Boring Tuesdays – Three Things to Read Today – 7

Hi Friends
Yesterday came with a big, sad news for the value investing community of India. Highly respected value investor Chandrakant Sampat passed away. Many regarded him as the father of value investing in India. You can read a small tribute to him by Forbes India here.
And here are three interesting articles for you to read today…
Article 1
Just think of it…there is no worse performing ‘asset class’ than the average investor. So true. Isn’t it? Here are the 7 Truths Investors Simply Cannot Accept, but should as soon as possible. 
Article 2
Do you know Rule of 72? If yes, then that is great. But did you know why the mathematical experts zeroed down to number 72, when 69 would have been a better choice? To know the answer, read Why Rule 72 is such a great Maths Hack.
Article 3
A really simple formula for successful investing = I + G + R + P (or rearrange and call it GRIP)
That’s all guys…
If you missed the last two posts of Boring Tuesdays series, you can read them here and here.
And if you find some interesting articles, which you want to share, please copy+paste the link to that article in comments or drop a mail to stableinvestor@gmail.com. Don’t worry if your comment is not visible as soon as you post it. Anti-Spam filters detect hyperlinks in comments (which you are sharing) and automatically park it for my review. I will eventually be notified about your comment. 🙂

Advertisements

Boring Tuesdays – Three Things to Read Today – 6

Hi Friends
Many of you have been sending links to interesting articles and ideas. I thank you all for your mails, as I now have a really long (& ever increasing) list of such articles. And in past few weeks, I have received numerous requests for sharing these articles on more than one day of the week. I wanted to know what others think. Please do let me know by means of comments…
In the mean time, I share with you three very interesting articles to read today…
Article 1
If you just have time to read one article today, then you need to read this superb one by Parag Parikh – Equities Can Scare You, But Won’t Kill You.
Article 2
If you ask me who my role models are, you will hear names like John D. Rockefeller, Warren Buffett, etc. All these are billionaires. But Mike Piper makes a valid case why he (and many others) should not have Billionaires as role models. Interesting read.
Article 3
You won’t know about an Indian named Divesh Makan. But Mark Zuckerberg does. And so do many other billionaires from Silicon Valley, who want him to manage their money. Read the real story about how this Unknown Indian manages Facebook’s Zuckerberg’s Billions.
That’s all guys…
If you missed the last two posts of Boring Tuesdays series, you can read them here and here.
And if you find some interesting articles which you want to share, please copy+paste the link to that article in comments or drop a mail to stableinvestor@gmail.com. Don’t worry if your comment is not visible as soon as you post it. Anti-Spam filters detect hyperlinks in comments (which you are sharing) and automatically park it for my review. I will eventually be notified about your comment. 🙂

How A Father Convinced His Daughter Not to Sell Her Stocks in Panic

I was reading an interesting Q&A session on Vanguard’s site about investing, when I came across this small but remarkable example of how to explain anyone about benefits of long term investing. An investor named Rick Ferri shares his experience about how he tried to convince his daughter about not selling her stock portfolio (or funds) when markets started falling.

Father Daughter Investing



And rest of this post is copied from that interview:

______________________________________________________________


My daughter had saved up a couple thousand dollars, and we had invested in the total market fund.


And it went down.


She started panicking and wanted to sell. 


I said, “I’ll make a deal with you. I will guarantee all of your losses 10 years from now if you split all of your gains with me 50/50.”


And she thought about it, and she said, “No, I’m good.”


I got her to think long-term, and she’s never forgotten that. I think that was a good lesson.


______________________________________________________________


PS – I think this example is indeed a very convincing way of making someone realize about the benefits of staying invested for long term. What do you think? How do you convince others about the benefits of long term investing?


Boring Tuesdays – Three Things to Read Today – 5

Hi Friends

It seems that last Tuesday was not that boring after all. Sensex fell a massive 855 points, i.e. 3% on that day. And instead of being happy about it, investors seemed troubled and didn’t make use of the beautiful opportunity to buy shares. I am not sure when will the people realize that market crashes are like discount sales – where you get to buy shares of your favorite companies at reduced prices!!

