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Archives for 2013

My Biggest Investing Mistake of 2013

December 30, 2013 | 89 Comments

“A life spent making mistakes is not only more honorable but more useful than a life spent doing nothing.” ~ George Bernard Shaw


A wise man once said that a person who doesn’t make any mistakes in stock market investing is someone who has never bought a stock.

For most of us investors, however, we are left with a lot of regrets come year end…

Regrets like…

  • I should have bought this stock a few months ago!
  • I should have sold this stock a few months ago!
  • Why did I sell this stock!
  • Why didn’t I buy that stock!
  • I made so many mistakes this year!

Needless to say, mistakes lead to resentments, resentments make you miserable, and being miserable is always painful.

When I look back at my mistakes this year, I see one that was really up there.

[Read more…] about My Biggest Investing Mistake of 2013

My 2014 Wish for You – Be Miserable

December 27, 2013 | 22 Comments

“Why are you in such a sad mood, Ravi?” I asked my friend as he visited us with his family this Christmas.

“You should see my stock portfolio Vishal!”

“Why, what happened?”

“Oh, it’s up just 30% this year!”

“30%! And you are still sad?”

“Yeah, because this could have been more than 30% had I not missed a few amazing stocks like…”

“Like?”

“Like Mindtree that is up 120% in the last one year, Cera Sanitaryware that is up 90%, Eicher that is up 80%, Aurobindo Pharma that is up 105%…and then there are the ones like Relaxo and Ashiana Housing, that are up 100% since April.

[Read more…] about My 2014 Wish for You – Be Miserable

Is this Newspaper Stock Worth Owning?

December 23, 2013 | 41 Comments

Statutory Warning: This report may cause a reaction, and acting on it can be injurious to your wealth.

Let me be upfront here. Across all my Workshops and other interactions with Safal Niveshak tribesmen, I have maintained my stance on the futility of reading newspapers, especially to get your investing ideas.

My stance is that the more you read newspapers, the less you would know because everyone is looking at the same things with similar pair of eyes. Moreover, newspapers create recency bias, which is such a destructive force when it comes to making investment decisions.

So I have been happy to know all this while that newspaper is a dying industry.

Even Warren Buffett has mentioned this in the past that newspapers have lost a notch in their economic attractiveness from the days when they appeared to have a bullet-proof franchise. Over time, he expects the competitive strength of newspapers to gradually erode.

Anyways, given the price wars being fought by top newspapers in cities, it surely seems that circulation is under pressure. After all, everyone’s getting information online nowadays.

[Read more…] about Is this Newspaper Stock Worth Owning?

A Quiz to Test Your Financial Intelligence

December 20, 2013 | 11 Comments

Finance Intelligence Quiz

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Please take this Quiz to test your Financial IQ. Please do not use Google to search for answers 🙂

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  1. Question 1 of 10
    1. Question

    Imagine that the interest rate on your savings account was 5 percent per year and inflation was 8 percent per year. After one year, would you be able to buy more than, exactly the same as, or less than today with the money in this account?

    Correct

    While your money would earn 5% during the year, an 8% inflation would mean that you end the year with a -3% return (5% minus 8%). So, in real terms, your Rs 100 would be worth Rs 97 at the end of the year.

    Incorrect

    While your money would earn 5% during the year, an 8% inflation would mean that you end the year with a -3% return (5% minus 8%). So, in real terms, your Rs 100 would be worth Rs 97 at the end of the year.

  2. Question 2 of 10
    2. Question

    Suppose you had Rs 100 in a savings account and the interest rate is 10 percent per year and you never withdraw money or interest payments. After five years, how much would you have on this account in total?

