Safal Niveshak

Wit. Wisdom. Value Investing.

Intrinsic Value: The Holy Grail of Value Investing

“You should always buy the stock of a good company.” In isolation, this seems a very valid statement.

But look at this – “You should always buy the stock of a good company, whatever the price.”

Now, this is a highly dangerous advice to give to someone.

A great company can translate into a great investment. But all great companies do not translate into great investments.

Confused? Well let me clarify.

There is a business behind a company. And there is a great business behind a great company – one that has all the ingredients of success, enjoys pricing power, generates a lot of free cash flow, is not much troubled by competition, and has a very good management team at helm.

So this business has a great value. But it will make a great investment only if it is bought at a reasonable price.

“But how do you know what is a reasonable price?” you may ask.
[Read more…] about Intrinsic Value: The Holy Grail of Value Investing

My First Stock Market Loss…and the Lesson I Learnt

The reason that pain hurts is because it should.

Pain is nature’s way of telling us to get out of harm’s way. Like fever tells us that something’s not right inside of us and that we must take the necessary medication to avoid doing a greater harm to our body.

This is also true when it comes to investing in stock markets. When the market moves and I’m losing money, I know it hurts.

But more often than not, unlike in life, I would continue to bear that pain (keep holding my losing stocks) instead of taking the medication (cutting the losses) to avoid a greater harm in the future.

No one is right all the time and I don’t have to be.

But this wasn’t something I believed a few years back, till the time I took my first major loss in a leading textile stock.
[Read more…] about My First Stock Market Loss…and the Lesson I Learnt

Sometime You Can’t Help But Make Money from Stocks. Is That Time Now?

The BSE-Sensex is down almost 1,000 points over the past 3 days alone. Newspapers have started shouting out – “India, tottering and sputtering”.

Some are calling this crash a “tragedy”, while there are others who are describing it as a “disaster” for investors.

And then, of course, there are many who are predicting that the future is going to get worse and that investors must stay on the sidelines till the dark clouds disperse.

Anyways, before we move further, here is a snapshot of the 4 major falls – the tragedies and disasters – the Sensex has seen over the past 15 years.

This first major drop came after the dot com boom bust in early 2000. The Sensex dropped 56% in a matter of 19 months. [Read more…] about Sometime You Can’t Help But Make Money from Stocks. Is That Time Now?

Winners of the “I Love Safal Niveshak” Contest Are…

The results are in, and let me tell you…this was tough.

Just to review, the idea behind the “I love Safal Niveshak” Contest was simple…just send me one reason you like Safal Niveshak, or one suggestion for improving this initiative.

I want to thank everyone who participated!

If there’s one thing I must tell you, it’s that there were way too many great submissions for this to be an easy exercise. So the choice of the winners was incredibly tight.

I could have easily had 10 or more winners, but instead chose to expand the winner pool to 4, instead of the originally announced 2.

So, there remains the first place for both these entries…

  • I love Safal Niveshak because…
  • I ‘still don’t’ love Safal Niveshak because…

…plus 2 honourable mentions that will also receive special prizes.

So here we go.
[Read more…] about Winners of the “I Love Safal Niveshak” Contest Are…

5 Jokes that Taught Me Serious Lessons on Investing

Here’s something light for you on a bright Saturday morning – 5 jokes that I read some years back and that have taught me some serious lessons on stock market investing. Enjoy!

  • An analyst is an expert who will know tomorrow why the things he predicted yesterday didn’t happen today! (I’ve been there, done that!) 🙂

  • Q: Why did God create stock analysts?
    A: In order to make weather forecasters look good.

  • There are primarily 3 different types of investors:
    1. Those who don’t know anything: approx. 10%
    2. Those who know a little: approx. 10%
    3. Those who don’t realize they don’t know anything: approx. 80%

  • The market is weird. Every time one guy sells, another one buys, and they both think they’re smart.

  • My broker and I are working on a retirement plan. Unfortunately, it’s his!

The Most Important Decision to Make After You Buy a Stock

“You talked about the importance of taking small losses before they magnify into bigger losses,” a reader of The Safal Niveshak Post asked me yesterday. “But how do I know which stocks to sell to takes such losses? Is that so simple?”

“No, it isn’t,” I must say.

Knowing when to sell a stock or which stock to sell isn’t as easy a decision as knowing when to buy a stock.

In fact, most discussions on investing revolve only around when to buy a stock.

“Which stock should I buy?” is the first question that comes to your mind when you think about your investment.

But as we discussed yesterday, an equally important question is – “Which stock should I sell?”
[Read more…] about The Most Important Decision to Make After You Buy a Stock

A Big Lesson I Wish I’d Learned Early in My Investing Life

I’ve learnt several lessons in my lifetime as a stock market analyst and investor.

One of the most enduring of them has been – taking small losses is often better than taking small gains.

The sad part is that it took time for me to learn this important lesson.

I’d read it many times that investors must try to “cut their losses short and let their winners run”.

Sage advice, but I did not follow till about the fourth year of my career. So I was…

  • Asking people to sell stocks after small gains only to watch them head higher, and
  • Recommending stocks with small losses only to see them worsen.

You see, no one will deliberately buy a stock they believe will go down in price and be worth less than what they paid for it.
[Read more…] about A Big Lesson I Wish I’d Learned Early in My Investing Life

The Story of My Life…and Yours

A reader of The Safal Niveshak Post recently asked me about my background and experience, and about the story of my life.

I thought today is a good day to share that, given that my story started exactly 33 years ago. 🙂

However, being an analyst and investor, here is a different way I will tell you the story.

Hope you’ll be interested to read it because the most important takeaway from my story is something that I’ve reserved for the end of this post.

So here I go.
[Read more…] about The Story of My Life…and Yours

John Templeton’s 16 Rules for Stock Market Success

“This time it’s different!”

How many times have you heard this from a stock market expert or from your friend who has made big money from stocks in a short time?

These words are commonly used in the stock markets to explain that stock prices can touch the sky, or touch the earth’s crust depending on whether they are rising or falling.

But if you were to listen to the legendary Sir John Templeton, these are four most dangerous words in investing – “This time it’s different.”

Apart from this, there are many other investing lessons that all investors can take from the experience of Sir John, who was the founder of the Franklin Templeton Group.

He has done well to distill his years of experience and expertise into the “16 Rules for Investment Success.”
[Read more…] about John Templeton’s 16 Rules for Stock Market Success

3 Great Investing Lessons from Dev Anand

Image Source: The Hindustan Times

“What is Dev Anand doing on a website dedicated to stock market investing?” you might be thinking. “Agreed, people are remembering the most romantic hero of Indian cinema after his demise, but still, what lessons can an investor take from him?”

See, it is human nature to overlook the importance of those who are here and now. Those who are great and live among us seem more normal because they’re breathing the same air that we are.

But we realize the greatness of such people only when they are gone. Like now, when Dev Anand is no longer with us, I realize some important life lessons that he epitomized.

So, I’ll pause today and remind myself of the 3 important lessons I, as an investor, can take from the legend that was Dev Saab. [Read more…] about 3 Great Investing Lessons from Dev Anand