- August 1, 2023
- Posted by: Intrinsic Value
- Categories: cyclical investing, Investing strategy, value investing
INVESTING- WHY- WHEN-WHERE-HOW
Why should a person think about investing
Short answer is to Survive. Many of my friends who are doing very well in their life professionly and financialy ask why do they have to invest.
Income is mostly dynamic, Life can not keep giving you the opportunities it is giving you right now. One of my friend is an IT engineer, he had a very good salary,but mostly he spent that money. On expensive Hotels, EMIs, Credit cards, shopping, big cars, foreign holidays.
When the tide turned and his company had to let him go. After 3 months He doesn’t even have the money to Pay EMI of the house he is living in.
This is the reality today, people lifestyle has made them so fragile financially.
And this is why you have to invest and most importantly save and when you save and invest, you have to make sure, you are beating the inflation so that your money is worth after 10 yr what it is worth today.
So my short ans will remain the same. It is to survive. Its not a luxury anymore, it is neccessity.
How should one start investing based on their goals and time duration of the goals.
The first and most imp part is to start investing, you have to start investing before thinking of goals and rewards.
A lot of people want to know about the fruits before they have even planted the seed, Too much planning has not done good for anybody, so first start saving and investing.
Second, I really don’t understand the goal based investing part, because future is Blur not clear, its dynamic not static. It is not a straight line. So if we keep investing most of our money and keep having a long term view, our goals will be filled automatically.
Having said that, if your goals are too short term lets say 6 months/ 1 yr, you should stick to fix returns like FD and Bonds. Where as if your goals are long term , you should dive in Equity. Because markets are volatile in short term and you don’t want volitality to work against you. We want volitality to work for us. This is why market serve you well in long term.
What are the available options for investments in India?
There are multiple options in india. There are fix interest investments like FD, Bonds, NPS, EPF and there are volatile assets like stocks, realestate, Gold. I only follow Equity markets.
I am a registered Equity Research analyst. But if I talk about my personal investments also, I have personally never invested in Gold, realestate, MF, EPF, NPS, Bonds. Apart from my personal Home, 100% of my networth is invested in stock market.
I diversify my funds , but I do that in stock market. If I think realestate is going to do well, I buy Realestate Company’s stocks, not the realestate itself. When realestate does well, due to earnings and valuation rerating, I get the double benefit of the cycle. How ever if I had invested in realestate I would have benefitted very less.
Views on Crypto
I remember in 2020, A lot of my friends contacted me to get my views on crypto I was against the crypto. As we proceeded, some of them started sending me the snapshots of their short term profits. When the tide was over, not only some crypto but the exchanges itself were wiped out.
Crypto had no physical value from the very first day but apart from that the low governance and fragile infrastructure is also very bad for investor. They don’t even have depositaries. Everything is kept at your broker. You can not invest your hard earned money there.
I will tell you what has been the modus operandi of all the Pump and dump and pyramid schemes scammers from 100s of years.
They will use fancy words, call themselves tech friendly, visionary and Next big thing and any one who doesn’t accept the concept will be called Anti-tech, non visionary etc. They will create the best possible FOMO techniques. it was the case in 2000, 2008 and in 2021 in crypto, It all ends the same way.
How to understand the risk associated in stock market and how to mitigate those risks
An investor should never be shortsighted in stock market and thus should not trade in F&O, Intraday, short term. These are sure shot ways to be broke in the market.
Apart from this I only recognise 3 risks in the market, fortunately for us, the mitigation of these 3 risks are in our control.
- Overvaluation- when the business is worth 100 and available at 200rp in the market.
- Concentration- When investor only has 2-3-5 holdings in the portfolio in order to “Maximize” the returns
- Leverage- When investors take loan to invest to get “Better returns” than interest rate.
If an investor can control his urge to buy Hot companies at extreme valuation, keep more than 20 no of companies in his portfolio and don’t take debt, He will beat not only the index but most of his peers.
How can one build a portfolio with you and generate returns in the long term
So yes, we are into advisory, investors can come and invest on our recommendations-
We follow a diversified value investing Approach.
We look for the business which are available at deep discount to their worth and wait for markets to realize the worth of the business and let it reflet in the stock price. We mostly work for multibagger which means our target price is 3times to 5-8-10 times of our buying price. Our average holding period is 2yr to 5 yrs.
Mutual Fund vs Small case. Which one should a beginner pick and why
If your goal is to just save tax, Go for mutual funds.
I Have explained this in one of my posts also.
There are low volitality, low return assets. Like FD and Bonds
There are High volitality, high return assets. Like Equity
And then there are mutual funds which posses the volitality of Equity markets and give returns slightly higher than bonds. they are basically High volitality, Low return assets.
This happens because most mutual funds are big in size and they have institutional binding on where they can invest or can not invest, it has nothing to do with risk profiling. It is purely based in regulations. And this is why Mutual funds benefit less to investors.
On the other hand Direct equity investments can help you invest directly in the market and if you have patience, you can do very well in the market. If I give you an example. Our smallcase Intrinsic Value Core portfolio is giving 42% CAGR for last 1.5 yrs that is beating most of available mutual funds.
Plus if you invest directly, you learn about market and eventually can take care of your own portfolio after some years.
What is the best investment we have done so far.
I have made 16X-68X multi-baggers in market but The best investment I made was to get educated, then I upskilled myself in investing , I allowed myself to make mistakes and learn from it. I think the education and upskilling is the best investment and everything that comes after that is just a byproduct.
#investing #Investingforbeginners #Valueinvesting #Longterminvesting #Mutualfunds #smallcase #personalfinance