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Archives for October 2014

Simple Ideas on Wealth Creation, the Subramoney Way – Part 1

If there is one person I’ve known in my life who can most easily and sensibly guide people on wealth as on health, it is PV Subramanyam (or Subra as he is popularly known). When he is not advising people on how to manage their financial lives sensibly, you can find him running or cycling long distances.

Subra is a Chartered Accountant by qualification and a financial trainer by profession. He writes frequently on his blog, Subramoney, and has also authored a book on wealth creation called ‘Retire Rich Invest Rs 40 a Day’.

Subra believes to make money, you do not need too many ideas. You need simple ideas and discipline. Simple ideas, and many of them, are what he shared recently with me in his interview for Safal Niveshak.

Before I get into our discussion, let me share that this was the most unusual interview I have been a part of in my life. The reason being the venue me and Subra decided upon, which was on a hill here in Navi Mumbai that lies midway between our homes.

We met at the base of the hill at 7 AM day before Diwali, walked all the way up, prayed at the temple on the top, and then sat at the backside of the temple, roadside, for this interview.

Let me now go straight to what Subra shared with me. Like all interviews I have shared with you in the past, I have broken this one also into a few parts so that you get a chance to absorb the ideas better, and also practice patience while waiting for the next part. 🙂

Let’s me start with the interview now.

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One Big Lesson I Learned Seeing Warren Buffett Make Mistakes

IBM and Coke represent two of Berkshire Hathaway’s three biggest investments (the biggest being Wells Fargo).

However, disappointing earnings announcements at these companies cost Warren Buffett around US$ 2.5 billion in the week gone by.

These losses add to a recent rough patch for Buffett, who slashed Berkshire Hathaway’s stake in British retailer Tesco recently. He has described buying into the stock as a “huge mistake” after the company announced another earnings disappointment and, over that, a £ 250 m accounting scandal.

The media is rife with these big “mistakes”, especially Tesco, and is surprised how the world’s best investor could commit them. But then, Tesco isn’t Buffett first mistake and it won’t be his last mistake either.

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5 Lessons on Life & Investing from Guy Spier’s Education of a Value Investor

Once upon a time, there was a young man who got his dream job in the financial services industry, thought he could make it big one day and worked hard at it, then got disillusioned and disgusted by what he saw around, and finally quit to live a life of greater peace and fulfillment, while pursuing his passion in value investing.

If I had not read Guy Spier’s The Education of a Value Investor, and someone told me this story, I would have believed it was mine.

This is truly my story, but Guy has captured this beautifully in his wonderful book, which I completed reading recently.

Of course, Guy gas written about his personal story, but it resonated so much with me that I have kept this book in my must-read book advisory list for any budding value investor.

Of course, there are great differences between me and Guy –

  • He studied at Oxford and Harvard while I studied at obscure colleges;
  • He won a lunch date with Warren Buffett (jointly with Mohnish Pabrai, at a cost of US$ 650,000), while I continue to dream of a visit to Omaha to meet the Oracle some day;
  • He started and ended his career at an investment bank, and I did it with an independent research house.
  • He now manages multi-million dollars, while I barely manage to manage my own little savings. 🙂

Anyways, coming back to Guy’s story and his book, as I mentioned, I could relate to a lot of his experiences, thoughts, and lessons. I have pulled out just five of them that have guided me well.

These thoughts not only hold importance in investing but in life as well. In fact, I find Guy’s book amazing because it talks less about value investing rules and more on a value investor’s character development.

In Guy’s own words…

…this book is also about the inner game of investing, and by extension, the inner game of life. As I’ve come to discover, investing is about much more than money. So as your wealth grows, I hope you will also come to realize that the money is largely irrelevant. And what you will want to do with the bulk of your wealth is give it back to society.

So, here are those five meaningful thoughts that Guy writes about in his book, which I believe serve a great learning for most people aspiring to find a greater meaning in life and become better as value investors.

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DLF Fraud: One Big Lesson for Investors

Warren Buffett wrote this in his 1989 letter to shareholders…

Stick to proven management with a lot of integrity, talent and passion. After some other mistakes, I learned to go into business only with people whom I like, trust, and admire.

Sadly, 25 years after Buffett first said this and after his countless repetitions of this thought, investors continue to deal with managements that lack integrity, and have talent and passion not in conducting their business affairs honestly but in looting other stakeholders.

The latest case is that of India’s leading (if size matters here) real estate company, DLF, which has sent its customers and investors into a tizzy. This is after the stock market regulator SEBI barred it from raising money from the capital market for three years.

So, home buyers who have invested in DLF projects are worried because they fear the projects that have already been delayed may be pushed back further or even get stalled due to lack of funds with the company.

As for investors (or let me say speculators, who were playing with fire), they have already lost a bucket-load of money in the company’s stock. The stock is down 55% in just the past four months, and 90% down from its post-IPO highs in January 2008.

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What is Your Biggest Fear of Being a Stock Market Investor?

