Well, you need not fear about provoking me as I have lot of respect for your words because of the stuff you are doing here.
Well, the time frame is a reference point towards which I feel I need to work as right now I am totally unprepared. I don’t even know if I have the temperament and liking for full time investing.
Also you had mentioned about losing time but I feel it’s the right price for the experience one gets.
A wise person, all in all.
Dear Sarvesh
Incisive and practical. Many Thanks
Morose Blue
Kovai Medical Center and Hospital - Health and Wealth - #98 by bheeshma
@bheeshma,
How much time do you spend daily to read articles in such great detail. I struggle to keep myself updated after office work.
Interesting question. Before calling it a night i try to put in 2 hours a day. My job has all saturdays working and sundays its difficult. I carry a kindle with me. I am not technologically savvy but am trying to make use of kindle as its much easier. However some other respected investors i know do tremendous amount of reading and i do only a miniscule fraction of that. You should ask @basumallick as he does read a lot and if i am not mistaken he too has a full time job.
I think it is better to concentrate on quality of reading versus quantity of reading. Also, I have found reading articles, books, articles, blogposts on the same topic for a few days/weeks helps me to get a better grasp of the topic. For example, if I want to understand the banking sector, I would read various things around that topic.
Sometimes, I feel it is beneficial to have a full time job and be an investor. It makes me more focussed on what I want or do not want to do. It helps me focus on the more important multi-year secular growth stocks.
Another thing that one can try is monthly projects - focus on one industry / company a month and read about it in detail. Write it down in some form of notes using tools like Evernote or Onenote (one I use) or simple word or powerpoint. That way at the end of a year, one would have a good handle on atleast 12 different industries or businesses. Keep at it for 5 years and you will run short of new sectors 
Thanks @basumallick and @bheeshma for sharing your reading and assimilation processes.
It will be great if we could have other folks also share this so that any ideas which seem useful to one can be incorporated into his or her routine.
Reading and researching on the same topic for a stretch of time would qualify as Deep Work as per Cal Newport. I also prefer this approach and perhaps instinctively prefer this.
I maintain a google drive folder where I jot down ideas and notes on things I make observations on. For instance a file is called ‘How I would commute to work in 2030’, you can guess what kind of stuff would go into that.
Personally I really enjoy reading not just on investing but on varied topics and I have this habit of chasing one topic for long, for instance these days I am reading a lot on medical science, terminal diseases and mortality. I dont know what I will use from it into my investing but it certainly helps one broaden his knowledge universe.
I might be the odd one out here because I don’t think, atleast as on today, I have ambitions to leave my core work and become a full time equity investor (which is in payments- fintech). My job serves as my investment capital provider and more importantly I like the space.
Regards
Deepak
While reading You have to navigate between active and passive reading.
Active reading as I define is reading specifically about an idea. Objective of this is to build investment case and aid in decision making. You read up about the industry and companies including annual reports, ideas from other investors etc. Ultimately at the end of this you are not just writing a research report on BUY or SELL but actually implementing the decision also.
Passive reading is about reading the concepts and soaking in wisdom of big investors. This is needed to build and reinforce mental models that will help you think about and implement the investment decisions.
If you just focus on a lot of passive reading you will end up not investing much or finding a lot of ideas. You can get drawn into a shell and your knowledge could become very theoretical. You have to be constantly in hunt for ideas. Look at the world around the changes happening and form opinions even at the risk of being wrong because that’s where most learning will happen. Just reading a lot and not actively building ideas and taking positions will limit your learning.
An interesting observation, people who are aware of the power of compound interest would already know. Say your salary is incrementing by 7% and you are continuously employed from age of 20 to 60 and you are putting same percent of salary as SIP(eg say starting years SIP is 10lakh, next is10.7lakh and so on).And say your portfolio compounds at 26%CAGR then the amount of money you will earn from first four years SIPs(age 20 to 24) is same as what you will earn from (24 to 60) at the time of retirement. it’s surprising how first 4 years salary is same as that of next 36 years put together. That’s compound interest for you, the 8th wonder of the world. ( Here is the calculation). Hope understanding this would help you decide better when to quit.
PS: Having said that salary growing at 7% may make sense only for govt jobs but in private jobs you can achieve great heights there too, you can work on-sites at different countries at different payscale, switch jobs to get big hikes etc and thereby accumulate significant wealth through professional career too.
Hi Ishan
26% CAGR would be a tremendous achievement over such a long period. I don’t know how many do that.
The sheet is not opening.
Regards
Unless your capital is too big 26% ie achievable, 26% means doubling every 3 years which is doable and recomended by many investors. If you have thousands of crores already then it might be difficult.
Sheet persmission changed to public.