But let us leave that discussion for another day…

I share with you three very interesting articles to read today…

Boring Tuesday Reads

Article 1

James Altucher shares his ‘surprising’ secrets about Personal Finance. I say surprising, because none of the secrets will ask you to save money! For example: He asks you – ‘Don’t save money. Make more.’ ….Strange…but correct…isn’t it? There are many more surprises in store for those who read his Surprising Secrets of Personal Finance.


Article 2

World’s richest man is worth more than $70 billion. And reaching this level took him decades. But you can turn $1000 into $179 Billion in less than 250 days!! Surprised? It is indeed surprising. And as you might have already guessed, this feat has never been achieved before. But it is not impossible. To know how it can be done, read the link above.


Article 3

With $60 Billion at his disposal, and prices of crude oil having plunged by more than 50% in less than 6 months, it seems that Warren Buffett would be buying an oil company soon!

That’s all guys…

If you missed the last two posts of Boring Tuesdays series, you can read them hereand here.

And if you find some interesting articles which you want to share, please copy+paste the link to that article in comments or drop a mail to stableinvestor@gmail.com. Don’t worry if your comment is not visible as soon as you post it. Anti-Spam filters detect hyperlinks in comments (which you are sharing) and automatically park it for my review. I will eventually be notified about your comment.

The 6 Deadly Sins of Investing

This post has been authored by Jae Jun of Old School Value
I’m not perfect.
No matter how good you are as an investor, you are bound to make mistakes.
Even the pros make plenty of big mistakes.
Newton was brilliant but he made a dumb move during the South Sea Bubble and lost his shirt. Bill Ackman’s pride got in the way of his JC Penney investment and he ended up losing millions.
John Paulson became famous by pulling off a legendary trade against subprime mortgaged backed securities, but has made bad calls ever since.
Whatever you are investing in, there are lots of different ways to make money.
In the stock market alone, there are tons of strategies ranging from trading to options, shorting, arbitrage, leveraging and so on.
The strategies to make money is extremely diverse and it’s why most gurus don’t even agree with each other. One says to diversify, another says to concentrate. One says to buy only what you know, another says to use index funds only. But when it comes to protecting losses and avoid blow ups, there are common themes that all pros agree with.


So here they are. The Six Deadly Sins to Avoid:
Sin #1: Not Having an Exit Plan
A common root to this sin is from following somebody’s advice in buying a stock without fully understanding the situation.
It’s so easy to do with all the media, blogs and websites that promote stock picking methods that will surely beat the market.
One of the biggest problems with this sin which I’ve experienced is that if the person I relied on to get the initial information suddenly disappears or doesn’t respond, I’m left in the dark about what to do.
By not having an exit plan, you leave yourself vulnerable to indecisiveness and the possibility of a blow up if you don’t know when and why you should exit.
An exit plan should be based on:
  • knowing what price you want to sell
  • or whether to use a stop loss
  • when to scale back a position
  • when to add to a position

Sin #2: Not Having an Entry Plan
Not having an entry plan is also a deadly sin.
This sin creeps in when you buy stocks based on feelings. The difference between a good and bad investment always comes down to the price you pay.
When it comes to buying a home, people will spend weeks and months searching for the right home and waiting for the right price.
But with intangible assets like stocks, most people will throw in money without thinking about the valuation or the future of the business.
An entry plan should revolve around:
  • valuation
  • positioning sizingand
  • whether the stock fits your portfolio

Sin #3: Not Reviewing Your Portfolio
When I “review” my portfolio, it isn’t looking at the daily stock prices.
I like to set a time every couple of months or so to go through the valuations of each company and decide whether it’s a continued hold, sell or buy.
It’s always much easier to buy more of a company that you already own rather than look for another position to add.
The best investment could be right in front of your nose.
By going through my portfolio once a while, I get to revisit a stock from a fresh perspective and sometimes, I’ve questioned myself, why I bought at a such a price.
Some notes on reviewing your portfolio:
  • Don’t review your portfolio daily or weekly as it will be emotion based
  • Ask yourself if the stock dropped another 50%, would you buy more?
  • Review your valuation inputs that you used to purchase the stock. Does it still make sense?

