Investing Behaviour

I Might Be Wrong

On the morning of the Battle of Waterloo in 1815, Napoleon Bonaparte smugly assured his generals – “I tell you Wellington is a bad general, the English are bad soldiers; we will settle this matter by lunchtime.”

Just before the Titanic was about to embark on its maiden journey in 1912, one passenger asked a ship’s agent for extra insurance on some valuables in her luggage. The agent replied, “Ridiculous. This boat’s unsinkable.”

Captain Smith himself was asked about the safety of the Titanic. He answered – “I cannot imagine any condition which would cause a ship to founder. I cannot conceive of any vital disaster happening to this vessel. Modern shipbuilding has gone beyond that.”

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How to Live and Invest Without Failure

Early this year, a close friend of mine, Rajiv, had his eyes set on finishing the Mumbai half-marathon (approx. 21 km) in less than 180 minutes.

So, crossing the finish line in 160 minutes was something of a major triumph for him. He was genuinely happy.

One another friend, Sameer, ran the same distance and recorded the exact same time of 160 minutes. However, this guy wanted to cover the distance in 150 minutes or less. Consequently, he was shattered.

He described his experience as a massive failure and as a result, his mind and body language were both a reflection of his belief (the belief that he had failed).

Sameer could have labelled his run many things but he chose ‘failure’.

Lecture on Value Investing at Goa Institute of Management

I recently delivered a lecture on Value Investing and Behavioral Finance at Goa Institute of Management.

Click here to download the presentation slides PDF (7 MB file), or read it in the panel below.

I have been extremely fortunate to be able to share my thoughts and experience with budding minds.

Please share this presentation with the young around you. Even if you can enlighten one mind and get him/her on to the right path of managing his money and behaviour sensibly, it would be a great job done.

By the way, on Safal Niveshak’s 5th birthday, I had invited tribe members to subscribe to Value Investing Almanack, promising to give away 100% proceeds to Nirvanavan Foundation to part-fund the purchase of a minibus to ferry kids from a few villages in rural Rajasthan to their schools.

I’m happy to report that that bus has arrived, and they call it the ‘Dream Bus’…and rightly so, as you can see from the smiles all around…

Here’s my heartfelt thanks to the tribe members who helped me in this cause!

That’s another great way to lighten up a few budding lives, isn’t it? 🙂

Dear Jealousy

Dear Jealousy,

I ask for an apology in advance because you may not like what you will read in this letter below.

You see, we have lived together in peace for years now. But, off late, I have started feeling dizzy having you on my side. Please don’t feel bad because I will soon explain my reasons for what I’m feeling now with respect to our relationship.

I remember you as early as the age of five, when you clouded my mind as soon as I saw my richer cousins with remote-controlled cars, nicer clothes, and bigger houses.

You stayed with me even as I was passing through high school. Those years, you made me jealous of my friends who scored higher marks then me and thus got a greater appreciation from the girls in the class. Then, when I was in college, you held my hand tight as I saw other classmates who arrived in their own cars while I took rickety buses. When I saw them also having cell phones, I felt your hug even tighter.

There were also times I found myself jealous of people who had no conscience and were famous for that. You made me think that I should become just like them. Thank God I didn’t!

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How to Handle Your Money

Benjamin Graham was one of the most successful investors who ever lived and remains the most influential investment thinker of all time.

He was the one who taught Warren Buffett the art of investing, and was also his first boss.

Graham worked on Wall Street for more than four decades, ran a market-beating mutual fund, taught finance at Columbia Business School and wrote two classic books on investing.

Security Analysis (1934) is still the bible for professional money managers. The Intelligent Investor (1949) is, in Buffett’s words, “by far the best book about investing ever written.”

In June 1955, Graham gave an interview on the basics of handling money. Almost 60 years have passed since then, but a large number of investing ideas that Graham talked about then, remain valid to this day.