    Correct

    Starting investment – Rs 100
    End of year 1 after earning 10% on Rs 100 – Rs 110
    End of year 2 after earning 10% on Rs 110 – Rs 121
    End of year 3 after earning 10% on Rs 121 – Rs 133
    End of year 4 after earning 10% on Rs 133 – Rs 146
    End of year 5 after earning 10% on Rs 146 – Rs 161

    Incorrect

    Starting investment – Rs 100
    End of year 1 after earning 10% on Rs 100 – Rs 110
    End of year 2 after earning 10% on Rs 110 – Rs 121
    End of year 3 after earning 10% on Rs 121 – Rs 133
    End of year 4 after earning 10% on Rs 133 – Rs 146
    End of year 5 after earning 10% on Rs 146 – Rs 161

  3. Question 3 of 10
    3. Question

    If your stock rises by 40 percent in Year 1, and then falls by 40 percent in Year 2, your net gain at the end of 2 years would be…

    Correct

    Rs 100 grows to Rs 140 at the end of Year 1, and Rs 140 declines by 40% (or Rs 56) in Year 2. So at the end of Year 2, you will be left with Rs 100 + Rs 40 – Rs 56 = Rs 84.

    Thus, your net return will be “minus 16%”.

    Incorrect

    Rs 100 grows to Rs 140 at the end of Year 1, and Rs 140 declines by 40% (or Rs 56) in Year 2. So at the end of Year 2, you will be left with Rs 100 + Rs 40 – Rs 56 = Rs 84.

    Thus, your net return will be “minus 16%”.

  4. Question 4 of 10
    4. Question

    What figure is closest to the historical (15-20 years) annual return earned by the broader Indian stock market as represented by the BSE-Sensex?

    Correct

    The BSE-Sensex has generated around 16.5% annual return over the past 15-20 years.

    Incorrect

    The BSE-Sensex has generated around 16.5% annual return over the past 15-20 years.

  5. Question 5 of 10
    5. Question

    You want information about the revenues and expenses of a company for a period of time. The financial statement you would read is the:

    Correct

    Income Statement is a financial statement that measures a company’s financial performance over a specific accounting period. Financial performance is assessed by giving a summary of how the business incurs its revenues and expenses through both operating and non-operating activities. It also shows the net profit or loss incurred over a specific accounting period, typically over a fiscal quarter or year.

    Also known as the “profit and loss statement” or “statement of revenue and expense.”

    ~ Investopedia

    Incorrect

    Income Statement is a financial statement that measures a company’s financial performance over a specific accounting period. Financial performance is assessed by giving a summary of how the business incurs its revenues and expenses through both operating and non-operating activities. It also shows the net profit or loss incurred over a specific accounting period, typically over a fiscal quarter or year.

    Also known as the “profit and loss statement” or “statement of revenue and expense.”

    ~ Investopedia

  6. Question 6 of 10
    6. Question

    A decrease in the net profit margin of a company might mean that:

    Correct

    Net profit margin = Net profit divided by Sales.

    Thus, a margin would decline when the company’s net profit relative to sales declines.

    Even when the net profit declines but sales decline faster, the net profit margin would improve.

    Incorrect

    Net profit margin = Net profit divided by Sales.

    Thus, a margin would decline when the company’s net profit relative to sales declines.

    Even when the net profit declines but sales decline faster, the net profit margin would improve.

  7. Question 7 of 10
    7. Question

    Which statement summarizes changes to parts of the balance sheet?

    Correct

    On the income statement, net profit adds to the retained earnings line on the balance sheet after dividends are paid. On the cash flow statement, the line items reflect the difference between the cash balance on two balance sheets. For example, if cash on the Dec. 31 2013 balance sheet is Rs 250, and cash on the Dec. 31 2012 balance sheet is Rs 175, then the cash flow statement will explain the Rs 75 change in cash for cash. And the statement of shareholders equity details the changes to the equity on the balance sheet. Really, every financial statement is a summary of changes to the balance sheet.

