Vishal Khandelwal

Inverting the Money Problem

In the controversial movie, The Social Network, which supposedly portrayed Mark Zuckerberg’s Facebook journey, Sean Parker’s character famously quipped –

“A million dollars isn’t cool. You know what’s cool? A billion dollars.”

It’s probably the most favourite problem that majority of the individuals in the world are trying to figure out i.e., how to get rich?

So let’s investigate this problem by using Charlie Munger’s most cherished mental model i.e., inverting the problems to solve them.

One of the ways to invert the question of “How to Get Rich?” is to ask, “Is getting rich worth it?”

Before you decide to skip this article thinking that it’s another one of those “money can’t buy happiness” rant, just stick with me for few more minutes and I promise that you won’t regret it.

In fact, this is a good opportunity to wear our curiosity hats and look at the hardships that tag along with large sums of money. Now given the fact that the author, yours truly, isn’t super rich (money wise at least) and likely never will be, is it justified for him to comment on the problems of the rich?

In my defence, all I have to say is that I never let my lack of first-hand experience with a topic stop me from speculating on it. 🙂

Maybe, like the proverbial fox and his sour grapes, I am deluding myself with a story that I never wanted what I will never be able to get. Or maybe I belong to the camp of those cash-poor intellectual types who want to prove to the world that rich people secretly live a miserable life.

I am not ruling out any of these possibilities where my subconscious is playing a game.

My Stock Selection Framework

To invest successfully over a lifetime does not require a stratospheric IQ, unusual business insights, or inside information. What’s needed is a sound intellectual framework for making decisions and the ability to keep emotions from corroding that framework. ~ Warren Buffett

My fundamental philosophy of life: Preparation. Discipline. Patience. Decisiveness. ~ Charlie Munger

Combining whatever I have learned from these and other legends of investing, and also my little investment experience spanning the last 14+ years, here is my “framework” for selecting stocks that have mostly worked well for me over time (sorry for a bit darkish image, but it just shows how cloudy it is here where I live).

Click here to download a larger image
A few pointers from this framework –

Screeners I use – Screener.in, Google Finance
My screening criteria is what has worked for me over time. You can modify it to suit what you are looking for
What this framework shows is the science part of investing. The art part involves changing the flow of filters in the funnel to suit your style. So, some people may have the “moat filter” prior to the “financial stability filter,” etc.
Warning – This framework has also handed me to a few mistakes, so beware. But overall, it has helped me build a portfolio of stocks that have done extremely well over a period of time. How well? I won’t put a number to it. Just that it’s been a number that has helped me build enough to pay off my financial liabilities, quit my job, and work on things and with people I love (don’t want to prove this to anyone). 😉

Anyways, the proof of the pudding is in the eating. So I would suggest you try this process, in case you don’t have one of your own, and let me know your thoughts/results five years from now. 🙂

And by the way, this framework will only help you prepare. You must get discipline, patience and decisiveness on the table yourself.

Send me your thoughts/questions on this framework, in the Comments section of this post.

Our First Money Workshop for Children – Some Key Lessons Learned

If compound interest is so good, why do we have simple interest?

If bankers know so much about money, they must be the richest in the world, right?

If you get more knowledgeable as you grow up, why don’t you get wiser with money?

Why don’t they teach us about saving and investing in schools?

If saving money is so important, why are you giving us balloons, which is a waste of money?

Well, these were just a few of the many questions that stumped us during the first session of our Camp Millionaire money workshop for children (click here to know more) in Bangalore last Saturday.

We had 32 children in the room, ranging from ages 8 to 15. It was heartening to see a few traveling all the way from far off places like Kerala, Chennai, Gurgaon, Sambalpur, Ichalkaranji, and Kuwait. For us, it was a fascinating experience especially because it was the first time we were handling kids and the subject of money together at one time.

Latticework of Mental Models: Echo Chamber Effect

A few weeks back I was reading a report penned by Amay Hattangadi and Swanand Kelkar from Morgan Stanley. In that report, I came across a very intriguing word called “Echo Chamber”. The authors wrote –

The most telling reaction post Brexit was from a London based friend who apart from lamenting the outcome went on to say that he didn’t know of a single person who was likely to have voted “Leave” and hence felt that the outcome was rigged. This is what we called the “echo chamber” in one of our earlier essays. We tend to be surrounded by people who are like us and share our world view. Social media accentuates this by tailoring our news and opinion feeds to match our pre-set views. To avoid falling into this homogeneity trap, one needs to seek out and dispassionately engage with people whose views differ from your own and that’s true not just for current affairs but your favourite stocks as well.

The word ‘echo chamber’ painted such a vivid picture in my mind that I decided to give it a permanent place in my mental attic. Echo chamber has thus become an important node in my latticework of mental models.

Dealing with Failure in Life and Investing: Lessons from the Chaos Monkey

Amazon Web Services (AWS) is the Titanic of cloud hosting. It provides on-demand cloud computing platforms to both individuals, companies, and governments, on a paid subscription basis. The platform is designed as a backup to the backups’ backups that prevents hosted websites – including some of the largest in the world – and applications from failing.

