Investing

This page contains our best articles on the subject of value investing and investment behaviour.

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28 Big Ideas on Investing, Business, Life, Behaviour, and Thinking (Special E-Book)

The world around us is changing pretty fast. Modern computers are becoming cheaper, faster and more intelligent than ever, which means they are ready to replace a large part of human workforce.

The day is not far when your work and skills will be threatened by artificial intelligence. To stay relevant, you need to ensure that you remain valuable to the society in a way which can’t be substituted by a robot.

And your only chance to remain valuable is by being a constant learner…a learning machine, as Charlie Munger says. In fact, he has been saying this for years –

I constantly see people rise in life who are not the smartest, sometimes not even the most diligent, but they are learning machines. They go to bed every night a little wiser than they were when they got up and boy does that help, particularly when you have a long run ahead of you.

The question is where do you start? There is so much to learn all around, and so little time.

Start with our latest special e-book – 28 Big Ideas on Investing, Business, Life, Behaviour, and Thinking.

Anything You Want by Derek Sivers

Derek Sivers was a full-time musician in 1998 making a comfortable living. One day he decided to sell his music CDs online and found that there was no way for a small time musician to sell online. So he learnt to program and built a website to sell his CDs. Very soon his friends started requesting him to list their CDs on the website. That’s how CD Baby was born and 10 years later it was doing $100 million in sales. In 2008 Sivers sold CDBaby.com and gave away the proceeds ($22 million) to a charitable trust.

Sivers never wanted to start a business and when he was running CD Baby, he intentionally wanted to restrict the growth so that he could run it the way he wanted. Ironically, those self-imposed constraints became the trigger for CD Baby’s growth.

Safal Niveshak Stream – January 14, 2017

Note to Readers: In Stream, we suggest worthwhile reading material on a variety of topics, not all of which are directly related to investing. Some of the articles require you to be paid subscriber of those sites. However, it is often possible to read such articles by going to Google News and searching for the article’s title.

Some nice stuff we are reading, watching, and observing at the start of this weekend…

Life/Learning

At times it’s scary to think how time is flying. And then there are posts like these that tell you that you may not learn some of the most important lessons till it’s too late in life, like these three…

1. Time passes much more quickly than you realize.

2. If you don’t take care of your body early then it won’t take care of you later. Your world becomes smaller each day as you lose mobility, continence and sight.

3. People are far more important than any other thing in your life. No hobby, interest, book, work is going to be as important to you as the people you spend time with as you get older.
Does anyone know anything any more? The ease with which one can look up facts on a phone at any time is one of the wonders of the modern age. But are we becoming too reliant on it? A new study indicates, at least, that there might be a snowball effect to such reliance. The more we depend on Google for information recall, it suggests, the more we will do so in the future. In short, Google may be rewiring our minds, and the debate we are now having about the effect of constant internet access on memory and creativity has precedents thousands of years old.

Value Investor Interview: Kuntal Shah

Note: This interview was originally published in the November 2016 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.

Kuntal Shah is the founder of Oaklane Capital Management LLP and has an opportunistic inclination towards a value-oriented and risk-controlled approach to investments. He has been an extremely successful investor over the past two decades and his success has come from exploiting the inefficiencies inherent in the markets.

Kuntal has an in-depth understanding of value investing with a focus on risk identification and mitigation, emerging trends, and opportunities in key growth sectors in India, taxation and accounting. He also loves to teach on these subjects and in the past has lectured at UTI Institute of Capital Markets, IIM (Ahmedabad), IIT (Mumbai), Symbiosis, FLAME and Chartered Accountants Institute. Kuntal is an Electronics Engineer from Pune University.

Safal Niveshak (SN): Could you tell us a little about your background, and how you got interested in value investing?

Kuntal Shah (KS): I was brought up in a middle-class family in Mumbai. I am an engineer by qualification. Early life was a constant struggle to make ends meet for our family of five siblings given our father’s limited earnings. I was lucky to be brought up in an environment where there was no compromise on education and was fortunate to be inculcated with middle class working ethos, frugality and conservatism of living within one’s means without recourse to borrowing to prepone consumption.

Latticework Of Mental Models: Planning Fallacy

When I planned my first road trip from Bangalore to Goa, I calculated that the distance (about 560 km) should take little more than 9 hours. Factoring in stopovers and few unexpected events like a flat tyre or traffic, I assumed that 12-15 hours should be sufficient for the road trip. It took 15 hours.

“Good job, Anshul!” I patted myself on the back. Not a bad estimate.

Now based on this, if I had to forecast the time it would take to cover a distance of say 5,000 km, a road trip to cover major cities in India, I might be tempted to extrapolate the Bangalore-Goa trip time. I’ll probably calculate that 560 km took one day so 5,000 km should take 10 days plus 2-3 more days.

Am I being reasonable in my estimation?

What I am forgetting here is that the second road trip is not only longer but more complex and subject to many more unforeseen and unexpected events. My estimation is fraught with over-optimism bias. And I am not alone in making this kind of mistake.

There are many ways a plan can fail and most of those things are too improbable to be anticipated. The likelihood that something will go wrong especially in a big project is high. Overly optimistic forecasts of the outcome of projects are found everywhere.

In fact, how often are you able to complete everything on your to-do list at the end of the day? This shows how absurdly ambitious we’re in planning.

This bias, a phenomenon in which predictions about how much time will be needed to complete a future task display an optimism bias (underestimate the time needed), is called Planning Fallacy. The term was coined by Nobel Laureate Daniel Kahneman and his colleague Amos Tversky.

