Investing

If your portfolio earns 50% in one year and then loses 50% the next year, you are back to the same level, right?

Wrong!

Your two year return is still a negative 25%.

Here’s the calculation. Rs 100 becomes Rs 150 in year one, and then halves to Rs 75 in year two. So, net-net, you are down from Rs 100 to Rs 75 over two years, which is a -25% decline.

This seems elementary, but a lot of us miss this simple math.

Anyways, the point I am trying to make today is not about our innumeracy, but that to achieve a high return over a long period of time, we must focus on minimizing our mistakes.

[Read more…] about As Long As You Don’t Lose Money

Note: This post was originally published in the April 2018 issue of Value Investing Almanack. To read more such posts and other deep thoughts on value investing, business analysis and behavioral finance, click here to subscribe to VIA.

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For many world-famous value investors, their interest in the field can be traced back to Warren Buffett.

In 1982, Thomas Russo was a business student at Stanford University when he attended Buffett’s talk. He was simply dazzled by the speed of Buffett’s mind and his knack for weaving profound investing lessons with stories and rib-tickling quotes. Russo was hooked for life and chose to pursue a career in value investing.

Today, Tom Russo is a pre-eminent value investor of our times who manages over US$ 12 billion as a partner at Gardner Russo & Gardner. The most important idea that Russo talks about wherever he goes is capacity to suffer.

[Read more…] about Capacity to Suffer

The Safal Niveshak Podcast Update: I launched my podcast recently, where I plan to share insights on stock market investing, wealth creation, behavioural finance, and lifelong learning. Click here to visit the Podcast page. You may also subscribe on Apple Podcasts, YouTube, Spotify, and Stitcher

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Tennis is one of my favourite sports simply for the individual brilliance, fearlessness, and electric atmosphere that is on display. Plus, as a tennis player, you have to take the entire onus upon yourself whether you win or lose, which I kind of like.

[Read more…] about Investing and the Art of Wait

This real-life story dates back to 2014, and it’s about my father.

During summer holidays, we were at our hometown in West Bengal where my father ran his business.

He was generally a healthy person, but for the previous few months he was having slight pain around his left shoulder. The pain was occasional and thus he did not bother to get it checked up. Ours was a very small town, and we were living at its outskirts. The nearest orthopedic doctor was around 20-km away, and so my father did not bother to visit him for a check up once.

One early morning, he woke up with an intense pain in that very shoulder. He took a pain killer, thinking the pain was due to him sleeping on his left side, with his arm pressed under his upper body. The pain reduced a bit, but stayed for a couple of more hours.

[Read more…] about A Simple Formula for Survival in Life and Investing

I received this email from a reader recently-

Boss, I’d prefer to read actionable articles on what stocks you like, and what trends you are seeing in the markets, etc. and not these crappy “how to think and invest better” articles. ~ AJ

And then this slightly more respectable one –

Your posts are like sermons. Please write about your stock picks, your predictions, and how sectors and markets are likely to perform in the future. ~ MK

[Read more…] about Why I Write What I Write?