Blog on Value Investing | Safal Niveshak

Zoom Out, Baby, Zoom Out

It was Valentine’s Day in 1990. The Voyager 1 space probe, which had completed its primary mission, was leaving the Solar System.

At the request of astronomer Carl Sagan, the American space agency NASA commanded Voyager to turn its camera around and take one last photograph of Earth, across a great expanse of space. The photograph that got clicked was from a distance of about 6 billion kilometers (same as 240,000 round trips from Mumbai to New York).

In the photograph, against the vastness of space and among bands of sunlight scattered by the camera’s optics, Earth appears like a ‘pale blue dot’ (that’s what the photograph was named) that is smaller than a pixel.

Anyways, four years later, in 1994, during a public lecture at Cornell University, Sagan presented the photograph to the audience and shared his reflections on the deeper meaning behind it –

Shut Up and Wait

Morgan Housel, who appears on The One Percent Show tomorrow, tweeted this four years back –

I completely agree with Morgan, and also that ‘shut up and wait’ is one of the sanest advices you will ever receive, and must follow, for wealth creation.

Just that doing this is not that easy.

The idea of buying and holding high-quality businesses over a long period of time is simple. Everyone knows that, and even those who don’t practice it appreciate that this works with most high-quality businesses as history has proven time and again. But then, it’s important to understand that the action of not doing anything over such a long period of time involves hundreds of decisions over months and years that lead to such inaction.

Like this –

Now, one way is to buy high-quality businesses and forget for 20 years and hope to end up with a fortune. There are quite a few such fairy tales you may have heard of. But the other side of the picture is that countless people have also ended with duds in their portfolios, or vanished companies, when they realized their father or grandfather had bought some stocks and forgot about them for 20 or more years.

So, overall, it’s not easy. And it’s not supposed to be easy.

But if you have done your homework well, and keep your eyes and ears open, ‘shut up and wait’ remains the best bet in your pursuit of wealth creation from stocks.

And like Frank Partnoy wrote this in a brilliant article many years back –

If we are limited to just one word of wisdom about decision-making for children born a hundred years from now, people who will have all our advantages and limitations as human beings but will need to navigate an unimaginably faster-paced world than the one we confront now, there is no doubt what that word should be.

Wait.

Better, shut up and wait.

Beware the IP-Ohs

People indulging in the stock market are often people with a lot of emotions. They get excited by something new, especially if it holds the promise of making them a whole lot richer and provides bragging rights at their next social gathering.

Maybe that’s why amateur and professionals alike tend to lose their minds in bull markets, particularly when a hot initial public offering, or IPO, is offered to them by their broker.

On one hand, had you bought into the IPOs of Infosys (yes, remember?), HDFC Bank, Sun Pharma, or TCS, you would have had some volatile price fluctuations along the way, but there is no question that you have made enough money to substantially change the quality of your life. Clearly, a well chosen IPO can be a life changing experience if you simply make the right choice and stick with the stock for years.

On the other hand, there is a large majority of IPOs such as those of Reliance Power, Suzlon and DLF, which have destroyed investors’ capital. With such businesses, even the “long-term” cannot save you from permanent capital destruction.

[Read more…] about Beware the IP-Ohs

Safal Niveshak is 10 Years Old

After I had decided to quit my job in late 2010, we got to know that our second child was on the way.

There was a momentary dilemma whether to go ahead with the decision or not, as an added member in the family would have meant added responsibilities, and that too in a period of high financial uncertainty.

I had exhausted a large part of my savings to pay off my home loan to be able to quit that job, and now there would be an extra mouth to feed, apart from other expenses that come along with a new-born – medical bills, diapers, etc.

“Go for it!” was my wife’s call. “We will see what happens only after we take this step,” she comforted me. “Worst, if nothing works out after you quit your job, we will sell our house and move back to our hometown.”

Of Free Brains and Effortless Money

The Sketchbook of Wisdom: The second print of my book – The Sketchbook of Wisdom – is now available. Click here to reserve your copy. Send me an email at vishal@safalniveshak.com if you wish to place bulk orders.

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In the hospital, the relatives gathered in the waiting room, where a family member lay gravely ill. The doctor came in looking tired and dull.

“I’m afraid I’m the bearer of bad news,” he said as he surveyed the worried faces. “The only hope left for your loved one at this time is a brain transplant.”

“Oh, how risky is the procedure?” a relative asked.

“It’s an experimental procedure, very risky,” the doctor replied, “but it is the only hope for your loved one. Insurance will cover the procedure, but you will have to pay for the BRAIN.”

The family members sat silently as they absorbed the news. After a time, someone asked, “How much will a brain cost?”

The doctor quickly responded, “Rs 20 lac for a male brain, Rs 5 lac for a female brain.”

The moment turned awkward. Some of the men had to ‘try’ to not smile, avoiding eye contact with the women.

A man unable to control his curiosity, finally blurted out the question everyone wanted to ask, “Why is the male brain so much more than a female brain?”

Ben Graham: Just Plain Lucky?

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Remember Ben Graham, the guy who wrote The Intelligent Investor? And who taught Warren Buffett to become Warren Buffett?

Well, if you really know who Graham was, you also know that he is associated with buying something cheap (one dollar worth at fifty cents) and then selling it when it reaches a value that reflects what it’s worth.

A very copybook, calculated approach, right? Like what a Rahul Dravid would do in cricket.

The One Percent Show: Episode 1 – Manish Chokhani

Welcome to the first episode of The One Percent Show with Vishal Khandelwal.

Also listen on YouTube | Spotify | Google Podcasts | Apple Podcasts | Amazon

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Also Read:

Books Recommended by Manish: Talks on the Gita (Vinoba Bhave), The Sketchbook of Wisdom
The Story Behind “One Percent”

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Please share with others on WhatsApp, Twitter, LinkedIn, or just email them the link to this post.

Stay safe.

With respect,
— Vishal

Is Day Trading a Good Idea?

The Sketchbook of Wisdom: The first print of my book – The Sketchbook of Wisdom – got sold out in a matter of 3 months. Now, the second print is reaching me soon. Click here to reserve your copy. I will start shipping next week. Send me an email at vishal@safalniveshak.com if you wish to place bulk orders.

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One of the questions I get a lot, and especially in times like these, is, “How do I learn day trading in stocks?”

I ask, “Why do you want to day trade?”

The answer often is, “To make money, obviously.”

I ask, “Why do you think you can make money day trading?”

There is generally a pause, and then this reply, “I see so many people making money day trading.”

Well, the answer to the question “Can I make money day trading?” is “Of course, you can.*”

But like you read those product advertisements with an asterisk and a small text saying “* Conditions apply,” this also applies to day trading in stocks.

A Simple Online Stock Portfolio Tracker

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In my past communications, I have written about the idea of avoiding online portfolio trackers, given the amount of irrelevant information that you get to see when you log into such trackers, and the unwanted action such noise may lead you to.

As an alternative, I have advised maintaining simple excel based trackers. Since you must enter data manually here, that may keep you away from tinkering much with it.

Welcome to The Money School: Teaching Kids About Money – Part 1

Given how important financial skills are to navigating life, it is surprising that our schools do not teach children about money.

How many of us look back at our childhood and wish we would have 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 have learned more about managing your money well, I am sure you want to help your kids not make the same mistakes. But then, even when many parents know it is important to teach their children about money matters at a young age, most do not 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, that is, through a medium they would like.