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My Thoughts on Investing in 2017, 2018, and Beyond (Video)

I was on ET Now yesterday to share my thoughts on investing in 2017 and 2018. While I managed to duck their questions on specific stocks, you can see the nervousness on my face even when I talk about a few old names. 🙂

Here is the video of the chat (click here if you are not able to watch the video below) –

Here are some notes from my talk that I prepared just to make the task a bit easier for you –

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Circle of Competence: What and Why

Tom Watson [the founder of IBM] said – “I’m no genius. I’m smart in spots and I stay around those spots.”

Charlie Munger and Warren Buffett define these spots where you are smart as your ‘circle of competence’ – the area beyond which you must not venture out if you were to make effective, profitable investment decisions.

I have talked about the circle of competence numerous times in my posts and presentations. But if you still have doubts on this concept, its relevance, the dangers of not adhering to it, when do you know something is within your circle, and how to grow that circle, here is an illustration that, to the best of my knowledge, may help you with the answers.

Circle of Competence - Safal Niveshak
Click here to download a larger image

Let me know if you think I may have missed out on anything related to the subject in the above illustration.

P.S. You may read a detailed explanation on ‘circle of competence’ here.

The 39th Lesson

Life’s passing by too fast, or so it seems. I complete 39 years in my present state of existence today. That’s 14,245 days or around 57% of the average life expectancy of an Indian male.

While spiritualists would want me to believe that I have existed from anadi (before the beginning of cosmos), and will exist till ananta (infinity), I see thirty-nine years as a good enough time to find some meaning in one’s life. At least, my rapidly greying hair and receding hairline help me realize that.

Now, while it amazes me that I’ve been around that long — I feel like I’ve barely begun.

I’m not usually one to make a big deal about my birthday, but as always, it has given me an opportunity to reflect.

So, like I have done over the past three years – see here, here, and here – let me share one of the key life lessons that have guided my life over the years, and two small but wonderful books that have brought this lesson to fore every time I have read them, including when I read them this year.

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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!

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.

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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.

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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.

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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.