Sin #4: Personalizing Losses
Honestly, some people don’t. Some people have no right to even touch money.
But the truth is that most people can easily manage their money and do well. It’s just that most people take the losses personally and it is hard for them to accept. Because in doing so, it makes them look bad.
If you look at histories of successful people, they all dealt with losses and failures remarkably well and objectively. The difference is that they learnt from it and didn’t it take it personally. Thomas Edison said:
I have not failed. I’ve just found 10,000 ways that won’t work.

All great investors failed more than once.
However, they are able to cut losses on investments that don’t work out without letting ego prevent them from doing the right thing.
To avoid personalizing losses:
  • Realize when you are making emotional decisions
  • Don’t get depressed or saddened
  • Take it as a lesson and move onto the next project

Sin #5: Personalizing Successes
On the flip side, personalizing successes is equally deadly.
Henry Ford revolutionized the motor industry but until he was forced to step down, the company lost millions for two decades. His string of early successes led him to believe that he had the Midas touch which prevented him from making objective decisions.
Steve Jobs was kicked out of Apple because he believed he could do no wrong and that his decisions were always the right one.
True to some extent.
But when you believe that your success is proof of future success, it will cause your guard to go down and create plenty of opportunities for it to blow up.
The difficult thing at that point will be to admit that not everything you do is successful.
To avoid personalizing successes:
  • Past performance doesn’t guarantee future performance
  • Heed the advice of others when necessary
  • Put systems in place that will prevent you from getting the Midas syndrome

Sin #6: Placing More Emphasis on Being Right than Making Money
Being right is a moral victory in the stock market.
During the great US recession of 2008, many pundits claimed that they predicted the market crash.
But of those people, how many people actually made money off it?
As far as I know, only two people.
Michael Burry and John Paulson.
This sin makes people focus on being a prophet instead of turning a profit.
The market can continue to go against you much longer than you can remain solvent. If you liquidate a position and 6 months later the market shows that you were right, does it matter that you were right even if you lost money?

What Other Sins Do You Commit?
These are fairly broad sins, but can you see how relatable each one is?
Being human, I’m sure I will commit these sins again but there are certainly more that I haven’t included here.
What are some other sins that you think should be included in this list?
______________________________________________________________________
About the Author
Jae Jun is an investment writer at Old School Value, a value investing site empowering individuals with stock valuation tools, tutorials and resources.

Boring Tuesdays – Three Things to Read Today – 4

Hi Friends

The first of the 52 boring Tuesdays of 2015 is here. My guess is that majority of you reading this post, would by now have already forgotten about your new year resolutions. ;-P

If that is true, then please remember that it’s only the 6th day of the year…and it’s not right to give up so early. Go ahead and do what you planned for!! It might be tough, but I am sure it’s worth doing. I myself am making it a point to go through my Resolutions for 2015 every few days.

With that dose of Gyan above, I leave you with three interesting articles to read today…

Article 1

When she died in 1916, she was believed to be the richest woman in the world. People back then referred to her as the Witch of Wall Street. But after almost 100 years of her death, I guess it is time we start referring to her as the Grandmother of Value Investing.

Article 2

Since childhood, we have been groomed not to copy others. But here is one man, who has taken copying to great heights. Having paid a Guru-Dakshina of $0.65 Million to his mentor Warren Buffett, Mohnish Pabrai is well on his way to become one of the most successful investors of all time. This article in Outlook Business about this Copy – Pasting Investing Genius, beautifully captures Mohnish’s story and is a must read for everyone.