    Incorrect

    On the income statement, net profit adds to the retained earnings line on the balance sheet after dividends are paid. On the cash flow statement, the line items reflect the difference between the cash balance on two balance sheets. For example, if cash on the Dec. 31 2013 balance sheet is Rs 250, and cash on the Dec. 31 2012 balance sheet is Rs 175, then the cash flow statement will explain the Rs 75 change in cash for cash. And the statement of shareholders equity details the changes to the equity on the balance sheet. Really, every financial statement is a summary of changes to the balance sheet.

  8. Question 8 of 10
    8. Question

    A company has more cash today when:

    Correct

    In many companies, products or services are delivered but no cash changes hands (instead, an invoice is sent to the customer which increases accounts receivable and is a sale but does not add to cash). Neither profit nor retained earnings impacts how soon a company gets its cash. It isn’t until the customer actually pays its bill that cash increases.

    Incorrect

    In many companies, products or services are delivered but no cash changes hands (instead, an invoice is sent to the customer which increases accounts receivable and is a sale but does not add to cash). Neither profit nor retained earnings impacts how soon a company gets its cash. It isn’t until the customer actually pays its bill that cash increases.

  9. Question 9 of 10
    9. Question

    If you buy a company’s stock…

    Correct

    Stocks are known as “equities” because each stock share represents a small percentage of ownership in the company, entitling the shareholder to vote in the election of directors and on other matters taken up at shareholder meetings or by proxy.

    Incorrect

    Stocks are known as “equities” because each stock share represents a small percentage of ownership in the company, entitling the shareholder to vote in the election of directors and on other matters taken up at shareholder meetings or by proxy.

  10. Question 10 of 10
    10. Question

    You invest Rs 500 to buy Rs 1,000 worth of stock on margin. The value of the stock drops by 50%. You sell it. Approximately how much of your original Rs 500 investment are you left with in the end?

    Correct

    When you buy stock on margin, you risk losing your entire investment – or much more. In this example an investor used Rs 500 to buy Rs 1,000 worth of stock, borrowing the additional Rs 500 from a brokerage firm to make the purchase. When the stock was sold after dropping 50% in value, its remaining worth was only Rs 500 – the same amount the investor still owed to the brokerage firm for the margin loan.

    Incorrect

    When you buy stock on margin, you risk losing your entire investment – or much more. In this example an investor used Rs 500 to buy Rs 1,000 worth of stock, borrowing the additional Rs 500 from a brokerage firm to make the purchase. When the stock was sold after dropping 50% in value, its remaining worth was only Rs 500 – the same amount the investor still owed to the brokerage firm for the margin loan.

If you cannot see the Quiz above, open this post on Safal Niveshak’s website and then participate.

Don’t worry if you score low, for a truly humble acknowledgment of ignorance is the first step to wisdom. 🙂

All the best!

The Devil Lies Within

December 15, 2013 | 1 Comment

A few random searches on Google brought me to these…



I posted the first image on Safal Niveshak’s Facebook and Twitter pages and got a flurry of replies…


I expected people to bash the forecaster in their responses, and so they did!

[Read more…] about The Devil Lies Within

Why I Stopped Trying to Change Others

December 10, 2013 | 10 Comments

I often receive emails from readers asking how I can help them change their financial lives, change how they manage their money, change how they make their investment decisions…basically change how they behave with money.

Then, someone recently wrote to me…

I don’t believe what you write makes sense for people, as there is nothing called as long term investing. You can only make money in the stock market in the short term because, as Keynes said, in the long term everyone is dead.

So your effort of changing how I, or anyone else, invest seems an exercise in futility.

You see, when people ask me how I can help ‘change’ them, or when this gentlemen wrote how my efforts to ‘change’ people is futile, I assume they are talking about modifying their thinking, attitudes, habits, beliefs, behaviours and thus outcomes.

———- Art of Investing Workshop in Bangalore & Chennai ———
Safal Niveshak’s Investing Workshop travels to Bangalore (18th Jan. 2014) and Chennai (19th Jan.). If you are interested to attend, please register here.
———————————————————————————————–

As I have realized over the years, from my experience and that of others, trying to change another person is generally an exercise in futility and frustration.

