Premium Value Investing NewsletterDownload Free Issue

Archives for November 2017

What We Are Listening To: Our Favourite Podcasts on Business, Investing, and Learning

If you don’t know who Charlie Munger is, then here’s a quick introduction. He’s a billionaire and he’s 93 years old. He’s not the oldest and he is not the wealthiest but when it comes to being the “oldest billionaire”, he doesn’t have any competition.

In other words, he has the two most coveted things in this world – wealth and a long life.

His advice to us – minimize stupidity. Remarkably simple, isn’t it?

The most effective way to follow Charlie’s advice is to learn from others’ mistakes. That’s where books come into the picture. They’re the best source of vicarious knowledge.

When humans first discovered that they could persist their words and other information in physical form, it was revolutionary. According to some historians, between the years 3500 BC and 3000 BC, ancient Sumerians from Mesopotamia civilization invented the first system for storing and processing information outside their brains.

In the timescale of millions of years of human evolution, this invention is pretty recent one. Irrespective of how trivial the ability to read/write sounds, it was nothing less than a disrupting technology when it came out. Probably thousands of talented Sumerians, who were employed for memorizing information, lost their jobs.

You don’t have to teach an infant how to swallow liquid or give walking lessons to a toddler. These skills are built into the human genome. But reading isn’t part of our DNA.

[Read more…]

My Thoughts on Value Investing, Personal Finance, and Life (Podcast)

I recently had the opportunity to get interviewed by Paisa Vaisa, an audio show/podcast based on topics around money, investing, and personal finance.

In the interview, I discuss my background, what got me to the stock market, thoughts on value investing, buying and selling stocks, core rules of personal finance, and my way of living a prosperous life without the paycheque.

I thought you might be interested in hearing me out (my kids did, for the first time). 😉

Here are the links to the podcast (around 15 minutes each) –

  • Part 1 (background, education, what drove me towards value investing, my teachers, biggest succcesses and failures)
  • Part 2 (thoughts on value investing, simple tips on building your portfolio, when to buy and when to sell stocks)
  • Part 3 (thoughts on personal finance, how to lead a better life by making smart money decisions)

Thanks for listening!

Latticework of Mental Models: Manufactured Memories

Yesterday when I logged into my Facebook account, it showed a picture I had posted six years back. In the frame, I was having lunch with an old school friend.

It brought a smile on my face.

Interestingly, I had completely forgotten about the lunch. I just couldn’t remember being present when that picture was taken. My brain had conveniently erased that incident from memory.

I am sure it happens to others too. Also, Facebook knows it, so they introduced this feature. Bringing back those lost memories creates a pleasant experience which isn’t much different from the one when you find money in your old pant pockets.

How would it be if we never forgot anything? Why does our brain choose to remember something and spaces out on others? Is there an evolutionary reason behind this behavioural quirk? Let’s explore these questions today.

[Read more…]

The Biggest Killer of Investment Returns

Somewhere, right this very moment, an investor you know of is having more fun than you. He has just made a lot of money – more than you – thanks to the graphite electrode stock he owns. And you just missed out on it.

Not just that, you realize you have missed out on so many other stocks that others own and are making tons of money on, and you aren’t. In fact, you may even know of someone who owns all the stocks that are rising, and you are cursing yourself for not being that person, plus envying him.

Not just that, looking at your portfolio you realize that somewhere, something isn’t right. There’s one stock, or maybe more, that hasn’t done much even when other stocks you don’t own have skyrocketed.

I know this affects you, annoys you. And that’s a normal emotion to have, and one you have no control over, which is also normal. Your lizard brain – part of the brain that is responsible for primitive survival instincts such as aggression and fear – is hardwired to behave that way.

So, even when you own more assets and privileges than you could have imagined by this age, and are reasonably happy in your life outside stocks, you feel terrible because you missed out on a few stocks that have done wonders for other investors you know of.

[Read more…]

16 Investing Lessons from a Superinvestor the World Forgot

What do you call an investor who earned 16% per annum on average over a 47 year period – that’s a 1,070-bagger – and is not called Warren Buffett?

What if I told you that this investor…

  • Did not care about corporate earnings
  • Rarely spoke to managements and analysts
  • Did not watch the stock market during the day
  • Never owned a computer, and
  • Did not even go to college

…you would not say anything but just ask me to reveal his name fast, so as to re-confirm whether such a super-investor has ever existed in the investment circles.

