Investing

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The “Rashomon Filter” to Make Good Investment Decisions

Heard of the Rashomon effect?

It is a term related to the unreliability of eyewitnesses. It describes a situation in which an event is given contradictory interpretations or descriptions by the individuals involved.

The effect is named after Akira Kurosawa’s 1950 film by the same name ― Rashomon. The story revolves around a murder described in four subjective, alternative, self-serving, and contradictory ways by four witnesses.

Each of the characters relate the incidents as a contradiction of the other, but they describe them in such a convincing manner that the audience tends to believe them all.

How to Fail at Almost Everything and Still Win Big

Here is some stuff I am reading and thinking about this weekend…

Book I’m Reading – How to Fail at Almost Everything and…
If you don’t know who Scott Adams is, odds are high that you would give a pass to a book with such a cheesy and hackneyed title. But if you did that it would be a huge loss. Scott’s How to Fail at Almost Everything and Still Win Big is one of my all-time personal favourites and I can vouch for the tremendous utility of his methods.

You Lost Your Job, Now What?

My cousin, age 40, married, with two kids, working with a Delhi-based start-up at a decent seven-digit salary, just lost his job!

With no cash flow to sustain operations owing to the Covid-19 pandemic and its impact on the economy, the start-up is on the verge of closing shop. To say the least, my cousin was unprepared for this.

We have been more like great friends over the years, and so he called seeking my advice. What follows below is part of the detailed email (edited for personal stuff) I sent him about how he can deal with the sudden loss of income and livelihood, and how he may move forward.

Oh, EBITDAC!

Before I share the best things I am reading and thinking about today, here’s a request.

If you’ve been enjoying the newsletter, please share it with friends on WhatsApp, Twitter, or just send them here.

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Is Value Investing Dead?

Newspaper headline reads – “Modi’s ₹20 trillion package: What does it mean for stock markets?” Reminds me of a Hindi idiom – गाँव बसा नहीं लुटेरे पहले आ गए (Translation: The village is still not thriving, but the robbers have already come).

The first part of the article reads – “Indian equity markets rallied in early trade on Wednesday as the size of the economic stimulus package announced by Prime Minister Narendra Modi is significantly higher than the Street’s expectations.” Well, after everything ‘unexpected’ that has happened over the past few months with the economy, businesses, markets and in people’s livelihoods, we are still playing the expectations game? Ha!

No One Has Any Idea

Based on requests from people loving my Saturday posts, I’m experimenting to be more regular in sharing stuff I’m reading and thinking about, in bits like pieces. Let me know if you find this exercise useful, so I may carry on.

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Mamba Mentality and How to Win at the Stock Investing Game

I have a confession. I have never been crazy about basketball. I played the game in school, but my body was too frail for the 625-gram ball to find any meaning in my life, like cricket and football did.

It was this lack of craziness that the only superstars from the game I ever knew of were Michael Jordan and Magic Johnson, also because the names sounded similar.

It was early this year that I first heard about another of the game’s legends, Kobe Bryant, and because of the news of his demise in an air crash. Then, the more I read and saw of this man just led me to feel an immense amount of respect for his basketball prowess and the efforts he made over the years to reach the pinnacle.

As I read about Bryant, I realized that life for him was not free of controversies. The worst came in 2003 when he, at the top of his career, was charged with sexual assault. He proclaimed himself innocent and the charges were later dropped. Bryant and his accuser reached a civil settlement, and his reputation was badly tainted.

Owning Stocks is a Long-Term Project

Here is some stuff I am reading and thinking about this weekend…

Book I’m Reading – Zen and the Art of Motorcycle Maintenance
Zen and the Art of Motorcycle Maintenance (ZAMM) is the autobiography of American writer and philosopher Robert Pirsig, wherein he chronicles his motorcycle journey across the country with his son. It is however much more than just an adventure tale. Through his journey, Pirsig explains his philosophy on life, creating a manifesto through motorcycle maintenance.

There are many lessons to be learned from this book, but a handful of persist throughout the story that can help reshape your perspective. Like, here is what Pirsig writes on how we lose so much time on unnecessary affairs that we move swiftly past what is really important –

We’re in such a hurry most of the time we never get much chance to talk. The result is a kind of endless day-to-day shallowness, a monotony that leaves a person wondering years later where all the time went and sorry that it’s all gone.

Once Upon a Time in the Stock Market

I started my career in the stock market in 2003, when I joined an equity research firm in Mumbai. It was purely an accident that I got into this field, as this was the only decent job that came to my MBA Finance class, among all others that required door-to-door selling of insurance and loan products. We were just coming out of the 2000 dot com crash led economic decline, and thus jobs were far and few in between.

My job, starting day one, was to study companies from the technology space, and write reports around what I understood. Annual reports were available online, but most companies made available only the latest 2-3 years’ reports. Not many companies were conducting investor meets or conference calls, and not many had functional investor relations department.

When I look back at those days, equity research was not such a well-known career and not many people outside finance really knew what investing in stock market was all about. Yes, we had passed through the Harshad Mehta and Ketan Parekh days, but stocks were mostly looked upon as a way to gamble instead of creating serious long-term wealth. Apart from television and newspapers, there were no other media to read about the stock market or investing and related ideas. Yes, Internet was available, but investing resources were not that much available or credible.

Despite this, that period around the start of 2000s was still modern compared to investors who came even earlier, some of whom I have had the privilege of interacting over the past few years.

Where Should You Begin?

One question that gets asked most often by Safal Niveshak readers is — As a new investor, where should I begin learning about investing?

In fact, it’s the most common question by people who are getting started with a new skill or new body of knowledge — Where should I begin? Which books to read first? Which online courses/blogs/websites should I start with?

Do you remember how you learned to walk? Probably you don’t.

Most babies take their first steps sometime between 9 and 12 months and are walking well by the time they’re 14 or 15 months old. When a child learns to walk, does it matter which leg was used first? How important is it that the toddler takes help of a wall or a walker? Whether she looks up, down, or forward while taking the first step?

My point is this — when it comes to picking up a skill or gaining knowledge about a new field, there’s no 100 percent foolproof step by step plan. What matters the most is how curious you are, and why do you want to learn.