Blog on Value Investing | Safal Niveshak

How to Avoid Your Worst Enemy as a Stock Market Investor

If you have been a member of the Safal Niveshak tribe for long, you know our hottest topic of discussion here. It is how various aspects of human behaviour influence investing.

As we have discussed at times, we are often our worst enemy when it comes to investing our hard-earned money.

An understanding of how vulnerable we are to our own psychology can help us avoid the stupid investor delusions that can screw up our financial security.

There is an old adage about the game of poker: If you sit down at the table and can’t figure out who the sucker is, get up and leave because it’s you.

These insights about investor psychology can keep you from being the easy prey.

Burton Malkiel, in his investing masterpiece, A Random Walk Down Wall Street, cites the study done by Charles Ellis, a longtime observer of stock markets and author of another brilliant investing book Winning The Loser’s Game.

The Art of Stock Picking, by Charlie Munger

Charlie Munger Some call him Warren Buffett’s alter ego. Some know him as Buffett’s quirky business partner.

But whatever you may call him, Charlie Munger is ‘the’ original thinker and the silent man behind the success of Buffett’s investment company Berkshire Hathaway.

Ask people about Berkshire Hathaway, and most will tell you that it’s Warren Buffett’s company, which is true as far as it goes.

But those in the know recognize that Berkshire’s success is actually the product of a tag-team effort by Buffett and Munger.

Munger’s book, Poor Charlie’s Almanack, is one of my most prized possessions.

It collects his speeches and musings, including his intriguing thoughts on the several tendencies that lead us humans to make really bad decisions.

Confirmation Bias: What’s Your Internal ‘Yes-Man’ Saying?

Confirmation Bias I remember the time when I bought my first car. I went to the showroom with my mind fully made.

I had in fact already imagined myself owning and using that car. When I reached the showroom, I was so much filled with a ‘confirmation’ towards that product that each of its features made me think that I was about to make the right decision.

The chosen car’s design seemed the best amongst all other cars displayed. Its seat covers looked the brightest and softest. Its power steering and power windows seemed the most powerful of all. And its price seemed reasonable.

I had already confirmed the purchase in my mind and was seeing everything fit into that mould now.

You see, the way I behaved while purchasing the car holds true with most other expensive things we buy in life. We first make an emotional decision to buy such things and then try to find rational reasons to justify the purchase.

A Value Investing Course You Won’t Want to Miss (And It’s Free!)

Something tells me you are smarter than most self-proclaimed stock market experts and others looking to invest in the stock markets.

Something tells me that you are not interested in ‘get rich quick’ schemes or ‘hot stocks’ that promise fast money from the stock markets.

You are not looking for a magical idea that involves no work, no time, and no sense on your part.

And you also realise that you don’t have to be Einstein to become a sensible, intelligent, and successful stock market investor.

So, you are smart. It’s only that you need to realise this truth and believe in yourself.

And with a view to create this belief in you, I invite you to join (if you haven’t joined already) my Free 20-lesson course in investing…

Value Investing for Smart People
Value Investing for Smart People is a simple and systematic way to understand and implement the time-tested principles of value investing (the most sensible way of investing) to create wealth from stocks.

It’s a 20-lesson course on value investing strategies that have helped the world’s best investors amass huge wealth from the stock markets.

Here are 5 key questions the course will help you answer…

Why you don’t have to be a genius to become a successful investor?
How to use ‘investment checklists’ to identify good stocks?
Why your stocks will never make you rich?
How to insure your investments with a ‘margin of safety’?
When to sell a stock?

Despite the immense value that this course carries and the invaluable investing insights that you will learn from it, I have kept it FREE.

Yes, you read that right! Value Investing for Smart People is a free 20-lesson course on value investing techniques that will be delivered to you via email once you sign up for it.

And why is it free? Simply because this is your first step into the amazing world of value investing, and I want you to take this step hassle-free and without any reservations.

So come, sign up for Value Investing for Smart People.

3 Surprising Reasons People Give Up Investing in Stocks

If you are a stock market investor, no wonder you think the game is rigged against you.

You believe the financial services industry is a racket, and the stock market is a game reserved only for the chosen few.