So while I disagree to what this gentleman who sent me the above mail says about long term investing, I agree to him when he says that the idea of ‘changing’ people is futile.

But I have known this fact ever since I started the Safal Niveshak initiative.

[Read more…] about Why I Stopped Trying to Change Others

My Ode to A Great Teacher

December 6, 2013 | 3 Comments

“Okay, so despite all my requests to stay over for some more time, you have finally decided to call it quits?”

“What do I do, my dear Vishal, I was longing to live a life much more peaceful than I had done all these years, and thus I had to go.”

“Yes, yes, I understand that…but you see, I can’t say how easy or difficult it would be for me to live with the thought that you are not anymore by my side.

“But you see, I’ve come to terms with the fact that I will never see you again. You have been an inspiration for me, one of the greatest teachers I ever had, and now it would be incredibly difficult to reconcile my desire to see you again, living and speaking, hale and hearty.”

“I do not feel happy leaving this place as well, but you see dear Vishal, there’s no other path I could have chosen.

“And by the way, I am already leaving with you a lot of my memories and thoughts that would stand by your side whenever you need them.”

“Yeah, I know that. I know how you have inspired me to make a difference in others’ lives, and stand up to the challenges.

[Read more…] about My Ode to A Great Teacher

10 Simple Rules that Brought Me Financial Nirvana

December 4, 2013 | 71 Comments

I was in Ahmedabad last week for my Art of Investing Workshop (here’s the proof), and met a few young executives – in their mid 30s – who had questions about how I have managed my own financial life so well so far.

A couple of them were, in fact, amazed to hear my story and told me that I have been an exception.

“That’s not true!” I told them. “I have not done anything special in my financial life that anyone else cannot do.”

In fact, whatever I have done to bring myself to a stage of financial nirvana – if I may use that term – I have done with the help of some simple rules on how I treated my money over the years.

Now, while I am too young to dispel any life-changing advice on “how to be a financial rockstar” or “how to remove all financial worries from you life”, I am happy to share below 10 rules that have changed my life for the better over the past few years, and how these can also benefit anyone who practices them with discipline and integrity.

Here are those 10 rules.

[Read more…] about 10 Simple Rules that Brought Me Financial Nirvana

The Value of Saving and Investing Money

December 2, 2013 | 10 Comments

“Nice to meet you. Just hold on for a second. I need to send an SMS to my husband.”

My cousin and I stood there waiting. The girl, a manager with a private sector bank, busily tapped out a text message on her new iPhone.

She was pretty slow with the typing, but we knew what was going on.

She was just showing off her new Rs 30,000 iPhone – hot stuff for Alwar, a small town in Rajasthan where I grew up and which has a relatively middle class population.

We had seen her arrive to the bank with her husband who drove a shiny black and modified SUV.

She and her husband were young… probably in their early thirties. As I came to know from her, he was a real estate broker in the town. Even though their income must be down in a weak housing and job market, their spending didn’t reflect the crisis.

“What’s going on here?” I asked my cousin who was a local.

[Read more…] about The Value of Saving and Investing Money

One Small Step Can Change Your Life

November 26, 2013 | 8 Comments

We live and we learn to take
One step at a time
There’s no need to rush
It’s like learning to fly
Or falling in love
It’s gonna happen when it’s
Supposed to happen and we
Find the reasons why
One step at a time

When you can’t wait any longer
But there’s no end in sight
when you need to find the strength
It’s your faith that makes you stronger
The only way you get there
Is one step at a time.

~ One Step at a Time (Jordin Sparks)

Every path to success has been littered with doubt, fear, and uncertainty, as well as persistence, calculated risks and repeated action.

The difference between someone who fails and someone who succeeds is the courage to act, repeatedly.

[Read more…] about One Small Step Can Change Your Life

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