Investing

This page contains our best articles on the subject of value investing and investment behaviour.

If you wish to receive these and all future such articles straight into your email, subscribe below to my free newsletter - The Safal Niveshak Post - that offers practical, time-tested insights to help you navigate stock market with confidence. Subscribers call it a "gold mine" for investors, and it's read by 80,000+ people across 120+ countries.

* No charge. No spam. Only wisdom.

Latticework of Mental Models: Lollapalooza Effect

Value Investing Workshop in Bangalore (9th Sept), Chennai (23rd Sept), Mumbai (30th Sept). Click here to register now. Few seats remain!

Why were Warren Buffett and his creation, Berkshire Hathaway, so unusually successful?

In 2007 Wesco Annual Meeting, someone asked the above question from Charlie Munger. He replied –

If that success in investment isn’t the best in the history of the investment world, it’s certainly in the top five. It’s a lollapalooza.

Lollapalooza in the conventional sense means something outstanding of its kind. A person, a thing or an event that is particularly impressive, or extraordinarily attractive. But being multidisciplinary learners, we shouldn’t be satisfied with the conventional definitions, should we? Moreover, Charlie Munger doesn’t use lollapalooza just for its dictionary meaning.

Here’s the definition of Lollapalooza taken from the book Poor Charlie’s Almanack –

Lollapalooza is, as personified by Charles Munger, the critical mass obtained via a combination of concentration, curiosity, perseverance, and self-criticism, applied through a prism of multidisciplinary mental models.

When Charlie Munger uses the word lollapalooza, he often attaches the word “effects” (as in “lollapalooza effects”) which means that multiple factors are acting together in ways that are feeding back on each other. [Read more…] about Latticework of Mental Models: Lollapalooza Effect

An Early Bird Or The Second Mouse?

It took the world by surprise when Warren Buffett announced that he’d be donating all his personal wealth to Bill Gates foundation. Till then people imagined Buffett and Gates as two fierce businessmen trying to outdo each other for the top spot on the Forbes list of billionaires. Bill Gates has dominated that list for a good part of last 25 years. Buffett has also remained in top five for the same period.

So Buffett’s decision came out as a shocking announcement. However, very few people knew that Warren Buffett and Bill Gates had been very close friends since 1991. They watch movies, go on family vacations and play bridge together.

In 1996, Bill Gates wrote about an incidence when Buffett invited him to play a game of rolling dice. He showed a set of four dice to Gates and proposed that both of them choose once die each from the set and discard the remaining two. Then whoever rolls a higher number most often would be the winner. [Read more…] about An Early Bird Or The Second Mouse?

The Dangers of Persistence

Value Investing Workshop in Bangalore (9th Sept), Chennai (23rd Sept), Mumbai (30th Sept). Click here to register now. Few seats remain!

A few months back, during my lecture to a class of MBA students, I asked them to finish a sentence. The sentence was – “If you play a slot machine in a casino long enough, eventually you will ………” *

The class yelled out in unison “WIN!”

As most people reading this know, that is exactly the wrong answer. Slot machines are engineered to make everyone but the casino a loser in the long run. But MBA kids don’t know that, and they are never taught that. I assumed they confused the benefits of persistence with the actual odds of succeeding.

Anyways, I met a couple of my neighbours in the gym today, who smiled – as if mocking me – when I told them about my work that is to teach people to make lesser mistakes with their money and also learn to make sensible investment decisions for the long term.

Pay it Forward

In June 2016, I found myself sitting with a bunch of wisdom seekers. It was a 3-day course on behavioural finance taught by Prof. Sanjay Bakshi at Flame university. We were like a pride of starving lions waiting to lap up every last drop of knowledge.

Prof. Bakshi’s mind is a fountain of insights and we had an insatiable thirst. No wonder the session would start at 9 am and go on till midnight. Even during the breaks, people would swarm him with incessant questions.

During one of the breaks, a course participant asked Prof. Bakshi, “Sir, we have benefited immensely from your teachings. How can we pay it back?”

[Read more…] about Pay it Forward

Whatever the Chatter, Corn Keeps Growing

Value Investing Workshop in Bangalore (9th Sept), Chennai (23rd Sept), Mumbai (30th Sept). Click here to register now. Few seats remain!

As students of value investing, we’ve all read about numerous businesses that Warren Buffett has invested in the last fifty years.

A number of these names regularly appear in Buffett’s annual letters. Especially the ones which he continues to hold – Coca-Cola, See’s Candy, Nebraska Furniture Mart, GEICO, etc. Buffett never gets tired explaining why these companies are great businesses to own.

Each of his investment is an instructive story with valuable lessons to learn. But whenever asked about his best investment, he’s quick to point out that it wasn’t a stock. He says –

Of all the investments I ever made, buying Ben’s book (The Intelligent Investor by Benjamin Graham) was the best (except for my purchase of two marriage licenses).