I’ve been investing in the stock market since 2004. Over these 10 years, I have seen two big rallies in stock prices and one shattering crash.

Now, 10 years isn’t a particularly long investment resume, but in these years, owing to my work first as a stock market analyst and then as an educator, I have spent a lot of time researching businesses, studying human behaviour, and meeting thousands of small investors.

Anyways, what I have known through these years is that the stock market can be absolutely brutal to your net worth if you are not wise and prepared.

If you planned to retire in 2008-2009 you were absolutely crushed if most of your investments were in stocks. Most things have rebounded five years later, but that means you lost five years of financial freedom with a whole bunch of worrying while you worked through the recovery.

Now, when you’ve been as involved with the stock market as I have, you see a lot of ugly stuff. Leave aside the occasional financial and economic crises that dot the timeline every few years, you also get to know…

  • How stocks and IPOs are (mis)sold;
  • How equity research analysts make (read, fake) recommendations;
  • How professional money managers (mis)manage investors’ money; and
  • How corporate managers mask bad performance through fraudulent accounting.

You see, nothing is exactly what it seems.

In fact, if you, as a small investor, knew everything behind the scenes, I fear pandemonium would break out.

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11 Cities, 18 Days, 9,000 KM – Final Schedule of Safal Niveshak’s True Wealth Workshop

I recently shared my plan of travelling across India’s leading non-metros with my True Wealth Workshop – a three-hour Workshop through which I plan to help people learn the basics of sensible investing and long-term wealth creation.

My travel plan is finalized now, and here is the schedule…

Phase I – North & West India

  • Ludhiana – 10th Nov. 2014, Monday
  • Jaipur – 11th Nov. 2014, Tuesday
  • Indore – 13th Nov. 2014, Thursday
  • Vadodara – 14th Nov. 2014, Friday
  • Surat – 15th Nov. 2014, Saturday

Phase II – Central & East India

  • Nagpur – 22nd Nov. 2014, Saturday
  • Raipur – 23rd Nov. 2014, Sunday
  • Bhubaneshwar – 24th Nov. 2014, Monday
  • Ranchi – 26th Nov. 2014, Wednesday
  • Patna – 27th Nov. 2014, Thursday
  • Lucknow – 30th Nov. 2014, Sunday

Overall, I plan to travel around 9,000 KM over an 18 day period while covering 11 cities.

If you are from any of these above-mentioned cities, please click here to fill the registration form right away. Even if you had filled it earlier, please fill again so that I know that you would really be coming. Also mention in the form any specific investment related issue(s) you want me to cover in the Workshop.

As for the fee of the Workshop, I would let the participants fix the same. 🙂

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Online Shopping, Investing, and Why We Get Fooled

A three-bedroom apartment. Two cars. Enough flying miles to send an airline into losses (well almost!). Job with a foreign consulting company. Annual salary of Rs 30 lac…or around 45-times India’s average per capita income. Yet my friend Rohan is not happy.

Whenever I meet him, he is, as I put it, caught on the “work-spend treadmill.”

So, just two days back, when he was showing off his latest purchase, a fourth mobile, and one costing in excess of Rs 45,000, I asked him, “You really need one more?”

“It was selling cheap on Flipkart, and so I bought,” he replied.

I knew that handset was Rs 5,000 cheaper on some other website as my other friend had bought it very recently. But then, how do you explain that to someone who bought stuff not because he wanted it, but because “it was selling so cheap and everyone else was buying like crazy!”

I have countless other stories like Rohan’s, where people bought stuff from Flipkart on its Big Billion Day – not because they needed stuff, but because things were selling cheap (at least that was what Flipkart communicated well) and they wanted to buy because others were buying, and before others could buy what they wanted.

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Desperately Yours!

This post isn’t about investing, but about my experience in dealing with criticism, which I am now used to through my work at Safal Niveshak.

I am sure a lot of you also face criticism in your life, especially when you go out of your way and do things that you are proud of, but that may raise a lot of eyebrows from those who do not understand what you are up to.

In fact, if you’re going to do anything interesting in the world, criticism is an unavoidable fact.

You’ll be criticized, because you’ll make mistakes, because some will be jealous, because people have opinions about anything interesting, because people want to help you, because some want to drag down those doing anything different.

The trick to navigating the icebergs of criticism is to figure out which are helpful, and steer clear of those that aren’t. And above all, do it with grace.

Now, while getting criticized – especially for the wrong reasons – got me emotional a few years back, I now take things in my stride. Often I don’t respond to critics who abuse me or my work instead of sharing a genuine critique, but it being a Sunday today, I got into this interesting discussion with a follower on Twitter (he isn’t a follower anymore 🙂 ).

Our dialogue started when I informed my Twitter readers about the last day of admission for my Mastermind course.

And over the next one hour, I was called “desperate”, “greedy”, “idiot”, and a “jhola chaap”. 🙂

Here’s that discussion. Instead of using that person’s original Twitter handle (let me not make him famous 😉 ), let me call him @abc420.

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