Can I Outperform the Share Markets Ever?

I have been investing in the share markets for about 4 years now. When I started, the great fall of 2008 happened. I didn't have an idea on how to react. So, I did what most of us did - Stopped investing. Partially because I was afraid and partially because I didn't have money as all that I had in spare was already committed when Sensex was at 21000! 

As per this article - Why investors always underperform the market, Sensex has given 17.79% CAGR in the past 10 years. This means 1 lakh in Sensex at that time would be 5.14 Lakh now. But frankly speaking how many of us have had such returns? Not many that I know…

Why? What is it that we do wrong? Leave Outperformance, can we even go near to the returns mentioned here? The same article lists some personal traits and behavioral patterns that stop us from doing so. Here is my take –

Fear and Greed: This is a common one and I mentioned this at the start of the post as well. We all get afraid when the market goes down. I was afraid in 2008. Similarly I was greedy in 2007 and hence had invested and the “Mount Everest” levels of Sensex. This is because of the other common trait “Greed” that common men like you and I want to acquire as much wealth as possible in the smallest possible time. Both of these make it hard to follow a plan.

The above 2 traits make us follow the Herd. Following the advice of other so called experts is because of the fear and greed again. Fear of being the black sheep, the failure and greed of making fast money. This makes us buy a stock when it is over heated (at a high price) just to sell the same stock at a lower price because of the Fear of losing everything.

While Buying and selling stocks, we don’t look for bargains very unlike when we are buying vegetables.

Warren Buffet suggests that one should be greedy when others are fearful and vice-versa. 

But generally it is the other way round. The key is -

• To be patient, assume stress when the market is down.
• Don’t look at your portfolio daily when the market is down.
• Study the stock like a hawk does for his prey before catching it.
• Buy the companies that you have researched on.
• Have a plan. Follow it like you do to your religion.
• Don’t look for a certain kind of return because your neighbor is getting the same. But make sure that you are getting what will fulfill your goals.

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Few facts about LTA

Some nice to know things about the LTA component of one's salary -

1. If you do not wish to claim LTA in one particular year you can have your employer carry forward your LTA for the next year.
2. You don't need to submit a proof/bills for the travel undertaken to the employer now. This has been termed in a judgement by Supreme Court in 2009. check this out. But this doesn't mean that you need not keep the bills. The taxation department might still want them from you directly.
3. The current block of LTA is 2010-13. You can claim tax benefits twice during these 4 years.
4. The bills can be any domestic travel. You cannot show fuel bills of the personal vehicle though.
5. You and your working wife can both claim LTA but not on the same travel.
6. LTA covers only travel and not the stay, which is weird. 

You can find details in my old post on LTA here.

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Can Holiday Package be claimed as LTA?

Found this article on the above topic. Thought to spread the word. Do check out - [one mint].

The answer is - Yes, it can be as far as it is a domestic travel, another thing to be noticed is that LTA is for spouse, dependent children, dependent brothers or sisters only, so if you have taken a holiday with your extended family or children who are no longer dependent on you, then you can’t claim LTA exemption on that part of the expense.

Since LTA can be claimed only for travel – if your holiday package included hotel and sightseeing (which it normally does) – you won’t be able to take an exemption for that.

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