Investing Behaviour

Dear Me

Dear Me As adults, we all nurture the secret wish to go back in time and change a few things here and there, so that our life gets better than it is now, in the present.

“Ah, I wish I had studied harder during my masters!” some might resent.

“Only if I had chosen Commerce over Engineering!” is another common wish.

Some would say, “I would have been richer only if I had behaved better as an investor when I was just starting out.”

And then, “I wish I had started saving and investing 15 years back!”

Well, imagine you are given a chance to flip a switch to go back in time when you were young. What would you do?

[Read more…] about Dear Me

Take Control, Investor!

Okay, this is going to be my smallest post on Safal Niveshak so far. But I hope this will leave you with something to introspect. 🙂

There are five key aspects of investing…

Risk = Not knowing what you are doing
Cost = Broking commission + Financial planning fee + Entry loads + Administration fee + Subscription fee for magazines, stock research + Consultation fee + Taxes
Time = Long term compounding
Emotion = Your behaviour
Return = Future gains/losses

Now…

So it beats me why…

Is this really true of you?

If yes (thanks for being honest!), tell me what you are doing to change this?

If not, hail Mogambo! 🙂

Applying Behavioral Finance to Value Investing

“Investing is not a game where the guy with the 160 IQ beats the guy with the 130 IQ…Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing.” ~ Warren Buffett

We call ourselves rational beings. The truth is that we aren’t rational but rationalising beings.

The brain that sits on the top of your head isn’t a flawless machine. Yes, it is powerful. But it has its weaknesses. In everyday terms, we call such weaknesses as ‘biases’.

The good part is that while we cannot exchange our brains with other people nor can we upgrade it at a hardware shop, we can reduce the number of mistakes that our biases cause by just taking notice of them.

How Will You Measure Your Life?

I recently shared with you the secret mission of Safal Niveshak, which has not much to do with the field of stock market investing.

Then, I also shared the best advice I ever got, which again was relevant not just for my investing pursuits but also for my life.

Today, I’m sharing with you another amazing article I read recently on the subject of “life”.

You might wonder why I’m writing (or covering) so much on the subject of “life” on a platform dedicated to investing.

Well, that’s the entire point of becoming a “Safal Niveshak” – one who is not just successful in investing his financial capital, but also enriches his human capital.

The Best Advice I Ever Got

While doing my MBA during 2001-03, I was a very energetic guy…like most MBAs usually are.

So whether it was completing my assignments on time, making clean presentations, participating in extra-curricular activities, and spending time studying for the exams…I was full of energy and drive to do something in life…

…something that earns me a good name and money, and that can make my parents proud.

This is usually the dream that a small town boy harbours while working hard to achieve his goals of a good education, and then a good career. In that way, I was no different.

So I was energetic, and also thought that I possessed a reasonable amount of intelligence to achieve whatever I wanted to achieve in life.

It was here that I came across this snippet from a lecture that Warren Buffett gave at the University of Florida School of Business in 1998.

I had no idea about Warren Buffett then, except that he was one of the richest men in the world. And in following my dreams of a nice career with a nice starting salary, I was excited to read something that a ‘rich man’ said.

Value Investing, the Sanjay Bakshi Way – Part 4

Here’s the final part of my interview of Prof. Sanjay Bakshi. You can read the first three parts here – Part 1 | Part 2 | Part 3

Safal Niveshak: Can you draw down a series of steps and checklists – the process – you use to identify stocks to buy using the value investing route?

Prof. Bakshi: You need different checklists for different styles of investing.

If you are analysing a bankruptcy situation, the checklist you will use will obviously be different from the one when you are buying into a business on the basis of the skills of one person, like Ajay Piramal.

Buying into Piramal Healthcare was essentially a bet on the man’s ability to allocate capital. So to evaluate how likely he will do that in the future, your checklist must first examine how well he allocated capital in the past and also how did he treat his minority investors in the past.

Value Investing, the Sanjay Bakshi Way – Part 3

Here’s the third and penultimate part of my interview of Prof. Sanjay Bakshi. You can read the first two parts here – Part 1 | Part 2

Safal Niveshak: How can a small investor build up a “positive loop” that you talk about to increase his circle of competence, given the time, education or background constraints? How did you do this when you started out as a small investor yourself?

Prof. Bakshi: Buffett talks a lot about the idea of “circle of competence”. But what do we mean by the term?

I like to define it in a creative manner. Most of my students are engineers and have little or no accounting background. One way to think about circle of competence for them is to only specialise in engineering stocks. And students who are specialising in marketing may develop their circle of competence in FMCG stocks.

Creativity in defining your “circle of competence”
That’s the conventional way of thinking about circle of competence. There are other ways. For example, you may specialise in micro-caps. Some of my students are doing exactly that. They have no interest whatsoever in large cap stocks.

Value Investing, the Sanjay Bakshi Way – Part 2

First the bad news! The post below is still not the complete interview with Prof. Bakshi, as his answers, to my late realization, were more extensive than I think I’d heard (might be due to me having lost in the aura of meeting him). 🙂

So you will still have to wait for at least two more parts to get the complete transcript of the interview.

Now for the good news! The next 4,000 words are going to bring you great enlightenment in investing and human behaviour.

As I type, and type, and type the interview, I am getting newer ideas with each paragraph. And I hope the same for you as you read, and read, and read what’s written below.

So over to my second question of the interview with Prof. Sanjay Bakshi, and his answer to the same.

Value Investing, the Sanjay Bakshi Way – Part 1

I recently had the privilege of meeting one of the highly regarded professors in the field of value investing and behavioral finance, Prof. Sanjay Bakshi in New Delhi.

Safal Niveshak meets Prof. Sanjay Bakshi

Prof. Bakshi teaches MBA students (at MDI Gurgaon) two popular courses: “Behavioral Finance & Business Valuation” and “Financial Shenanigans & Governance”.

He is also the CEO of Tactica Capital Management, a boutique firm engaged in deep value investing.

It was like a dream come true for me, having met a guru who has been a great teacher in my investing pursuits over the past few years. So it was obvious for me to wait for Prof. Bakshi’s arrival with butterflies in my stomach.

8 Things I Wish I’d Known Before Starting as an Investor

I have been a stock market investor for the past nine years now, and have seen a respectable performance overall.

Why respectable? Because my investments have helped me at several key phases of my life, most important being the purchase of a house property and then repayment of the entire loan on the same within 5 years (though with some support from the family).

Then, apart from a solid support from my wife, I must thank my investments to have given me the necessary “guts” to quit my job and begin on this journey of independence, where all I work for is my passion – to help individual investors like you become independent and sensible in managing your own money.

So even after doing a respectable job as an investor, what could be the things that I still rue I’d learned before starting out nine years back?