How To

How to Manipulate the Stock Market, Legally?

Imagine you win a lottery of Rs 100 crore (just imagine!). What would you do with this “free” cash?

Spend it to buy all the luxuries of life? Maybe!

Give most of it to charity? Really?

Invest most of it in the stock market so that it grows over a period of 5-10 years? Maybe!

What about manipulating the stock market so that your Rs 100 crore doubles in the next 1 year?

“The last option looks great!” you think, and then ask, “But isn’t manipulating the stock market against law?”

Yes it is!

15 Quick Rules of Stock Market Investing

Despite all the fun stock prices seem to be having these days, there is no doubt we are passing through one of most uncertain times ever to invest.

I do think the uncertainty is going to rise even further so I wanted to put this note together.

Please don’t follow any of my advice you read below. This is what I do and follow myself, and it works for me.

1. Expect, Don’t Fear Corrections
A stock market correction is always around the corner. But no one can predict when it will strike and how much it will hurt. So don’t sit on the sidelines expecting a correction. But always be prepared for one at all times.

10 Big Ideas from Warren Buffett’s 2014 Letter

Warren Buffett has been the highlight of two of my last three posts –

On an extended holiday, as I read more of the legend, I am happy to share more of him with you as well. 🙂

Buffett’s latest annual letter to shareholders is out (click here to read), and here are ten important ideas I have pulled out for you from the same –

Warren Buffett’s Age-Old Secret on How to Get Rich

Have you ever wondered why we are willing to hold on to our real estate investments for years even as we trade in and out of stocks?

So, we may buy and/or sell just 1-2 properties in our lifetimes, but the count of stocks we move in and move out of runs into 100s.

Of course the size of the investment plus ability to liquidate (buy and sell) is one factor. But the most important factor that is at work here is – Stocks provide you minute-to-minute valuations for your holdings, whereas you don’t see quotations for your real estate holdings so frequently.

When it comes to stocks, Ben Graham’s mentally-ill fellow Mr. Market comes to you daily and quotes a random price that causes you to behave irrationally.

“Don’t just sit there, do something!” he shouts at you daily, and you gladly take his advice and buy stocks when he quotes a high price and sell when he quotes a lower price.

Intrinsic Value: A Big Deal?

Here is an email I received from a tribesman yesterday…

I agree that evaluating and buying great businesses at the correct price (i.e. prices below the intrinsic value) is of utmost importance.

However, while I think I am getting better in evaluating the growth of businesses, their durable moats and creating my own check list of investing, my biggest challenge is in calculating the range of the “intrinsic value”.

I am still not able to calculate the risk associated with the stock and that is prohibiting me from confidently buying a stock which I believe is a value buy.

May I request you to please share any pointers, books, frameworks which can help me estimate the risk and/or this intrinsic value?

I believe this – calculating intrinsic value – is one big issue most investors face, and thus I thought of replying to this email via a post.

Well, the concept of intrinsic value is indeed tricky.

How to Generate Stock Ideas

In an interview with Warren Buffett in 1993, Adam Smith, author of Supermoney, asked how the small investor can find good investment ideas.

Warren Buffett: I’d tell him to do exactly what I did 40-odd years ago, which is to learn about every company in the United States that has publicly traded securities, and that bank of knowledge will do him or her terrific good over time.

Adam Smith: But there are 27,000 public companies.

Warren Buffett: Well, start with the A’s.

Everybody knows that Warren Buffett gets his investment ideas largely from annual reports.

Of course, now he has become so influential that companies call him to share their own ideas. But, fifty years ago, Buffett was not the go-to guy if you wanted to sell your company or raise capital for your failing bank.

He was a small investor who was clawing his way up the investing street by reading whatever annual report came his way, and then finding his investment ideas that worked wonders in the subsequent years.

You are probably at the same stage Buffett was fifty years ago. But there’s a big advantage you have over the early day Buffett.

How to Stop Worrying about Falling Stock Prices

My friend Rohan visited me on the weekend, and here is how our discussion went. Rohan’s comments are in red.

“Hey Vishal, did you notice the crash last week? I am pained to see my portfolio again and again!”

“Crash? Where?”

“Stop fooling dude! You know I am talking about the stock market and the crash in the Sensex!”

“Oh that! No, I was busy somewhere else, so didn’t notice that!”

One Year Course in Value Investing
Join The Safal Niveshak Mastermind, my special one-year course in Value Investing to reinvent how you invest and take control of your financial life. Click here to know more and subscribe. Subscriptions for the first batch close on 25th August 2013!

“How could you miss a 1,200 points crash in the last 8 days? And you seem to be writing an investment blog, huh!”

How to Save an Extra Rs 25 Lac

A three-bedroom apartment. Two cars. Enough flying miles to send an airline into losses (well almost!). Job with a foreign consulting company. Annual salary of Rs 30 lac…or around 45-times India’s average per capita income.

Yet my friend Rohan is not happy.

Whenever I meet him, he is, as I put it, caught on the “work-spend treadmill.”

So, last week when he was showing off his latest purchase, a third mobile, and one costing in excess of Rs 45,000, I told him, “Spend less money, my friend.”

“But spending money is what makes me happy,” he replied.

“You don’t have to feel deprived when you spend less money,” I said. “In fact, if you keep spending and spending even as your income rises, you’ll keep running and running and never get anywhere.”

How to Read

As a reader, two questions may have come on top of your mind right now.

One, “Why is a site that should tell me ‘how to invest’ telling me ‘how to read’?”

And two, “Who needs to learn how to read?”

The answer to your first question is – Before you invest, you must read. What to read? First, read my outline of a 2-year course in investing.

The answer to your second question is – Before you read, you must learn how to read.

But then, as you rightly asked, who needs to learn how to read?

[Read more…] about How to Read

How to Identify Winning Mutual Funds (Free E-Book)

One of the oft-asked questions in my Art of Investing Workshops is – “How to identify the right equity mutual fund schemes from among the thousands available?”

Well, here’s an e-book that tries to answer the question – How to Identify Winning Mutual Funds.

This e-book explains the key attributes you need to identify the best equity mutual funds from among the thousands available. It also helps understand the pitfalls while selecting the right equity funds for your portfolio.

Let me know your feedback on the e-book in the Comments section below.

If you like it, I would be happy if you can share this with your friends and colleagues who might be interested in the subject.