Well, before I tell you this man’s name, you must read what Buffett had to say about him…

…He doesn’t worry about whether it it’s January, he doesn’t worry about whether it’s Monday, he doesn’t worry about whether it’s an election year. He simply says, if a business is worth a dollar and I can buy it for 40 cents, something good may happen to me. And he does it over and over and over again. He owns many more stocks than I do — and is far less interested in the underlying nature of the business; I don’t seem to have very much influence on him. That’s one of his strengths; no one has much influence on him.

Now, if you haven’t already read below to find out who I am talking about, let me now disclose the name of this man, whom Buffett termed a Super Investor in his famous essay, The Superinvestors of Graham-And-Doddsville.

[Read more…]

How Fortunes are Made in the Stock Market

I was re-reading this book titled “100 to 1 in the Stock Market”, in which the author Thomas Phelps talks about, well, how investors can grow their wealth one hundredfold through buy-and-hold investing.

I came across this book the first time in 2015 through a recommendation, and then realized there was a frenzy around with people trying to get their hands on to a copy of the same.

Just going by this book’s title – 100 to 1 – I thought it was a dangerous first book to be read by people just getting started in the stock market (I continue to believe the same).

The title smelled of overconfidence, and survivorship bias (it still does).

Anyways, I found the book to be good in parts, especially when the author makes the case for long-term ownership of stocks and the virtues of having patience along the journey.

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.

“Make me Allah,” he orders the angel.

[Read more…]

Value Investing Workshop & Camp Millionaire: Chennai & Kolkata

If you aren’t in Chennai or Kolkata, you may skip reading this post.

If you are still reading, this is to announce our upcoming Value Investing Workshop and Camp Millionaire (money workshop for kids) in Chennai and Kolkata.

For the uninitiated, Camp Millionaire is our game and activity-based financial education program for children of age group 8 to 14 years. Kids will learn how to make, manage, multiply and donate their money wisely first hand in this day-long program and they will have fun doing it.

The main objective of this program is to provide a stimulating, fun-filled, learning environment where kids can feel safe exploring and learning the various principles, ideas, and skills needed to create a financially successful and responsible life.

The Chennai session of Camp Millionaire is on Saturday, 18th November. The Kolkata session is on Saturday, 2nd December.

Click here to know more about and register for any of these Camp Millionaire sessions.

As for our Value Investing Workshop, it’s a one-day session where I teach the most important principles and practices of value investing and move through an entire structure and process of picking up high-quality stocks using these principles.

Apart from teaching the process of picking the right kind of businesses using the rules of value investing, the Workshop also covers the core ideas in Behavioural Finance – how cognitive biases hurt our investment returns and steps an investor must take to minimize the mistakes on this account.

Overall, I have sifted through a mountain of amazing books, documents, lectures, plus my experiences in investing to bring to the table the most important practical ideas in becoming a sensible, successful, long-term investor.

The Chennai session of Value Investing Workshop is on Sunday, 19th November. The Kolkata session is on Sunday, 3rd December.

Click here to know more about and register for any of these Value Investing workshops.

Email me at vishal[at]safalniveshak[dot]com if you have any questions around these workshops.

Of Free Brains and Effortless Money

In the hospital, the relatives gathered in the waiting room, where a family member lay gravely ill. The doctor came in looking tired and dull.

“I’m afraid I’m the bearer of bad news,” he said as he surveyed the worried faces. “The only hope left for your loved one at this time is a brain transplant.”

“Oh, how risky is the procedure?” a relative asked.

“It’s an experimental procedure, very risky,” the doctor replied, “but it is the only hope for your loved one. Insurance will cover the procedure, but you will have to pay for the BRAIN.”

The family members sat silently as they absorbed the news. After a time, someone asked, “How much will a brain cost?”

The doctor quickly responded, “Rs 20 lac for a male brain, Rs 5 lac for a female brain.”

The moment turned awkward. Some of the men had to ‘try’ to not smile, avoiding eye contact with the women.

A man unable to control his curiosity, finally blurted out the question everyone wanted to ask, “Why is the male brain so much more than a female brain?”

[Read more…]