Archives for 2021

The Most Important Thing That Counts in Investing

September 13, 2021 | 5 Comments

One 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.

Dear Mr. Buffett

August 30, 2021 | 9 Comments

This is a Warren Buffett birthday post, and like all birthday wishes, I will not take long. This message will never reach Mr. Buffett, but I silently hope the thoughts form some kind of waves and time-travel to reach him before he celebrates his 100th birthday.

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Dear Mr. Buffett,

Happy birthday to you.

Trust you are doing well, feeling young at 91, and in the pink of your health.

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Is Your Stock Portfolio A Museum or A Warehouse?

August 25, 2021 | 27 Comments

Rework by Jason Fried is one of the best books I have ever read on starting up. Jason has condensed his wisdom in starting and running a business into pithy, one-page, chapters.

One of the interesting chapters from the book is about the idea of being a curator. In this, Jason writes –

You don’t make a great museum by putting all the art in the world into a single room. That’s a warehouse. What makes a museum great is the stuff that’s not on the walls. Someone says no … There is an editing process. There’s a lot more stuff off the walls than on the walls. The best is a sub-sub-subset of all the possibilities.

Re-reading this chapter reminded me of Costco, one of the world’s largest wholesale retailers and among the very few that have shown remarkable resilience in an industry that has been subjected to increasing pressures from online retail.

Zoom Out, Baby, Zoom Out

August 16, 2021 | 12 Comments

It was Valentine’s Day in 1990. The Voyager 1 space probe, which had completed its primary mission, was leaving the Solar System.

At the request of astronomer Carl Sagan, the American space agency NASA commanded Voyager to turn its camera around and take one last photograph of Earth, across a great expanse of space. The photograph that got clicked was from a distance of about 6 billion kilometers (same as 240,000 round trips from Mumbai to New York).

In the photograph, against the vastness of space and among bands of sunlight scattered by the camera’s optics, Earth appears like a ‘pale blue dot’ (that’s what the photograph was named) that is smaller than a pixel.

Anyways, four years later, in 1994, during a public lecture at Cornell University, Sagan presented the photograph to the audience and shared his reflections on the deeper meaning behind it –

Shut Up and Wait

August 6, 2021 | 5 Comments

Morgan Housel, who appears on The One Percent Show tomorrow, tweeted this four years back –

I completely agree with Morgan, and also that ‘shut up and wait’ is one of the sanest advices you will ever receive, and must follow, for wealth creation.

Just that doing this is not that easy.

The idea of buying and holding high-quality businesses over a long period of time is simple. Everyone knows that, and even those who don’t practice it appreciate that this works with most high-quality businesses as history has proven time and again. But then, it’s important to understand that the action of not doing anything over such a long period of time involves hundreds of decisions over months and years that lead to such inaction.

Like this –

Now, one way is to buy high-quality businesses and forget for 20 years and hope to end up with a fortune. There are quite a few such fairy tales you may have heard of. But the other side of the picture is that countless people have also ended with duds in their portfolios, or vanished companies, when they realized their father or grandfather had bought some stocks and forgot about them for 20 or more years.

So, overall, it’s not easy. And it’s not supposed to be easy.

But if you have done your homework well, and keep your eyes and ears open, ‘shut up and wait’ remains the best bet in your pursuit of wealth creation from stocks.

And like Frank Partnoy wrote this in a brilliant article many years back –

If we are limited to just one word of wisdom about decision-making for children born a hundred years from now, people who will have all our advantages and limitations as human beings but will need to navigate an unimaginably faster-paced world than the one we confront now, there is no doubt what that word should be.

Wait.

Better, shut up and wait.

What to Do When There’s No Stock to Buy?

July 22, 2021 | 2 Comments

The Sketchbook of Wisdom: The second print of my book – The Sketchbook of Wisdom – is now available. Click here to reserve your copy. Send me an email at vishal@safalniveshak.com if you wish to place bulk orders.

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Investing is difficult.

But not investing – sitting with cash and not finding stocks worth buying – is more painful.

After all, to most of us, activity equals achievement.

The need to remain active at all times is what leads CEOs to make bad capital allocation decisions, especially during heady times. And that is what leads most investors – big or small – to buy overpriced stocks.

We all want to be in the thick of action – largely because we hate the feeling of missing out on the party.

Beware the IP-Ohs

July 12, 2021 | 3 Comments

People indulging in the stock market are often people with a lot of emotions. They get excited by something new, especially if it holds the promise of making them a whole lot richer and provides bragging rights at their next social gathering.

Maybe that’s why amateur and professionals alike tend to lose their minds in bull markets, particularly when a hot initial public offering, or IPO, is offered to them by their broker.

On one hand, had you bought into the IPOs of Infosys (yes, remember?), HDFC Bank, Sun Pharma, or TCS, you would have had some volatile price fluctuations along the way, but there is no question that you have made enough money to substantially change the quality of your life. Clearly, a well chosen IPO can be a life changing experience if you simply make the right choice and stick with the stock for years.

On the other hand, there is a large majority of IPOs such as those of Reliance Power, Suzlon and DLF, which have destroyed investors’ capital. With such businesses, even the “long-term” cannot save you from permanent capital destruction.

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Safal Niveshak is 10 Years Old

July 9, 2021 | 146 Comments

After I had decided to quit my job in late 2010, we got to know that our second child was on the way.

There was a momentary dilemma whether to go ahead with the decision or not, as an added member in the family would have meant added responsibilities, and that too in a period of high financial uncertainty.

I had exhausted a large part of my savings to pay off my home loan to be able to quit that job, and now there would be an extra mouth to feed, apart from other expenses that come along with a new-born – medical bills, diapers, etc.

“Go for it!” was my wife’s call. “We will see what happens only after we take this step,” she comforted me. “Worst, if nothing works out after you quit your job, we will sell our house and move back to our hometown.”

Of Free Brains and Effortless Money

July 5, 2021 | 10 Comments

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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?”

Ben Graham: Just Plain Lucky?

June 29, 2021 | Leave a Comment

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Remember Ben Graham, the guy who wrote The Intelligent Investor? And who taught Warren Buffett to become Warren Buffett?

Well, if you really know who Graham was, you also know that he is associated with buying something cheap (one dollar worth at fifty cents) and then selling it when it reaches a value that reflects what it’s worth.

A very copybook, calculated approach, right? Like what a Rahul Dravid would do in cricket.