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Archives for August 2014

Interview with Basant Maheshwari

I am conducting my Value Investing Workshop in Kolkata this Sunday, 31st August 2014. If you are in the city and would like to attend the Workshop, click here to register now.

Anyways, in utilizing my Kolkata visit to the maximum, and also to pick the brains of one of the best-known intelligent investors in India, I will be meeting Basant Maheshwari, founder of The Equity Desk and author of The Thoughtful Investor, for an interview for Safal Niveshak.

Now I need your help in preparing a questionnaire for Mr. Maheshwari.

I need to finalize a maximum of 10 questions, and thus invite you to send me the ones you would’ve asked Mr. Maheshwari had you met him personally.

Please avoid questions like “What stock do I buy?” or “What do you think about XYZ stock?” 🙂

Broadly, you must ask questions around “stock market investing” and “investment behaviour” in general and “value investing” in particular.

Please add your question(s) in the Comments section below by the morning of Sunday (31st August).

Thank you!

3 Reasons IPOs Are Almost Always Bad Investments

Investors are people with a lot of emotions. They get excited by something new, especially if it holds the promise of making them a whole lot richer and provides bragging rights at their next social gathering.

Maybe that’s why amateur and professionals alike tend to lose their minds in bull markets, particularly when a hot initial public offering, or IPO, is offered to them by their broker.

On one hand, had you bought into the IPOs of Infosys, HDFC Bank, Sun Pharma, or TCS, you would have had some volatile price fluctuations along the way, but there is no question that you have made enough money to substantially change the quality of your life. Clearly, a well chosen IPO can be a life changing experience if you simply make the right choice and stick with the stock for years.

On the other hand, there is a large majority of IPOs such as those of Reliance Power, Suzlon and DLF, which have destroyed investors’ capital. With such businesses, even the “long-term” cannot save you from permanent capital destruction.

[Read more…]

When NOT to Sell a Great Business You Own

Consider this. If you want to multiply your money 100x in 25 years, you want your investment to return 20% every year.

In other words, Rs 1 growing at 20% per annum will turn to Rs 100 after 25 years, excluding all dividends.

But if you sell this stock after 20 years (instead of holding for 5 more years), you will get just Rs 40. The remaining Rs 60 would come only between the 21st and 25th years.

Even if you earn 15% return per annum, your Rs 1 would turn to around Rs 35 in 25 years. But 50% of these returns would come only between the 21st and 25th years.

[Read more…]

How Fortunes are Made in the Stock Market

I have started reading a book titled “100 to 1 in the Stock Market”, in which the author Thomas Phelps talks about how investors can make more of their investment opportunities.

The book starts with a story of five poor Arabs who are woken up one night by an angel.

“Each of you can have one wish,” the angel says.

“Give me a donkey,” asks the first Arab, and he is granted his wish.

Thinking how little the first Arab asked, the second one asks for ten donkeys and gets them.

The third asks for even more – a caravan with a hundred camels, a hundred donkeys, tents, rugs, food, wine, and servants – and gets them from the angel.

The fourth Arab, who had heard the previous three’s wishes, asks for even more. “Make me a king,” he commands the angel who bestows him with a kingdom.

Now, the fifth Arab, having seen his companions ask for too little, resolves to make no such mistake.

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Follow @safalniveshak on Twitter

Did you know there’s a Safal Niveshak page on Twitter where I share varied content on all days, even when I do not post on the website?

You see, it’s easy for me to share the varied thoughts I get during a normal day in 140 characters than in 500 words. And thus, I am more active there than you see me on the Safal Niveshak website (which though is still the most important platform for me to perform)

Anyways, here’s what you’ll get when you follow me i.e., @safalniveshak on Twitter

  • Fresh Safal Niveshak content
  • Classic Safal Niveshak articles
  • Curated ideas on investing from across the web
  • My random thoughts on investing and life
  • Key lessons from the world’s best investors

For example, here are a few things I have tweeted recently –

If you wish to receive thoughts like these on a regular basis, I invite you to get on board and follow @safalniveshak on Twitter.

When I Had Plenty of Money, But Not Much Wealth

Most of what we think we know about people with a lot of money – the enviable lifestyle of the rich and famous – comes from television, movies and novels. A lot of it is inaccurate.

Apart from the happiness that is showcased, financially well-to-do people have their own set of concerns – uncertainty over their relationships, anxiety about their children, fear of isolation and, of course, fear of losing their financial wealth.

In fact, I have known plenty of such “poor rich” people over the last few years, who have lots of money and assets…but not much else.

They are financially wealthy but emotionally, physically, spiritually, mentally and even socially, bankrupt.

Imagine your own life. If you own one big house (or even five) but you live in an unhealthy, stressed, over-worked, sleep-deprived, over-medicated body that’s going to die twenty or thirty years too soon (as many do), are you really wealthy?

So maybe health equals wealth.

Or if you’re a millionaire but you live in an unhealthy marriage with a spouse you haven’t spoken (heartily) to for a year and kids who never see you invest time into their lives, are you really rich or do you just have lots of money?

[Read more…]

Confessions of a Stock Market Analyst

Note: This article was originally written in June 2012. I am re-publishing it given that I have received quite a few emails in the recent past with people asking me what made me quit my “great” job in the stock market that promised a “bright” future.

I’ve received several emails from readers of Safal Niveshak asking why I left my “lucrative” job as a stock market analyst.

“It must be a well-paying job! So why in the world did you leave it?” asked one of them a few days back.

I’ve shared my reasons to leave my job with them in private, but thought there was a need to confess in the open – to the entire Safal Niveshak tribe.

After all, even you might be wondering what really hit me to have left the “safety” of a job that promised a “bright” future.

So here is a confession from an (ex) stock market analyst on “why in the world” he left a well-paying job to start a mission that some have called “a journey into the unknown”.

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What to Do When There’s Nothing to Buy?

Investing is difficult.

But not investing – sitting with cash and not finding stocks worth buying – is more painful.

After all, to most of us, activity equals achievement.

The need to remain active at all times is what leads CEOs to make bad capital allocation decisions, especially during heady times. And that is what leads most investors – big or small – to buy overpriced stocks.

We all want to be in the thick of action – largely because we hate the feeling of missing out on the party.

[Read more…]