Simplifying Investing

@a_basumallick
http://valueinvstr.blogspot.com
 Why?
I will try to
cover the The Process
following
today
Learnings
How can you
beat Roger
Federer?
Play a different
game
 How to play a different game in the markets?

Information edge - Know about developments in Institutional investors, people in the end-to-end
an industry / company before others value chain of company – suppliers / distributors

Analytical or Knowledge edge - Skill, education

and domain knowledge As a retail investor, you have the advantage if
you:
1) Specialize in an industry / sector / company
Portfolio size edge - Can buy stocks which
others cannot 2) Don’t need to withdraw money in crisis; have
long term or permanent capital
3) Not competing with fund managers on a
Time edge - Can wait patiently without getting
daily NAV basis
flustered

Play the game to your advantage

When you should consider being a direct investor?

Passion

U
Successful Time
 Ask yourself why are you investing

For passing
To accumulate time To be financially
wealth free

To brag
For the thrill

People usually get what they ask for.

You need to be clear what exactly you want and what you are willing to give up to get it.
Buy & Hold – Multibaggers galore ☺
Looking at some stocks that have done Company Start Date End Date Start Price End Price Years CAGR
well over a very long period of time (>10 Pidilite 1/3/2000 8/1/2017 17.2 806 17.6 24.45%
years) and seeing that they have ITC 1/3/2000 8/1/2017 19.64 293.25 17.6 16.61%
historically compounded wealth at a Godrej Ind 1/3/2000 8/1/2017 3.44 680.4 17.6 35.07%
reasonable pace. Nestle 1/3/2000 8/1/2017 449 6830.05 17.6 16.74%
HDFC 1/3/2000 8/1/2017 30.89 1764 17.6 25.86%
Average CAGR of the following stocks has HDFC Bank 1/3/2000 8/1/2017 34.88 1734 17.6 24.87%
been over 26%. Kotak Bank 7/1/2003 8/1/2017 7.99 1015 14.1 41.01%
Britannia 1/3/2000 8/1/2017 150.11 3897 17.6 20.34%
Which means if one had invested 1 lakh,
Maruti 7/9/2003 8/1/2017 164.3 7856 14.1 31.62%
it would amount to 32 lakhs after 15
years, phenomenal by any standards. Asian Paints 1/3/2000 8/1/2017 26.55 1156 17.6 23.93%
Glaxo Healthcare 7/9/2003 7/25/2017 269 5489 14.1 23.93%
It would have beaten all other asset Berger Paints 7/22/2003 8/1/2017 2.3 244.6 14.0 39.43%
classes handsomely. Century Ply 1/28/2005 8/1/2017 7.75 280.45 12.5 33.21%
VST Industries 1/3/2000 8/1/2017 65.85 3019.85 17.6 24.30%
And this would have included the biggest Supreme Ind 1/3/2000 8/1/2017 28.79 1113 17.6 23.10%
crash of our generation in 2008.

Note - Prices can be slightly off, as I have taken them from publicly available charts
The Process
 • Have a written down
framework
• Your framework should cover
Investment atleast the following
• Stock selection
Framework • Portfolio Allocation
• Selling
• Risk management
• For example: For stock selection,
you may use QGLP
• Build your own checklist
• Then keep updating your
framework based on your
personal or vicarious
experiences
 Building the right investment temperament will
yield better results over time than any other skill

• Try to note down lessons learnt
from your own and others
successes and failures
• See if there is a pattern in your
success / failures over time
• Makes you more prone to
mistakes and invest in riskier
propositions
• "Someone will always be
getting richer faster than you.
This is not a tragedy.“ ~ Charlie
Munger
• Some things have a higher • Disconnect from facebook,
chance of happening than twitter, whatsapp groups which
others generate unnecessary noise and
most often block the actual
signal which needs attention

Study both Don’t chase Understand base

Cut out the noise
success and failure returns rates

Napoleon’s definition of a military genius was “The man who can do the average thing when all those around him are going
crazy.” It’s the same with investing: You don’t have to be brilliant, you just have to consistently be not stupid.
 Try to spend atleast 1 hour a Read in clusters – study Do monthly or quarterly
day on weekdays and 2 hours companies in the same projects on a industry /
on weekends industry together company

Read voraciously – annual Just reading will NOT help

Listen to podcasts / videos / reports, magazines, trade you. You need to spend quiet
concalls while commuting journals, biographies, non- time to synthesize your

Process for fiction, fiction… learning.

learning Try to jot down a short

Use a tool like OneNote or
Evernote etc to keep all your
summary of whatever you
notes in one place. I prefer Try to do a weekly summary
have read / heard / seen so
electronic over paper as it is of your daily notes
that a child of about 12 can
more easily accessible and
understand
searchable

Learn what to ignore. Not

Bunch your reading of similar
Use tech tools to your reading newspapers or
topics together to gain more
advantage watching business news are
insights
starting points.
Some Learnings
Understanding the
Averaging up Letting the winners run
cycle

For any event,

Making a list of key understanding its Follow the numbers,
monitorables impact on the thesis of don’t hope
the specific company

Writing down thesis

Keep a wish list of There is always a bull
helps in building
companies market somewhere
conviction
 Some resources
• https://www.fs.blog/blog/ • https://www.gurufocus.com/news.php?cat=
rank
• https://fundooprofessor.wordpress.com/ • https://www.project-syndicate.org/
• http://www.collaborativefund.com/ • http://qz.com/
• http://blogs.cfainstitute.org/ • https://www.nytimes.com
• http://hbr.org/ • https://www.bloomberg.com/
• https://www.theguardian.com/uk/business
• http://knowledge.wharton.upenn.edu/
• Forbes India
• https://www.brainpickings.org/
• Outlook Business
• http://investorfieldguide.com/ • Business Today
• www.thinkmentalmodels.com • Business Standard
• http://www.tweedy.com/research/papers_s • Mint
peeches.php • Economic Times
• Economist
Some books (beyond the usual ones)
• Against the Gods The Remarkable Story of Risk – Peter Bernstein
• Value Investing Today - Charles Brandes
• Contrarian Investment Strategies - The Next Generation - David Dreman
• Drunkard’s Walk – Leonard Mlodinow
• Value Investing – James Montier
• More Than You Know - Michael Mauboussin
• Think Twice - Michael Mauboussin
• The Investment Checklist - Micheal Shearn
• The Ascent of Money - Niall Ferguson
• Psychology of Intelligence Analysis – Richards Heuer Jr
• The Aggressive Conservative Investor – Martin Whitman, Martin Shubik
• The Manual of Ideas – John Mihaljevic
Investing is simple. But not
easy.