Investing

Investor, Pay Attention

August 21, 2019 | 2 Comments

Note: This is an excerpt from the article Where Do Great (Investment) Ideas Come From, which I wrote for the May 2015 issue of our premium newsletter, Value Investing Almanack. To read the complete article and our vast archives spanning 4+ years, please click here to subscribe.

Consider that you are looking to buy a stock and the two that you come across on your screen are, say, Company A and Company B. Here are a few data points about the two companies, which are the only factors you would look at while making your decision. Look at them and think which one you would rather purchase –

Did you make a decision? Before you read on, jot down either Company A or Company B. Now I’m going to give you some more data points on these companies. No information has been changed, but some has been added.

Which stock would you rather purchase now? Again, write down your answer. I’m going to present the options a third time, again adding one new element.

Now, which of the two would you prefer?

Safal Niveshak, Uncopyrighted

August 12, 2019 | 31 Comments

January 11 2013 was a sad day for the Internet world. That day, Internet pioneer and open information activist Aaron Swartz committed suicide at a young age of 26.

Swartz’s “crime” – he had logged into JSTOR (Journal Storage), a database of scholarly articles, and rapidly downloaded those articles with the intent to make them public.

He didn’t “hack” the network to secure those downloads. MIT is anyways an open network.

He didn’t crack any special password system to get behind JSTOR’s digital walls. All he did was figure out how JSTOR was filing the articles that he wanted and wrote a simple script to quickly gather those articles and then copy them to his computer.

If Swartz had lived to be convicted of the charges against him, he either had to accept the label of a criminal and go to jail for 50 years or fight a million-dollar lawsuit.

Aaron decided to take a third option. He hanged himself!

Why Most People Will Never Be Good at Investing

August 7, 2019 | 18 Comments

…because most people in the stock market, most of the time, don’t do investing, which is…

Thinking how markets work,
Understanding how people behave,
Studying businesses,
Sticking only with what is simple and what they understand, and
Buying stocks at appropriate valuations.

Instead, they are busy…

Envying (others making money fast or losing money slow),
Cloning (others’ stock ideas mindlessly),
Predicting (future of markets, stock prices, and economy),
Fearing (missing out on future gains),
Regretting (past mistakes),
Avoiding (accepting current mistakes),
Denying (reality, especially when it’s harsh), and
Indulging (in useless information and noise)

And if that’s not all, these often lead us to –

Trading (frequently, which adds to our costs),
Averaging down (on bad businesses),
Boasting (about our lucky short-term gains), and sometimes
Trolling (other investors on social media, who have not performed as well as us in the recent past).

With such a busy schedule, where is the time to practice investing? 🙂

A Story of Courage and Hope from the Life of Charlie Munger

August 5, 2019 | 25 Comments

Here is a story I shared with my daughter yesterday and thought this deserves to be shared with a wider audience. It’s that good!

This story is from the life of Charlie Munger, from long before he was rich and famous, and before he had such a large and happy family –

Image Source: Poor Charlie’s Almanack; Photograph is of Charlie celebrating his forty-fifth wedding anniversary with his family in 2001
The story dates to 1953 when Charlie, then 29 years old, got divorced from his (first) wife of eight years. Divorce had a huge social stigma attached at that time and it was the first blow for Munger.

His wife also got almost everything in the separation, including the house. Charlie’s friends revealed that he moved into “dreadful” conditions after this divorce.

Stock Market Crisis: Your Big Questions…Answered

July 29, 2019 | 36 Comments

Here is my attempt to answers a few key questions I have received from Safal Niveshak readers on the current turmoil in the stock market.

You won’t find perfect answers below, but this is just my attempt to help you get over your fears, which may otherwise lead you to act in haste, which can cause some damage to your process of long term wealth creation.

Let’s start right here.

1. Why is the market crashing?
It hasn’t crashed…so far! The BSE-Sensex is down just 6% from its peak this year. BSE-Smallcap is down 14%. BSE-Midcap is down 11%. This isn’t a crash!

If you think it is, you maybe be suffering from ‘denominator blindness’, which is the tendency to focus on the absolute number then the percentage decline. Or you just seem to have been spoilt by rising markets over the past few years and were not investing in 2008 when the last real crash happened. That was painful for people who experienced it with their money (and not just their eyes and ears). We have not seen anything like that since then.