You also believe that the stock market experts appearing on business channels and other financial media try to lure you into stock advice that only serves their selfish interests.

But despite these truths – yes what your believe is true – there is no other asset class that has provided better long-term returns to investors than equities.

So I feel sad whenever people, after facing a loss on their stock investments, or after going through a short-term correction, or after getting duped by a greedy advisor, leave investing.

In fact, here are the three most common reasons I’ve heard over the years from people who’ve thought about completely exiting the stock markets.

10 Graphs on 10-Year Performance of Indian Companies

The last decade has seen a dream run for Indian companies. Helped by fast growth of the Indian economy and supported by higher consumer and industrial spending, companies have seen their businesses grow by leaps and bounds.

However, has this growth filtered across all parameters that make companies ‘good’?

And have the shareholders benefited from this growth?

Here are 10 graphs that show the combined performance of India’s leading companies (BSE-200, excluding banks and financial institutions) over the past 10 years. This will provide some answers to the questions above.

1. Sales: This has been one of the two most promising charts, the other being the next one. As I mentioned above, Indian companies have benefited from economic growth and rising spending. This has led to higher sales year after year, except a slight lull in FY10 that was due to a widespread economic slowdown.

Why Warren Buffett Would Love to Be In Your Place

Warren Buffett He’s been called the best investor of all time. In multiplying every dollar invested in 1964 by a massive 490,409 times over a 46 year period, Buffett has left every investor aside in the investing game.

However, despite such an enviable track record and so much wealth, there is one reason Buffett envies you – the small investor – a lot!

Yes, that’s true…and Buffett has himself claimed this time and again.

You still don’t believe me?

Well, here is what Buffett said in a Business Week interview in 1999…

If I was running $1 million today, or $10 million for that matter, I’d be fully invested. Anyone who says that size does not hurt investment performance is selling. The highest rates of return I’ve ever achieved were in the 1950s. I killed the Dow. You ought to see the numbers. But I was investing peanuts then.

It’s a huge structural advantage not to have a lot of money. I think I could make you 50% a year on $1 million. No, I know I could. I guarantee that.

The universe I can’t play in i.e., small companies has become more attractive than the universe I can play in, that of large companies. I have to look for elephants. It may be that the elephants are not as attractive as the mosquitoes. But that is the universe I must live in.

Safal Niveshak StockTalk #3: Voltas

Welcome to the third issue of the Safal Niveshak StockTalk. (Download PDF Report)

After covering L&T and Tata Steel in the first two reports, this time I delve deeper into another Tata Group company, Voltas, which is one of India’s two largest players in the business of electro-mechanical projects (includes air-conditioning, mechanical, electrical, and plumbing works), and also a leading name in the home home air-conditioner business.

How to Get Very Lucky as an Investor

The famous American writer Dorothy Parker once said, “I hate writing. I like having written.”

I know many people who are like that about their life and work. They love to fantasize about what life will be like when they ‘make it’, but they like to skip over the part that reads – hard work.

Like the young man I met a few days back who has spent the past ten years of his life destroying his body with alcohol, excessive food, and a sedentary lifestyle…but wanted to know a quick way to get fit, lean and healthy in just the next six months!

He, probably, expects to get ‘lucky’ in his life by getting whatever he wants without the hard work to accompany it.

Really? Is ‘luck’ really about instant gratification?

If I look back to the lives of great people, the answer I get is something absolutely different.

The ‘Willpower Trick’ to Become a Smarter Investor

January is the month of broken resolutions. The jogging tracks are packed for a week and working desks are cleaned for the first time in ages, and meetings start and end on time.

We pledge to finally become the person we want to be: slim, neat and punctual.

Alas, it doesn’t take long before the jogging tracks are once again empty, the working desks start to crumble under the weight of unwanted junk, and meetings occupy more time than actual work.

Just into the third week of the month, we forget about that pledge to become a saner, kinder, and gentler person.

You see, human habits are stubborn things. We make resolutions without realizing whether we have the necessary willpower to achieve them.

This explains why almost 90% of all resolutions end in failure, as per a 2007 survey of over 3,000 people conducted by the British psychologist Richard Wiseman.

So what’s the reason our resolutions end in such dismal fashion?