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Archives for October 2017

My Interview with Morgan Housel

Note: This interview was originally published in the April 2017 issue of our premium newsletter – Value Investing Almanack (VIA). To read more such interviews and other deep thoughts on value investing, business analysis and behavioral finance, click here to subscribe to VIA.

Morgan Housel - Value Investing AlmanackI sincerely believe in what Charlie Munger often says about envy, that it is a really stupid sin because it’s the only one you could never possibly have any fun at. I am lucky to have stayed away from this sin as far as investing and other aspects of life are concerned.

But if there is one, and just one, person who arouses this sin in me every time I read him is…Morgan Housel. And it’s for the simplicity of his thoughts that he puts across through his powerful writings. I have tried to emulate Morgan several times in my writing endeavor, but he raises the bar each time he publishes something new, more simple yet more powerful.

Morgan’s posts at The Collaborative Fund, where he is currently a partner, have been a great source of learning for me. I have also read him for years at his earlier stints at The Motley Fool and The Wall Street Journal.

Morgan is a two-time winner of the Best in Business award from the Society of American Business Editors and Writers and a two-time finalist for the Gerald Loeb Award for Distinguished Business and Financial Journalism. He was selected by the Columbia Journalism Review for the Best Business Writing 2012 anthology. In 2013, he was a finalist for the Scripps Howard Award.

In this interview, Morgan shared with me his simple investing thought process, what gets most people into trouble in investing, and the people who have inspired him the most in his journey.

Let’s get started right here.

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I Disclose

We are in a bull market, without doubt.

The index made up of subscribers to my investment newsletter The Safal Niveshak Post (let’s call it ‘SN Index’) has outperformed the BSE-Sensex and has crossed the critical resistance level of 36,000. The CAGR of this index over the past six years since it was launched has been 475%! This is given that it started with a base value of 1 (one) subscriber, which was me (see how good looking CAGRs are created!).

Anyways, given the buoyancy in the broader markets over the past few months, handsome gains have also been seen in the SN Index in recent times. Just over the past twelve months, the index has moved from 25,000 to 36,000 compared to the BSE-Sensex that has managed a rise from 28,000 to 32,000.

SN Index Vs BSE-Sensex

Given these stupendous, outperforming gains in the SN Index, it has also attracted a lot of new subscribers, many of whom may have come with a lot of expectations (not their mistake, but bull market’s). A lot of them have emailed me asking for my stock recommendation and money management services, while some have questioned my intention of teaching value investing instead of simply providing stock tips.

Anyways, some old timers tell me that the SN Index is heading rapidly towards the 50,000 mark (it’s their love for me, I know) while some have also quoted a figure of 100,000 to be reached by the end of 2018 (now that’s irrational exuberance, you see).

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Happy Diwali…and My Wish for You

I was recently reading a story on the classical Greek philosopher, Socrates, who was tried and executed in 399 BC. He was tried on two charges – corrupting the youth, and impiety (perceived lack of proper respect for something considered sacred).

Socrates had done no such thing. What he had done was educate the youth, teaching them to challenge arguments from authority and question what they believed to be true.

In the process, he frustrated and embarrassed many powerful people with his constant line of questioning, known today as the Socratic method.

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The Most Important Thing That Counts in Investing is Character

The Diary of a Young Girl - Anne FrankOne story from World War II that I found as tragic as it was magnificent was that of Anne Frank.

Frank was born in Frankfurt, Germany but moved to the Netherlands for safety in 1934, five years after she was born. The Frank family hid in their basement with four other Jews when Germany took control of the Netherlands.

Anne then began to write, at age thirteen, in a diary of her life, feelings and the outside world. She wrote in the diary every day for two years until their hiding place was found and she was forced into a concentration camp where she died with her sister due to a sickness. She was just fifteen when she died.

Although Anne wasn’t only a tragic girl in this war, her diary that is available to read as The Diary of a Young Girl displays the strength of her character. The diary portrays her as a brave and hopeful girl, character traits that are hard to manage in the kind of hardship that she was a part of.

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How to Teach Kids the Value of Money

Warren Buffett is undoubtedly a famous man. And he is not just famous for his riches, but also for his rejection of the trappings of wealth. As we all know, he lives in the same house he had bought in 1958 for US$ 31,500, and his annual salary of US$ 100,000 is far less than what most CEOs (including many in India) earn.

But there’s one aspect of Buffett that many people don’t know much about. And that is about how he has brought up his kids when it comes to the subject of money.

Over the years, several interviews with his kids have revealed how Buffett’s message to them on money was loud and clear as they were growing up. And it was that money wasn’t what mattered in life. Instead, it was finding something you loved to do and then doing it.

In his book, “Life Is What You Make Of It,” Peter Buffett, a musician and the youngest son of senior Buffett writes about the values he absorbed growing up as the son of Warren Buffett and his late mother, Susan Buffett, and the path he has pursued to identify and pursue his passions in life.

He also writes about things like requiring children to do chores and letting them solve problems on their own instead of bailing them out. But he warns that children will pick up on their parents’ true beliefs about money – no matter what a parent says about money.

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Safal Niveshak Stock Analysis Excel Version 3.0

A few readers have accused me in the past of being a sadist who wants them to do the dirty work of analyzing companies on their own, instead of simply recommending stocks like so many other blogs do.

But I’d rather give you a compass instead of a map, for you can confuse the map with the territory and lose your life’s savings walking that path.

In this pursuit of handing you another compass, here is Version 3.0 of my Stock Analysis Excel Sheet that you can download on your computer, read through the instructions to follow a few simple steps, and then analyze not just the past performance of a company but also arrive at its approximate intrinsic value range.

And unlike the previous versions where you were required to enter most data manually, this latest version feeds in data automatically from website, which subsequently feeds into my sheets on financial analyses and intrinsic value calculations. So you must thank Screener’s creators and my friends Ayush and Pratyush before thanking me. 🙂

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