Th write up is good, however, I do not understand why the whole premise of the blog is based upon a faulty logic - I mean why would someone want to leave the current job and take up investing as full-time career if he/she does not have passion for investing? That’s like out of the frying pan into the fire! Isn’t it settled already that the person in hindsight has considered this option before? Also, just in case someone is not passionate about both his current job and investing, then the more logical course of action would be to assign corpus to a skilled wealth manager and pursue a career that keeps the individual intellectually stimulated.
I was also thinking on the same line. If still more interested can join organisation as research analyst where your skills will be further honed. This is not to discourage the enthusiastic.
Bear markets are unpredictable.
How much will the index fall and for how long the bear market will continue, both these questions no one can answer for sure.
Markets may correct sharply immediately after you start, or go sharply up immediately after you book profit… So bear markets are worst.
God help if one starts any venture (business, job, or investments) in a bear market !
I can see where you’re coming from. However, my goal in life has always been to retire as early as possible, slow down, pursue my passions and spend more time with family.
Live lazy, live long
It is easy to assume that you have a passion for something after you have had success with it. This is a good thumb rule in most walks of life where skill dominates. In investing, it is easy to confuse luck with skill, especially during bull markets and get into investing full time.
Real passion for something is obvious only after you face failure for a long period of time and still stick to it. a 15% drop for 3 months is not a real bear market. A real bear market would be 3 - 4 years of flat and grinding market which sucks out all your enthusiasm as there are no returns to be made.
thats the real point of the post…will you invest full time even if you dont make any money for 3-5 years ? thats a personal question only which one can answer for himself
I think you have written this blog (same name but I am not sure) and if so, then I understand your emotions with it. It is well written but I have a difference of opinion with the basic premise. Allow me to explain…
You have mentioned about confusing luck with skill. Lets evaluate this –
When someone in the age group of 18-21 years prepares for competitive exams in anticipation of becoming a doctor or an engineer or a civil servant, how sure is he/she of cracking it? Maybe a handful studious ones? Yet there are thousands counting on their luck every year who even sacrifice 4-5 valuable years in anticipation of success and yet majority fail. And what about the ones who get the chance of being in best medical colleges, IITs etc.? Are they sure that they would be able to handle the pressure and not dropout of it and maybe even commit suicide (maybe that’s extreme but it happens)? Now lets suppose they pass-out from a top college and get a job for themselves, then I can assure you that only top ten percentile of those grads will land up with plush jobs, which these colleges highly publicize to attract the best talent. The rest of the candidates generally start with basic salaries dreaming of achieving financial independence for half of the rest of their lives. And in the end few LUCKY ones achieve it.
I am sure medical, engineering, MBA, Civil are some mainstream careers in India. But not everyone loves to study so lets explore other options. How about creative arts? Singing, dancing, acting, writing and so on. Or lets say sports? Cricket, Badminton, Chess etc.? Don’t you think luck is equally important to make a career in these fields alongside skill?
There is a rat race out there and the only way to win is to have both skill and luck in just about every walk of life in today’s world. But its not as bleak as I sound. There is one escape to all this nonsense. And that escape is ‘Passion’. Because when you have a passion for something, the journey is far more satisfying than the final outcome. Passion will bring dedication, through dedication comes hardwork and wisdom of the world says that hardwork makes its own luck…and so there is a greater chance of success.
In my six years of teaching management grads, I have never instilled fear of failure in young minds. I have seen students taking up career choices from societal pressure. Parents never allow them the space to choose for themselves. Even today, when a child desires to pursue her (or his) majors in English literature, she meets with fierce resistance from the very souls who must encourage her. We cut and customize to fit her in our scheme of things rather than allowing her to stretch and spread her wings. This should explain why we produce average engineers and average doctors, ending their real journey halfway from where they were destined to reach.
Not every passion can/should be valued in monetary (materialistic) terms. An investor who hates his job, has a passion for investing and is willing to take it up as a full-time career can be far happier making 10% gain on portfolio, than a 30% opportunity cost he/she could have earned from the shitty corporate job.
One of our fellow boarders, very well wrote the motivations (other than monetary) of investing which I’d like to quote here:
No taking away from your write up, but I hope I am clearer in the difference of opinion on the basic premise that fear should not be the reason behind not pursuing passion in life. We all have but one life and the best we can do is nothing but to live and die by our passions. We will win some and lose some. But we would never know what we are capable of unless we keep aside the fear of failure and venture out.
By the way, to answer your question, I started investing directly in stocks in the beginning of 2007 and have remained invested through the 2008 crash losing 70% of my networth in one year only to recover slowly thereafter. Neither did I enter at a right time and nor could I exit right. Personally, I do not like to fail in life so I made sure to take note of my mistakes and develop a panache for investing. And investing is only second of my many passions. That is more on the personal note.
The reply was not directed at your personal experience and the success/failure with it. If you had a 70% draw down and still stuck with, then you are definitely NOT the person i have mind. you have stuck with it through the ups and downs and only interest, passion etc will sustain you through.
