Tortoise and Hare: Contrasting investment style

Most of us have heard The Tortoise and the Hare story in our childhood. How a nimble footed hare ridicules a slow moving tortoise, in turn the tortoise challenges him to a race. The hare soon leaves the tortoise far behind and, confident of winning, he decides to take a nap midway. When he wakes up, however, he finds that the tortoise, moving slowly but steadily, has already won the race.

This sort of contrasting styles is often found when it comes to retail investor behaviors and idiosyncrasies. Here I refer them as Hare and Tortoise investors.

Traits of "Hare" investors:

• Overconfidence; sporadic initial success gives them a false sense of invincibility. Heydays of stock bull run between 2005-07 when most stocks were in upswing, gave many first time stock investors egoboo. Cut to 2008 and the downward slide must have inflated most of that.
• Unrealistic expectation, always in look out for the next multi-bagger. For this they will seek information and tips from every possible sources including TV business channels, websites and will base their investment (rather speculation) decision based on these sources. Thus their portfolio will have a laundry list of dud stocks which were in fashion once.
• Whimsical investment decision implemented in fits and starts. Trading gives them kicks, investment is too long term to be exciting.
• Restless and impulsive, since investment decision are not governed by any long term plan these people gets easily carried away by short term swings in market. Keeps shuffling portfolio at the drop of a hat.
  

Traits of "Tortoise" investors:

• Disciplined and methodical, keeps aside a part of earning regularly for saving/investing. While he may not be savvy of all latest investment FADs, he keeps putting money in saving instruments (ppf, nsc, fd etc.) and investment instruments like equity, ELSS, SIP etc.
• Goal-oriented; he is aware of his various financial responsibilities in short, medium, long term and works towards investing for those specific purposes so as to avoid any last minute hassle.
• Moderation in everything - greed, fear, risk taking, return expectation, life style. Thus he doesn’t get perturbed by short term downturn in market or get exuberant when stock market is at record high nor does he indulge in impulsive shopping spree to meet his extravagant life style. 
• Patience; they know that only way for earning millions overnight is through lottery or gambling. They start investing early and regularly which helps in build long term corpus.

Its a no brainer who wins in the long run. So wake up investors (aka Wake Up Sid …)