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Archives for August 2015

Lecture on Value Investing at Goa Institute of Management

I recently delivered a lecture on Value Investing and Behavioral Finance at Goa Institute of Management.

Click here to download the presentation slides PDF (7 MB file), or read it in the panel below.

I have been extremely fortunate to be able to share my thoughts and experience with budding minds.

Please share this presentation with the young around you. Even if you can enlighten one mind and get him/her on to the right path of managing his money and behaviour sensibly, it would be a great job done.

By the way, on Safal Niveshak’s 5th birthday, I had invited tribe members to subscribe to Value Investing Almanack, promising to give away 100% proceeds to Nirvanavan Foundation to part-fund the purchase of a minibus to ferry kids from a few villages in rural Rajasthan to their schools.

I’m happy to report that that bus has arrived, and they call it the ‘Dream Bus’…and rightly so, as you can see from the smiles all around…


Here’s my heartfelt thanks to the tribe members who helped me in this cause!

That’s another great way to lighten up a few budding lives, isn’t it? 🙂

Latticework of Mental Models: Moral Hazard

Millions of years ago, before the agriculture revolution, when homo sapiens was still living life as a hunter-gatherer, there was this one naturally occurring phenomenon which aroused a sense of wonder, fear and longing at the same time in his mind. The phenomenon occurred on its own in nature and humans found it very useful but it espoused extreme dread too because of its destructive capabilities.

I think you can guess what I am talking about. That natural phenomenon was fire!

About 100,000 years ago, humans finally learned how to create fire and it accelerated the development of human race. Fast forward to this day. Even after having developed technologies to create, douse and control all sorts of fires, wildfire is one thing where humans have found themselves helpless in front of mother nature.

Wildfire kills 339,000 people every year[1], even today! So why we haven’t been able to do much about wildfire carnages? Agreed, we can’t prevent a tsunami or an earthquake but we can surely prevent and contain a fire. Right?

The surprising truth is that with the help of modern technology the number of wildfires have come down drastically over the last hundred years but the total destruction caused by these fires hasn’t gone down proportionately. It even seems to have increased.

[Read more…]

Stock Market Crash: Your 10 Big Questions…Answered

Crash. Collapse. Carnage. Calamity. Meltdown. Panic.

Well, these are some attention-grabbing keywords you must have heard and read in business media over the past two days. Even I used the word crash in the headline of this post to grab your attention. And it worked, didn’t it?

Well, that’s the way the psychology of fear works, and especially when it come to the stock market. The media adds so much fuel to fire, that short-term losses end up overshadowing our awareness about the possibility of long-term gains.

Amidst this, here are answers to the ten key questions on the current crash I have received from tribe members since yesterday – all asking what to do as others around them lose their heads.

You won’t find perfect answers below, but this is just my attempt to help you get over your fears, which may otherwise lead you to act in haste, which can cause some damage to your process of long term wealth creation.

Let’s start right here.

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Cheat Sheet for Investing Your Money (Free E-Book)

“Go to college, study hard, get good marks, land up in a decent job and you’re settled.”

The world around us has changed but this advice hasn’t.

The concept of getting good grades and finding a good job is an idea whose time has passed. It is not a bad advice but we need new ideas and different kind of education.

In the long term, the old advice is not just insufficient but downright risky.

We have been taught, and taught pretty well, how to work hard to earn money. But what about making our money work hard for ourselves? Every rupee that you earn has in it the seed to multiply into thousands. You just have to know where to sow that seed and how to water it.

The only way to learn that is to start on the path of self-education. A wise man said – “School education will earn you a living but self-education will make you a fortune.”

It does not matter where you stand today. Whether you are a student, in a job, a professional or even unemployed, you have the ability to educate yourself and take control of your personal finances.

If you are reading this, my guess is that you have already spent some time looking for the answers to your financial and investment queries. Therefore, you are a seeker who has already taken the first few steps.

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Annual Report Review: Gruh Finance

In continuation of this series on annual report review, here is my review of the FY15 report of India’s leading non-banking financial company, Gruh Finance.

Click here to download the PDF review (11 MB file), or read it in the panel below.