Yet, like the Titanic, AWS crashed in April 2011, taking with it popular websites like Reddit, Quora, FourSquare, HootSuite, and New York Times, among many others, for four days.

It faced another major outage in February 2017, which again brought a large number of key websites down on their knees.

There was, however, one site that kept chugging along well during both these instances, despite also having AWS as its host at both the occasions.

This was Netflix, the world’s leading streaming video website and one that owns a dominant share of downstream Internet traffic – almost 35%; double of YouTube – in North America during peak evening hours.

Safal Niveshak is 6 Years Old!

Birthdays aren’t a big deal when you grow up. And if you are like me, with a fading memory, you sometimes forget that you are growing up fast.

Like it happened yesterday. It took a reminder from someone to, well, remind me that it was Safal Niveshak’s birthday. 😉

So, this initiative that I started in 2011 with just one reader – yours truly – has completed six years. The tribe is now 32,422 members strong, with one-third of these coming in the last twelve months.

A lot has happened in these quick six years, but as with my six-year-old son, Safal Niveshak is just getting started.

Most of all, I want to thank each and every one of 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 keeping me honest, 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.

10-Point Action Plan for a Young Earner

Noted Irish playwright and philosopher George Bernard Shaw opined, “Youth is wasted on the young.”

What he possibly meant was that many young people have everything going for them physically; they’re in the best health they will ever be in, and their minds are sharp and clear.

However, they lack patience, understanding, and wisdom which results in so much wasted efforts.

The energy that can be directed towards building a solid thought process and action plan for the future is spent on short-lived pleasures.

Shaw’s words are especially applicable to those young adults who are starting a career and wondering if they should start saving and investing for their future or spend the next few years living life kingsize.

Value Investor Interview: Brent Beshore

Note: This interview was originally published in the March 2017 issue of our premium newsletter – Value Investing Almanack (VIA). To read more such interviews and other deep thoughts on value investing, business analysis and behavioral finance, click here to subscribe to VIA.

Brent Beshore - Value Investing Almanack

Brent Beshore is the Founder and CEO of adventur.es, a family of North American companies that invests in family-owned companies with unfair advantages. For the past nine years, Brent’s firm has started, funded, bought, and operated organizations across a wide range of industries.

The companies adventur.es owns have recruited doctors for the U.S. military, provided online public relations to some of the world’s largest organizations, manufactured cutting-edge home solutions, created software products for small businesses, curated the latest in women’s fashion to sell on the internet, and even helped make a couple of blockbuster movies.

Brent founded adventur.es in 2007 with the goal of creating an organization that allowed him to do what he loved, in places he enjoys, with people he admires. Since then, adventur.es has made over 50 investments, and was ranked #28 on the 2011 Inc. 500. Brent reads a lot, writes occasionally, dabbles in wine-making, and was nominated for a VH1 Do Something Award for helping his hometown of Joplin, Mo. recover from the devastating tornado.

As you would have understood from Brent’s profile, he isn’t a typical public markets investor like the ones I usually profile in this series, but an owner of private businesses. The thoughts Brent has shared in this interview, however, are equally valuable for a public market investor, as you would realize as you read forward.

So, over to Brent!

Announcing Camp Millionaire – Money Workshop for Children

Given how important financial skills are to navigating life, it’s surprising that our schools don’t teach children about money.

How many of us look back at our childhood and wish we would’ve been taught more about money? A lot of people graduate from college without any idea how to manage their money or balance their bank account. Maybe you were one of them.

Now that you’ve learned more about managing your money right, I am sure you want to help your kids not make the same mistakes. But then, even when many parents know it’s important to teach their children about money matters at a young age, most don’t know where to start or how to go about it.

I have been through this situation wherein, despite knowing what to teach my kids about money, I lacked the structure and skills to teach them in the way they would learn best i.e., through games and fun-filled activities.

This was till I met Rachana Thamankar of Thrifty Gene. More on her and her initiative later, but let me take the pleasure to introduce you to a structured, games and activity-based workshop for kids to teach them about money and investing.

Why I Don’t Talk About My Stocks Publicly, And Why You Shouldn’t Either

It was sometime in the middle of 2008 when the realization of a global financial crisis had finally settled on the Indian stock market. I was working on my job as an analyst.

One stock – an Indian engineering major – I had recommended to our clients at the start of the year had fallen around 30% since my recommendation. Not just the stock price, the business had started to wobble. But I closed my eyes to that because my recommendation was now public and many clients would have bought it in their portfolios. To change my view after a 30% cut in stock’s price, however honest I would have been to accept my mistake, would have been a disaster.

Now, this wasn’t just one example that I can think of from that time. There were a few similar such recommendations I and my team had made then.

Some stocks had fallen just because the markets were down. But a few had fallen because their underlying businesses were also bouncing around on a rough wicket.

“What would our clients think of us,” I asked my colleague, “If we change our view now after the stock has already declined? It would hit the trust our clients have on us!” He agreed.