The problem, as the author diagnoses, is that the typical investor’s mind harbours “the false premise that investing is a craft, like carpentry or doctoring.”

No, investing is more like a scientific query session, says Fisher.

“As a scientist, you should approach investing not with a rule set, but with an open, inquisitive mind. Like any good scientist, you must learn to ask questions. Your questions will help you develop hypotheses you can test for efficacy.”

Simple questions that he advises one to ask begin with a quest to know the areas where one sees wrongly: “What do I believe that is actually false?” Second question is to find where one doesn’t see at all: “What can I fathom that others find unfathomable?” Essentially, this is out-of-the-box thinking, explains the author. “Intuitively you know if no one knows what causes a particular result — let’s call it result Q — and we can prove factor Z causes Q, then every time we see Z happen we can safely bet on Q happening because we know something others don’t.”

And finally, the third question: “How can I out-think my brain which normally doesn’t let me think too well about markets?”

Impossible to ignore.

If you are looking for a starter book on finance, here is Basic Financial Accounting for Management by Paresh Shah ( www.oup.com). Written to help the self-learner, the book has exercises and case studies in ample measure, apart from a discussion of the basics in a simple style.

For instance, in a section on ‘buyback of shares’, Shah explains that the phrase refers to the act of purchasing own shares by a company ‘either from free reserve, securities premium, or proceeds of any shares or securities’.

The relevant law is cited too: Section 77A of the Companies Act, 1956, according to which a company can buy its own shares from the existing equity shareholders on a proportionate basis, open market, odd lot shareholders, or employees of the company pursuant to a scheme of stock option or sweat equity…

Useful reference.

Be on your own

Quit your job and turn your passion into your profession, exhorts Jonathan Jay in Sack Your Boss ( www.jaicobooks.com).

“The one thing you must have in bucketfuls is self-belief,” he insists. “If you do not believe in yourself, no one else will.” When you sack your boss do not make the mistake of taking a partner, cautions Jay.

“The reason people take on partners or fellow directors is that they do not believe in the business themselves. It is far easier to go into business with someone else than by yourself because that way you have someone with whom you can share the blame.”

Revealing insights!

Dog laws

There are seven ‘dog laws’, according to The Bow-Wow Secrets by William Cottringer ( www.wisdomtreeindia.com). First, ‘know what kind of dog you are’. It is okay for one dog to ask another if he is unsure about something, says the author.

“Sometimes a second opinion is good.” And there are more lessons to learn from dogs — such as, they compete against themselves, and learn early on what they are best at doing.

Another law is to bark and not bite; review, therefore, your communication style — what you say and how you say it. Yet another law is, ‘Don’t try to do too much’.

Look for opportunities to make small but well-timed and well-placed interventions which can have a big impact, advises Cottringer.

Should work in the markets too!

Wow.

Options demystified

In an options contract, the buyer of the contract, also called the holder or the long, has a right, while the seller, also known as the writer or the short, has an obligation. Thus reads a snatch in Fundamentals of Options by Sunil K. Parameswaran ( www.tatamcgrawhill.com). “The long has the freedom to decide as to whether or not he wishes to go through with the transaction, whereas the short has no choice but to carry out his part of the agreement if and when the holder chooses to exercise his right.” Option premium is the price that the holder has to pay to the writer at the outset, in order to get the right to exercise. This premium is a sunk cost, explains the author. “If the holder were not to exercise prior to expiration, the premium cannot be recovered.”

Elucidatory.

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