Let me know your thoughts and questions on this review in the Comments section of this post, plus any additional thoughts from your own review of Gruh’s FY15 annual report. Also share any suggestion(s) you may have to make future reviews better and easier for your understanding.

Statutory Warning: This is NOT an investment advice to buy or sell shares. Please make your own decision, as blindly acting on anyone else’s research and opinions can be injurious to your wealth. I do not own the stock, but despite this, my analysis may be biased, and wrong. I have been wrong many times in the past. I am a registered Research Analyst as per SEBI (Research Analyst) Regulations, 2014 (Registration No. INH000000578).

Latticework of Mental Models: Feedback Loops

Few weeks back, Vishal was conducting the Art of Investing workshop in Bangalore and he asked me to speak on the subject of human behaviour and how it relates to investing.

Now, unlike him, I am not used to speaking in front of a large audience. Although it was a room full of around 50 people, but for me anything more than two is a crowd. So to say that I had butterflies in my stomach would be an understatement. It felt like flying horses in my belly.

Finally when Vishal handed over the mic to me, one part of my brain was trying hard to control my shaking legs, the other part was busy adjusting (with trembling hands) the microphone attached to my shirt.

Just when the first word came out from my mouth, a loud screeching noise echoed in the room. For a moment I thought that my heart, which by that time was pounding hard against my chest, had come out. Then I realized that the loud noise was coming from the speakers. I immediately cut it by covering the mic with my hand.

It’s a pretty common problem (sound from the speakers feeding back into the microphone, and then going in an unending loop between speaker and mic, often causing a loud squeal) and most of you must be familiar with this kind of audio feedback noise. This acoustic problem can be easily corrected by tuning the instruments and using few filters. But what’s fascinating about this feedback loop phenomenon is that it pervades almost every other natural as well as man-made systems.

So let’s explore this mental model i.e., Feedback Loop, and see how it can help us understand the world around us.

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The Tale of Two Fathers

First, please ignore the “father” in the headline because this is a story about “parents”. But I couldn’t find a better headline, and thus this one.

Anyways, over the past four days, I’ve read two contrasting stories on the relationship between parents and children.

The first came from Aninda Baruah, who wrote about Google’s new CEO Sundar Pichai, who was born and bred in India. Aninda wrote about how Sundar’s parents sacrificed a lot to ensure that he got all the facilities for education. Almost all the money that his parents had saved was used to buy tickets for Sundar to fly to the US for his scholarship Master’s degree. [1]

He concluded his story thus…

…Sundar Pichai (or for that matter Satya Nadella, Indra Nooyi, Adobe CEO Shantanu Narayen), does not just owe his success to his IIT engineering degree, or Stanford University or Google. He owes it to that entire generation, including his parents, that created the culture of extreme personal sacrifice in favour of educating us.

Reading Sundar’s story, I’m sure his parents not only used their money to help their son, but also sacrificed their time to be with him through the most important times of his upbringing.

Anyways, the second story I read was from Devdutt Pattanaik, who wrote about Samba, the son of Lord Krishna and Jambavati. [2]

[Read more…]

Annual Report Review: Ashok Leyland

In continuation of this series on annual report review, here is my review of the FY15 report of India’s leading commercial vehicle company, Ashok Leyland.

Click here to download the PDF review (9 MB file), or read it in the panel below.

If you wish to submit such reviews of annual reports, I would be happy to share the same with other tribe members. Just prepare them in the same format I am doing (make your notes on the report itself, scan them, convert to PDF file, and email to me).

It will be a good practice for you on how to read and analyze annual reports, plus the tribe will benefit. 🙂

Let me know your thoughts and questions on this review in the Comments section of this post…and also share any suggestion(s) you may have to make future reviews better and easier for your understanding.

Statutory Warning: This is NOT an investment advice to buy or sell shares. Please make your own decision, as blindly acting on anyone else’s research and opinions can be injurious to your wealth. I do not own the stock, but despite this, my analysis may be biased, and wrong. I have been wrong many times in the past. I am a registered Research Analyst as per SEBI (Research Analyst) Regulations, 2014 (Registration No. INH000000578).