Article 3

What do you expect from shares of a company, which has almost never earned any profits? Nothing much…right? Wrong!! There is one such (really) big company. And surprisingly, its shares have been going up and up and up. Here is an interesting article about How Amazon gets away with never earning a profit.
That’s all guys…

If you missed the last two posts of Boring Tuesdays series, you can read them hereand here.

By the way, if you have missed out on previous post, then there is some serious discussion going out in comments section of the case study I published a few days back. If you invest in mutual funds, then you might be interested in getting involved in that discussion. You can read the case study here.

___________________________________


And if you find some interesting articles which you want to share, please copy+paste the link to that article in comments or drop a mail to stableinvestor@gmail.com. Don’t worry if your comment is not visible as soon as you post it. Anti-Spam filters detect hyperlinks in comments (which you are sharing) and automatically park it for my review. I will eventually be notified about your comment. 🙂

Boring Tuesdays – Three Things to Read Today – 3

Hi Guys

It’s the second last Tuesday of 2014. Hopefully you would be getting ready to go on a vacation to celebrate your new years. So before you leave, I share with you three interesting articles.


So here it is…

Article 1

‘All past market crashes are viewed as opportunities, but all future market crashes are viewed as risks.’Makes Sense…isn’t it? How about this – ‘A couple of times per decade, investors forget that recessions happen a couple of times per decade.’ There are 14 more such statements, waiting for you in a Stunning List of 16 Rules for Investors to Live By.

Note – If the link asks you to subscribe, just copy the title of the article (in link) and search on Google. And then click on the first search result. You will get access to full article without subscribing. 🙂

Article 2

Let me ask you two things. Why are you not part of the richest 1% of your country? And how much of your total income comes from not working for others? Strange questions…Right? Joshua Kennon tells you How the Richest 1% Generate their Income. It’s a short but powerful, eye-opening article, which clearly shows what we should be aiming for.

Article 3

He bought a stock at $38 which later went down to $27. On way to the school, his sister reminded him daily, that even her stocks were going down. He felt terribly responsible. When the stock recovered, he sold with a small $5 profit. Almost immediately after, the stock soared to $202 a share. Warren Buffett remembers this episode as one of the most important ones of his life and which made him learn Three Very Important Lessons about Investing, early in his life.

That’s all guys…

If you missed the last two posts of Boring Tuesdays series, you can read them here and here.

Note 1 – Next article in this series would be published on 6th-Jan-2015 and not on 30-Dec-2014, as I will be busy with my own new year celebrations. 🙂

Note 2 – And if you find interesting articles which you want to share with others, please copy+paste the link to that article in comments* or drop a mail to stableinvestor@gmail.com


*Don’t worry if your comment is not visible as soon as you post it. Anti-Spam filters generally detect hyperlinks in comments (which you are sharing) and automatically park it for my review. I will eventually be notified about your comment. 🙂

Interview – Safal Niveshak’s Vishal Khandelwal – Part 4 (Final Part)

This is the fourth and final part of this interview. You can read the first three parts at the following links:

Part 1  |  Part 2  |  Part 3
Question 10.

From your blog I know that you do not prefer Index Funds even though they are highly recommended as decent options for average long term investors. Do you think that an average investor is better off picking an actively managed fund over index funds, despite the risks associated with fund manager and his team’s ability?
A. To clarify my stand on index funds, these are what I personallydon’t prefer because I trust a few active managers more than the index. However, that’s not to take away from the simplicity of investing in index funds, which people not wanting to choose active managers or direct stocks, must do.
In investing, the most important thing is to know what you don’t know. So if you don’t know how to pick stocks directly and how to pick the right active funds directly, it’s better to start with a passive, low-cost index fund.
Since there’s not much differentiation between different index funds, pick the one with the lowest cost and from a decent fund house.

Question 11.