How to Avoid Getting Cheated by Bad Investment Advice

“Come what may, I will not listen to anyone’s advice before investing my money this year,” said my friend Ravi. “I’ve had enough of bad advice last year!”

“Is this your New Year resolution?” I asked him.

“Yes! And this time I am not going to break it!”

“Let’s see,” I said while infuriating my friend who thought I did not believe he was really going to adhere to his resolution this year.

“See Ravi,” I told him, “I don’t want to disappoint you. But you have to go past a great obstacle to meet your resolution of not falling for your advisor or broker’s advice.”

“What do you mean?” he questioned.

“Okay, let me be very clear with you now.”
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Investing and Law of the Farm

Centuries ago, a Chinese King was sitting in his cabinet meeting discussing about the poor economy of his country. One economist said, “Sir, we can’t do anything about it. It’s the Law of Supply and Demand.”

The King said, “I’m the King. I will repeal that Law!” The Cabinet kept quiet, but one brave soul said, “Sir, you cannot repeal the Law of Supply and Demand. It’s like the Law of Gravity.”

And the King said, “I’m the King. I will also repeal the Law of Gravity!”

Obviously, this story is purely fictional. But the message that comes out is clear – You cannot repeal some laws that govern this universe.

Like the Law of Gravity, and…

The Investor’s Manifesto

Read it. Print it. Frame it. Face it. Remember it. Do it.

This is for you. This is from someone like you.

It is Safal Niveshak’s The Investor’s Manifesto.

It is something you can reflect back on if you ever felt stuck in your investing life.

If you believe in it, follow it, and stand for it, your investing life will be good. In fact, very good.

Here is the third copy of the Manifesto that adorns my wall, and the first copy that I gifted to Prof. Sanjay Bakshi (the second copy went to Mr. Mohnish Pabrai)…

Read it. Print it. Frame it. Face it. Remember it. Do it.

This is YOUR Manifesto.

Rising Stock Prices and the Return of Arrogance

Disclaimer: This post is not my attempt to predict what lies in the future and where the stock market is headed, because I have a post-graduate degree in making disastrous predictions, especially about the future. What I am sharing below is what I have started experiencing around me, and why I believe you, as an investor, must be very careful of falling into the trap of people making rosy predictions about the future.

One of the key themes of my discussions with investors during my extensive travel over the past few days was that risk-taking and arrogance is back in the stock market.

I got a hint of this from a lot of people stressing on the benefits of borrowing money to invest in “great opportunities” available out there.

So one participant at my Indore workshop argued – “Why shouldn’t I borrow at 10-12% interest and invest for 25-30% returns that are there for the taking?”

Another asked in Vadodara – “Why shouldn’t I borrow when I know the opportunity to multiply money is great?”

Without doubt, I could answer these questions only to the point I understand the dangers of borrowing money to trade or invest in the stock market. Beyond a point, if someone has made up his/her mind that borrowing money is a great idea (because others have found success doing so), I have no answers to provide.

One Big Lesson I Learned Seeing Warren Buffett Make Mistakes

IBM and Coke represent two of Berkshire Hathaway’s three biggest investments (the biggest being Wells Fargo).

However, disappointing earnings announcements at these companies cost Warren Buffett around US$ 2.5 billion in the week gone by.

These losses add to a recent rough patch for Buffett, who slashed Berkshire Hathaway’s stake in British retailer Tesco recently. He has described buying into the stock as a “huge mistake” after the company announced another earnings disappointment and, over that, a £ 250 m accounting scandal.

Few seats remain at my Value Investing Workshop in Bangalore on 1st Nov. (Saturday). To join, please register here – https://t.co/VoXkYaHm9q

— Vishal Khandelwal (@safalniveshak) October 27, 2014

The media is rife with these big “mistakes”, especially Tesco, and is surprised how the world’s best investor could commit them. But then, Tesco isn’t Buffett first mistake and it won’t be his last mistake either.