Value Investing Workshop – Mumbai, Bangalore, Chennai

Happy to announce the 2018 edition of our Value Investing Workshop in Mumbai, Bangalore, and Chennai. Here are the details –

Mumbai
Date & Time: Sunday, 19th August 2018 | 10 AM to 6 PM
Venue: The Sahil Hotel, 292, Bellasis Road, Mumbai Central, Mumbai – 400008

Bangalore
Date & Time: Sunday, 9th September 2018 | 10 AM to 6 PM
Venue: Hotel Shilton Royale, 9, 100 Feet Inner Ring Road, Koramangala, Bengaluru, Karnataka – 560047

Chennai
Date & Time: Sunday, 23rd September 2018 | 10 AM to 6 PM
Venue: Regenta Central Deccan Chennai, 36, Royapettah High Rd, Jagadambal colony, Sripuram, Teachers Colony, Royapettah, Chennai – 600014

Registration fee is Rs 8500, and includes FREE subscription to our Financial Statements Analysis course and Mental Models e-book, together priced at Rs 6400.

What is more, first 20 registrants in each city can claim Rs 300 early bird discount, group registrations can claim Rs 500 per person discount, and women participants can claim Rs 2000 discount.

Click here for detailed curriculum, and click here to register.

The Illusion of Free Will

How many times have you stepped into a public bathroom and felt disgusted by puddles of spilled over liquid around the porcelain urinal?

We all know that it’s the result of men relieving themselves carelessly. When people know they aren’t required to clean their own mess, they’re least bothered about aiming properly to minimize the spillage.

Maybe putting up notices like – Please piss responsibly – would help. But we know most people don’t heed to such requests. So the architects of Schiphol Airport in Amsterdam came up with a brilliant strategy. They put a fly in each urinal.
[Read more…] about The Illusion of Free Will

Stock Analysis and the Illusion of Control

“The greatest obstacle to discovery is not ignorance – it is the illusion of knowledge.” ~ Daniel Boorstin

The Art of Thinking Clearly is a nice book from Rolf Dobelli. In one chapter, Dobelli shares a couple of instances…

Every day, shortly before nine o’clock, a man with a red hat stands in a square and begins to wave his cap around wildly. After five minutes he disappears. One day, a policeman comes up to him and asks: ‘What are you doing?’ ‘I’m keeping the giraffes away.’ ‘But there aren’t any giraffes here.’ ‘Well, I must be doing a good job, then.’

A friend with a broken leg was stuck in bed and asked me to pick up a lottery ticket for him. I went to the store, checked a few boxes, wrote his name on it and paid. As I handed him the copy of the ticket, he balked. ‘Why did you fill it out? I wanted to do that. I’m never going to win anything with your numbers!’ ‘Do you really think it affects the draw if you pick the numbers?’ I inquired. He looked at me blankly.

Consider my own example. I was once a die-hard cricket fan…or let me say I was a fan of only watching India win (and hated it when they lost).

So, during crunch matches, I used to change my seating places in front of the TV frequently to hit upon one from when India started doing well.

I got up from that place, and the Indians either lost a wicket or dropped a catch, so I stuck to that place throughout the crunch situation.

I thought my seating place controlled the fate of the Indian team, which was such a stupid thought.

What to Do With Losing Stocks in Your Portfolio

VIA Anniversary Offer Ends Tonight: The special anniversary discount of Rs 3,000 on our premium newsletter – Value Investing Almanack – ends tonight. Click here to subscribe now.

I met a gentleman (a friend’s brother) recently who owns 45+ stocks in his portfolio, most of which are bad businesses – he realizes that – and are deep into losses despite the decent run in the stock market over the last few years.

“What should I do with these stocks?” he asked me. And he is not the only one who’s asked me this question in the past. I have met numerous people over the past few years who have held on to bad businesses and losing stocks in their portfolios, and not knowing what to do with them.

One way people look at such stocks is – “Oh, this XYZ stock is already in a deep loss. What would I get by selling it anyways?”

Another way is – “I will sell this ABC losing stock only when I get my capital back. I don’t mind holding it for the long run.”

Safal Niveshak is 7 Years Old

Yep, it’s time to put on the big boy pants…Safal Niveshak completes seven years today. 🙂

I started with a simple idea in 2011, that of helping people become better at their stock market investment decisions. The idea was just that, and I had no clue how I would do it (I still have no clue about the future!)

However, a lot has happened in these seven quick years – and the tribe is reading 50,000 members – but as with any kid of this age, we’re just getting started.

Most of all, I want to thank you for “raising” this initiative to this point — it truly could not have happened without you, dear tribe member.

I know I’ve said it before, but it bears repeating – Thank you so much for reading, for commenting, for your interest and support, for helping this entire movement of creating smarter and independent stock market investors become greater and spread wider.

You are magnificent, and I am supremely grateful for your time and attention.

Just in case Safal Niveshak has touched your life, I would be happy and honoured to read your thoughts in the Comments section of this post.

Thanks again for being there!

With respect,
Vishal