As an allocator of capital for your personal and family wealth, what percentages do you generally have in equity / non-equity baskets (ignoring real estate investments)? The percentage allocations might be dynamic depending on market conditions, but what is the thought process behind the decision making when allocating capital to various asset classes?
A. Well, my allocation is not so much dependent on the market conditions as it is dependent on when I need the money.
Any money I need in the next 1-3 years, plus my emergency fund that is around 6-8 months of my household expenses, I don’t invest much of that in stocks.
However, of all the money I need beyond three years, I invest 80-90% of the same in equities, either directly in stocks or through equity funds.
Largely, I try to keep 80/20 allocation between equity and bonds, with the latter also including some gold.

Question 12.

If you were to go back to the start of your career as an investor, would you like to change something – add or delete?
A. Nothing to delete, but I will like to add a greater amount of patience. I have always been a long term investor, but I have lost a lot of wealth-creation opportunities by owning some great businesses for just 2-3 years which should’ve been owned for 15-20 years. So I have lost a lot of potential gains.
Another mistake I made, which I would like to correct if I were given a chance to go back in the past, is that I used to get anchored to stock prices. So I’ve sold a lot of stocks that earned me 100-200% returns just because they earned me 100-200% return, and because I was anchored to my buying price.
Your original cost price, as I realize now, does not matter when you are making a decision to hold or sell a stock, or buy more of the same. Then, once you have bought a great business – and there aren’t much of such businesses – it’s important to sit tight on it for years until the business itself does not change for the worse.
So yes, if I could, I just want to add more patience to my past investing decisions. How I wish that was possible. 🙂

Question 13.

What would you say to those who are just starting to learn about the markets and investing their own money?
First, read Safal Niveshak. 🙂
Jokes apart, here are my ten quick suggestions to a new, young investor –
1.      Start…don’t wait
2.      Read everything
3.      Know that you don’t know…a lot
4.      Keep it simple and minimalistic
5.      Turn off the noise
6.      Have patience
7.      Focus on process, and outcome will take care of itself
8.      Accept that you will make (a lot of) mistakes
9.      Find your role models
10.    Know what to avoid (like leverage, trading, and speculation)
Finally, while these ten suggestions/rules can help a new investor take better care of his/her money and financial life, I would also suggest him/her to not get too focused on these things that he/she loses out spending time on the real joys of life.
As a wise man, or maybe a woman, once said, “No matter how hard you hug your money, it never hugs back.”

Question 14.

For a young person who avoids investing in stock markets (due to risks & volatility), what examples will you share to convince him to start investing?
I don’t believe in convincing people, but inspiring them.
So, to such a person, I will try to inspire him/her by sharing my own experiences and the numerous stories of others who have created wealth for themselves using the power of compounding over long periods of time.
I will also gift him a few books like…
These books have inspired me a lot when it comes to taking proper care of my money, and I am sure these will inspire the person I gift them to, if he/she were read them diligently.

Question 15.

What’s your final, two-minute advice for an investor?
A. Nothing, as I’ve already advised a lot. 🙂
Just love your family more than the money. Be a good son/daughter, spouse, and parent.
Your best investment in life would not be any stock or bond or real estate or gold, but the time you spend with your child. Life can pull you in a thousand directions, and you might ignore it especially when your child is little. But remember – Children don’t stay little for long. So, slow down…take some time…give some time…invest some time.
And finally, please take care of your health. If you want to benefit from compounding, you need to be alive and in good health beyond 50 years of age.
If you have great health and a loving family, there’s no bigger wealth you can ask for in life.

The End

______________________________________________________________________________

Brief Bio

Vishal Khandelwal has 11+ years experience as a stock market analyst and investor, and 3+ years as an investing coach. He is the founder of Safal Niveshak, a website dedicated to helping small investors become smart, independent, and successful in their stock market investing. Over the years, Vishal has trained 1,500+ individual investors in the art of investing sensibly in the stock market, through his Workshops and online investing courses.