Safal Niveshak Stream – January 7, 2017

Some nice stuff we are reading, watching, and observing at the start of this weekend…

Life/Learning

(930 words / 4 minutes read) Meet the ‘James Bond of Philanthropy’ who has given away the last of his fortune…

Nearly five years ago, Charles F. Feeney sat in a cushy armchair in an apartment on the east side of Manhattan, grandchildren’s artwork taped to the walls, and said that by the end of 2016, he was going to hand out the last of a great fortune that he had made.

Altogether, he had contributed $8 billion to his philanthropies, which have supported higher education, public health, human rights and scientific research … His remaining personal net worth is slightly more than $2 million. That’s not quite broke, by any standard, but it is a modest amount for a man who controlled thousands of times as much wealth. He and his wife, Helga, now live in a rented apartment in San Francisco. “You can only wear one pair of pants at a time,” Mr. Feeney has said.

[Read more…] about Safal Niveshak Stream – January 7, 2017

7 Acceptances (Not Resolutions) to Live By in 2017

I wish you a very happy, healthy, peaceful, and fulfilling 2017.

Life is short (it’s already almost six years since I started Safal Niveshak), so let me not waste another moment and thank you for being here for me.

As we begin 2017, let’s not start with New Year resolutions that anyways don’t last till 5th of January. Let’s start with some acceptances that you should come to terms with in 2017 and beyond.

Print what follows below – Your Note of Acceptance as an Investor – and look at it every day. It might help you deal better with the reality of the investing world.

Here it goes…

[My Note of Acceptance as an Investor]
I ACCEPT THAT…

I will act stupid and envious at times and make mistakes, how much ever intelligent I am, and whatever resolution I make to avoid all mistakes this year.
I, or anyone else, have no clue about the impact of macroeconomic or socio-political events on my investments.
I, or anyone else, cannot predict the future of markets with any degree of accuracy, however certain things look like.
I will lose a lot of money over time if I invest on tips, in bad businesses, with bad managements, and in expensive stocks.
I may create wealth from stock market in the long run only if I practice patience in owning good businesses, not when I chase multibagger returns.
Luck will play an important role in my investing, and especially when I make high returns in quick time.
However good my investment process is, the outcome at times may not be to my liking.

Finally, it’s good to admit and accept that the future is inherently unknown and unknowable, and that there is no point blaming “uncertainty” for your investment mistakes and losses. Relax, and learn to appreciate the thrill of finding out what happens next. That’s the best part of being a stock market investor.

What you can control is your own behavior – and only to a certain extent – and how you respond to whatever happens around you. For all things outside your control – including return on your investment – there is no point fearing the future.

Stay happy, healthy, and peaceful.

Happy New Year!

P.S. The idea of this post comes from here.

Safal Niveshak’s 2016 Annual Letter to Tribe Members

Dear Tribe Member,

Trust you are doing great.

Here is a brief update on what transpired during 2016. It was another tremendous year for Safal Niveshak. The tribe has crossed 26,000 members. Our Twitter count has crossed 17,500 followers. We conducted five workshops during the year, meeting 120+ tribe members in the process.

The Mastermind Value Investing Course student count increased by 30%, while our premium newsletter – Value Investing Almanack (VIA) – which is about to complete two years, gained 25% new members, and has continued to receive some inspiring reviews from its subscribers. During the year, as part of the VIA, we interviewed a few wonderful value investors including Rajeev Thakkar, Jason Zweig, Samit Vartak, Kuntal Shah, and John Huber.

The idea to launch VIA in 2015 came from the need we felt of a detailed value investing newsletter in the Indian context, which had deep insights on the subject, business analysis, and interviews with practitioners of the art. We had always missed such a product in India, and could not find a better way to get it than to create it ourselves. The journey over the past two years of launching VIA has been inspiring for the breadth and depth of reading and learning we ourselves have done to bring our subscribers high quality content.

Anyways, in 2016, we also launched our first comprehensive e-book titled Mental Models, Investing, and You. This was just the first part of our collection of mental models notes we have written on Safal Niveshak so far (the second part releases in 2017), and received great reviews from readers. Despite our offer to people to get the e-book for free or pay as much as they wished, more than 850 people paid up, which was a much higher count than what we had expected.

Stock Talk (December 2016)

Latticework Of Mental Models: Lucretius Problem

It was a Friday on March 11, 2011 when a massive earthquake with an intensity of 9 on Richter scale hit off the coast of Japan at 2:26 pm local time. The epicenter of the quake was 70 kilometer east of the Oshika Peninsula of Tōhoku.

The earthquake triggered powerful tsunami waves that reached heights of up to 40 meters. It took 50 minutes for the largest wave in the tsunami to arrive at the shores of Fukushima. What followed was something totally unimaginable and unexpected for those who take pride in taming the mother nature.

The Fukushima Daiichi nuclear power plant had six separate boiling water reactors, protected by a 10-meter-high seawall to prevent sea waves from entering the plant.

When the tsunami struck the Fukushima coastline, the gigantic waves easily overtopped the plant’s seawall. It took seconds to flood the basements of the turbine buildings and disabling the emergency diesel generators. Soon the backup generator building was also flooded. This resulted in an explosion and leakage of radioactive material to the sea water and created a huge nuclear hazard.

Why would the engineers and designers of Fukushima nuclear power plant build a wall only 10-meter high? What made them believe that the waves can’t breach the 10-meter height? [Read more…] about Latticework Of Mental Models: Lucretius Problem