You make a point about engineering, MBA etc and i think you are getting my argument the otherway around. Lets say you appear for the entrance exams and make it to IIT and then to IIM and then get a good job etc etc, the chances of this being due to luck is much lower. The same is not true with investing. One can do well for a long time on luck and mistake that with skill. I think there is a lot of research on it.
My point is that the post facto probability of luck ‘after’ someone has been successful is less with a lot of professions than investing. Now a lot of folks find phenomenal success in investing and it could be luck or skill, but most assume skill and think they also have a passion for it. My argument is that one should live through an entire market cycle (maybe two) before concluding that one has skill for the craft and also passion for it.
ofcourse that may be too much for a lot of folks …but then its just my view, not some rule.
btw, yes thats my blog and i dont disagree with your points. I am myself an engineer, MBA (20 years now) and have gone through the same grind as everyone else. However in my case, i have always been concerned that the returns were from luck and i could not conclude for sure if it was from skill in a few years.
taking up investing as full time would make sense only if i thought i had skill (the passion part was already there). If i realized i have no skill, then passion is not a good enough reason for full time …as i dont think i would like to risk my family’s well being on it. in such a case better to pursue it till i could be more confident about the skill part. As the confidence level rose, so did the allocation to it
but as i said, this is very personal choice. i have just laid out the math …the decision is beyond that, but the math still should be kept in mind.
Yes indeed if someone has mistaken a few lucky bets for skill, its a problem. The irony is that they would never know for sure until they venture out. Investing is an art which can be learned over a period of time with patience and hardwork. I feel only a passionate person would do that. Skill can be enhanced if you have passion. But you would never be a happy engineer/MBA if you had the skill but not the passion for it.
Personally, I have always followed a thumb rule. I let my heart dream and then I train my mind to do what it takes to achieve it. Hence for me heart (passion) takes precedence over mind (skill).
I must congratulate you on your blog and would encourage you to keep sharing knowledge. Its good sharing ideas with you.
Talking about luck, we are lucky
- to be investors (part time or full time),
- Born in this century,
- Have access to Indian capital market
- Have great resources and access to information.
- First hand knowledge of Indian businesses and being a consumer in India.
We take most of these for granted. They are actually invaluable luck.
I learned about a Stand Up comedian, who admitted that he did odd gigs for 15 years, because he identified his passion early on. He started at 22 yrs of age, and now at 44 he is at top of his game.
Good things in life take their own sweet time to come. However, mediocrity is always at hand.
Well articulated @rohitc99
Separating luck from skill or the outcome from process is something that Mr Vinay Parikh also spoke about in the Vp conference.
His views resonated with me as in a bull market one tends to overestimate ones ability to identify opportunities and in a bear market one underestimates.
He and others I met have very well defined processes. They tend not to get swayed away by market fluctuations. Most importantly he said that over a very long period of time the best investors tend to generate a cagr of ~ 20%.
Despite passions one must have a well defined process and chip away at improving that process.
Even after achieving considerable success I was struck by how eager all of them were willing to learn despite disagreements. This is a hallmark of good investing practice. The desire and awareness to hone the process and not confusing it with the outcome.
I have much to learn from them and others here.
Do keep posting @rohitc99
I just read on Highway…
NORMAL SPEED MEETS ALL YOUR NEEDS
Only point is even to hv this liberty we need some initial financial resources like a battery to cell start the car.
Few may be God gifted to manage without it, but largely others are not
Yes, passing through extremes of temperature n Humidity cycle along with Vibration Test is must prior to conclude a success.
In manufacturing days we used to call it QM 333 Quality cycle for environmental testing of Electronics Products prior to proceeding for bulk production.
Analogy is apt here.
As such i liked above part of your write up.
Just read on farnamstreet blog…
The ability to change your mind is a superpower.
Dear @us121 Thank you for your kind words. But I assure you I am just as normal a human being as you are (without any superpowers).
The article explains open-mindedness and close-mindedness vividly. Nice read. Please do share your understanding of the article and the leanings drawn in the current context for the benefit of the group.
Sensex, in 1978 was 100 and today it is 32400. CAGR for 39 years is 15.98% and add to it a dividend yield of 1.5%. Total CAGR = 17.5%. Do you mean best investors (very small percentage of investing fraternity) beat index only by 2.5% ?
I assume that these best investors are retail investors and not fund managers or HNIs.
at a 20% CAGR over 39 yrs , Rs 100 would be 122481. That 2.5% difference is extremely significant over long periods of time
If dividend is reinvested, sensex is currently at 55000(17.5% and not 15.9% cagr). 55000 to 122000 is just 2.1 times networth compared to passive investor for an investor’s life time(39 yr). Is this what best investors acheive with all the freedom theey enjoy unlike fund managers? Is this 20% is an above average investor’s return? If best investor acheive only 20%, then above average investor will find it difficult to beat index but then the term above average investor becomes a misnomer and also oxymoron.
If we consider index returns only for one time period instead of multiple periods, we may reach above conclusions. Index may or may not give similar returns in future. So to make a case, we should look at different starting points and time frames.