Archives for February 2016
Poke the Box: School Yourself
Let’s Start with Safal Niveshak
Just in case you missed any of this on Safal Niveshak in the last week…
- As humans, we don’t only imitate good actions, but we also have a tendency to follow wrong actions and inactions of fellow humans. The Bystander Effect.
- Switching costs create moat but what creates switching costs?
- A combination lock should really be called a permutation lock. Find out why.
Book Worm
The Elements of Investing is a short, straight-talk book about investing and saving. While talking about power of saving and compounding, authors, Burton Malkiel and Charles Ellis, write –
Time is indeed money, but as George Bernard Shaw once said, “Youth is wasted on the young.” If only we could all train ourselves at a young age to know what we know now. When money is left to compound for long periods, the resulting accumulations can be awe inspiring.
Benjamin Franklin provides us with an actual case. When Franklin died in 1790, he left a gift of $5,000 to each of his two favourite cities, Boston and Philadelphia. He stipulated that the money was to be invested and could be paid out at two specific dates, the first 100 years and the second 200 years after the date of the gift. After 100 years, each city was allowed to withdraw $500,000 for public works projects. After 200 years, in 1991, they received the balance—which had compounded to approximately $20 million for each city. Franklin’s example teaches all of us, in a dramatic way, the power of compounding. As Franklin himself liked to describe the benefits of compounding, “Money makes money. And the money that money makes, makes money.
Latticework of Mental Models: Permutation and Combination
Here’s an interesting trivia.
If you wear different tie on the same shirt, most people will think that you’re wearing a different shirt. That’s an interesting way to multiply your options without really buying new cloths (except few new ties).
“That’s not a trivia, that’s a Jugaad.”, you might want to say. Anyways, That brings me to an equally interesting mindbender.
If you have 2 shirts (white, blue), 3 pants (black, gray and brown) and 3 different ties (pink, orange, red), in how many different ways can you get dressed? Assumption here is that getting dressed requires you to wear all three i.e. a shirt, a pant and a tie.
Using the multiplication principle we can say that there are total 2 x 3 x 3 = 18 ways to get dressed. Of course some of the dress combinations will look outright funny but our concern here is to find out all possible ways to get dressed. Moreover, today we are getting into Maths discipline and most mathematicians don’t really have whole lot of fashion sense anyways.
So that’s the simplest example of using the idea of combinations in real life. Now let’s say, for some strange reason, we were also considering the order in which you put on the cloths, i.e. it matters to us if one puts on the shirt first instead of tie.
Imagine wearing a tie first and then squeezing the shirt inside the tie, funny right? I told you mathematicians don’t care much about the dressing etiquettes 🙂
Okay, back to the same question again. In how many ways can you get dressed if the order of dressing matters?
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Poke the Box: Dealing with Stock Market’s Moments of Terror
Let’s Start with Safal Niveshak
Revisiting the archives for some old posts on dealing with stock market turbulence…
- How to survive a stock market panic…and make it work for you.
- How to stop worrying and start investing.
- What should investors do when stocks crash?
Book Worm
Yesterday, I was re-reading what Buffett wrote in his 1987 letter to shareholders, which I believe is one of the most important texts ever written on how to become a sensible stock market investor. As a student of value investing, you must have read what follows several times. But then, such super-texts need several readings, and then several more.
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InvestorInsights: Gaurav Jalan
Gaurav Jalan, an enterprising and inspiring young value investor shares his invaluable insights and experiences in sensible, long-term investing.
Gaurav has 14 years of experience in management consulting and investment management. He manages investment portfolios for high net worth individuals and companies as Chief Investment Officer at Avant Garde Wealth Management. Previously, he was an Investment Analyst at Fidelity International in Mumbai and also worked as a Senior Associate Consultant at Bain & Co., New York. Gaurav completed his MBA from Columbia Business School, New York in 2006 and his B.A. in Economics and Computer Science from Amherst College, Massachusetts in 2001.
In his interview with Safal Niveshak, Gaurav shares his wide investment experience and how small investors can practice sensible investment decision making.
Safal Niveshak (SN): Could you tell us a little about your background, how you got interested in value investing?
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