability” to ensure that the trigger leads to intended behavior.

Generally, it is far more difficult to increase motivation vis-a-vis ability.

Hence the apps which end up creating habits, initially focus on the ability portion. They make the action as easy as possible. The easier it is do something, the more users will do it. Think about the ease of all the actions which we do in various apps – scrolling, clicking, liking, sharing, playing a video etc

To make the action as easy as possible, app developers focus on these six elements and keep simplifying them

  1. Time: how long it takes to complete an action
  2. Money: the monetary cost of taking an action
  3. Physical effort: the amount of labour involved in taking that action
  4. Brain cycles: the level of mental effort and focus required to take an action
  5. Social deviance: how accepted that behaviour is by others
  6. Non-routine: how much the action matches or disrupts existing routine times
Level  of  of  motivation  and  ability   determines  if  action  will  occur. MOTIVATION TRIGGER  	 SUCCEEDS TRIGGER ...

Thus the app designers make the action as easy as possible, thereby ensuring that the trigger is effective.

As expected, the action phase of the hook is where the habitual behavior occurs.

So now we have

  1. A trigger which reminds us to do the action
  2. An action which is simple enough to be done

Hang on. There is still a major issue.

You have reminded me to act. Sure. You have made the action simple. Alright.

But why in the world should I do the action however simple it is. What is my incentive? 

So the app developer is now stuck with the problem of motivating us to do the action. Let us see how he solves this.

 3.Variable Rewards (rewards for using the app – and its variable!!)

The app developers solve this issue by rewarding the actions that it triggers. Rewards are not necessarily the monetary ones . There are several others types of rewards such as social rewards, search for resources, personal achievement etc about which I have discussed in detail in the below post

A deep dive into variable rewards

But here is the killer. Researchers have found that, instead of a steady and predictable reward, if these rewards are made variable (i.e random where you have no clue on when and what type of reward you stumble upon), they produce significant cravings in us and lead to addictive behavior. Eg Slot machines, video games, scrolling twitter in search of interesting information etc

This finding is born out of research conducted on animals, for example: teaching a rat to press a lever. Researchers found that when compared to a fixed schedule (eg: a piece of cheese for every other lever presses), varying the schedule (eg: two rewards in a row after one press, then a single reward after three presses, etc) was much more effective though the overall rewards received ratio was 1 to 2.

How Variable Rewards Work - Jason Shen

I have discussed this interesting concept in detail in my earlier post here

A pigeon from the 1950s has the answer to your facebook addiction

Thus as seen above variable rewards are one of the most powerful tools that app developers use to hook users.

 4. Investment (our inputs into the app)

The last phase of the Hook is where the user is asked to do bit of work. The point of the investment phase is to ask users to put something of value into the system, which increases the likelihood of them using the product and of successive passes through the Hook cycle.

Example: Inviting friends, sharing articles, commenting, sharing pictures, updating status, sending email etc

Unlike the action phase, which delivers immediate gratification, the investment phase is about the anticipation of future rewards.

The Hook Model applied in real life..

Let us see how Facebook uses the HOOK framework to create a habit


External Trigger – Notifications

Image result for facebook notification

Internal Trigger (the most powerful source of trigger)

You start using facebook whenever you are bored or lonely

2) Action

The scroll – how much more simpler can it be!!

Image result for facebook scrolling

3)Variable Rewards

The scroll action is done to get the variable rewards. There are several variable rewards that facebook deploys

  • We could get a friend request
  • Someone could tag us a in a photo
  • A friend could comment on our status update
  • A friend could have posted his/her own status update
  • Someone might have sent us a direct message
  • A friend might be online and ready to chat with us
  • We might stumble upon an awesome video shared by our friends
  • Some nice article in our news feed
  • Event invites
  • There is a discussion in our facebook groups etc

4) Investment:

Inviting friends, following people, sharing articles, commenting, sharing pictures, updating status, commenting in groups etc


Thus an addictive app mostly has all these 4 ingredients

  1. A trigger which reminds us to do the action
  2. An action which is damn simple to do
  3. A variable reward to keep us craving for more and repeating the action (this is responsible for the addictive behavior)
  4. An input from us into the app which leads to step 1 albeit with a lag

Apply this to any of the popular apps that you are using and I can guarantee your “Aha” moment.

In our next post, we will learn on how to invert the hook model and figure out on how we can slowly start reducing our app addiction.

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