If you see many ace investors like ashish kacholio, dolly khanna, vijay kedia, ramdev agarwal. their pf has done 30%CAGR+ in last 15-20 years that too with large capital. I agree they might not be able to compound at this rate for next 15-20 years too but you and me might be able to.
Actually I would say you shouldn’t aim so high also, I feel 30% is bit too high even if its achiveable, better settle for 25%
@deevee , @phreakv6 I added the calculation for 18%CAGR too, it come first 7 years salary is equal to next 33 years.
And also for case of combining 25%CAGR for first 20 years and 15%CAGR for next 20 years, it again comes to first 4 years salary is equal to next 36 years, though amount is obviously lesser than 26%CAGR straight.
Will be nice if the CAGR was configurable - So we can see how much the initial years contribute vs later years when CAGR is 15% or 20% and so on.
Compound interest plays nice to the pareto principle (Being related to power laws). I presume as the compounding rate comes lower, more of the initial years will be required. Your 26% says 10% (4/40) of the SIPs are enough to generate half of the rest’s performance. As the rates come down we may go more towards the 80:20 of the pareto principle.
Basically you find first doubling block. ie if it’s 26% then it doubles in 3 years but to negate the fact salary is also increasing by 7% the first doubling block here is 4 years.
So first doubling block will be similar to sum of next 9 doubling blocks put together because
2^10 > 2^9 + 2^8 + 2^7 + 2^6 + 2^5 + 2^4 + 2^3 + 2^2 + 2
So yes that 10% will be enough provided that 10% is a doubling unit after adjusting SIP increments.
Next week will be a pretty good time to think if one wants to be become a full time investor
My sense is it will get ugly for a few days, markets will test one’s conviction and motivation. It is not easy to keep your wits about you when you see a 15% fall within 10 days in the portfolio value, with the small cap index having fallen 14% from the peak some folks would have already experienced this.
Happy introspecting!
Tax on long term capital gains will hurt the full time investors the most as most full time investors will be counting on LTCG as a major source of their income.
What’s worse, government is even talking about bringing taxation of equities in line with other assets (read 30% STCG Tax and 20% LTCG Tax).
Bottom of a bear market is the best time to be a full time investor. If you feel like going full time when you are down 30%, you have what it takes to be a full time investor. At least you will not be basing your judgement on an inflated portfolio value.
Finance Secretary’s talk on bringing equity’s taxes similar to other asset classes doesn’t make sense to me. In other asset classes profit declaration is murky and not as transparent as equities… Also share of equities in India’s savings is still low compared to global standards. Instead the government could have looked at more ways to tax profits made in assets like real estate and gold. I am afraid whether they are cutting the goose before it has laid enough eggs.
Coming to the topic, behaviour on corrections like this decide if one has the character to consider equities as a full time career… There will always be draw downs like this every year (2017 was an exception) and one’s risk management strategy will be tested
django
Great to know you want to become a full time equity investor. I am in the same boat as you are but a bit older(actually 15 years) and have already quit my job an year back.I do share the same passion as you and i think i have it in me to research companies and invest in them to create wealth. What have i been doing since i quit my job?
Its been 13 months since i got my paycheck(which was quite hefty) without really thinking what i wanted to do.I did loved stocks/investing but had never done anything on own.I had quit stock market in 2006 because i wanted to construct my house and dint enter till 2015.I lost lot of fun in between though.Only since June 2017 did i start managing my portfolio(without knowing much really).I am slowly reading books on becoming a better investor but bit lazy there too.Completed reading ‘One up on Wall Street’(which is highly recommended),Intelligent Investor(still few chapters left.Too dryly written). Right now reading ‘The little book that builds wealth’.I too am an Engineer like you but with no Finance Background.I have been learning how to read Balance Sheets/P&L/Cash flow, Various ways of evalutating companies and so on.And its great fun really.
What do i see as a future in this field? Let me list down few things that i thought that i can do that can create a career in the field i love. I will also present the Pro/Cons of each of these and let you to mull on it.
1.I can become a sub broker/Authorised Person with one of many Big brokers like Motilal Oswal,Edelweiss,Angel etc.The business is to find customers in our friends/acquaintance circle to open Demat accounts & educate them to invest in Stocks.We get to collect some brokerage. The more they trade/invest, more money we make.
- Downside: People like Zerodha will eventually kill the fee based brokerage biz model.It wont take much for a Professional trader/investor to find that Zerodha is free(For delivery) and charges pittance for Derivatives/Intraday.Ofcourse a counter argument is that the market is so big that we all will survive.And until everybody shits to Zerodha, there is money to be made.
2.Become a MF reseller but registering with AMFI/SEBI.This is a lucrative business as fund houses give a commission for enrolling MF investors.
- Downside: People like me will figure out that i can directly invest in MF houses and avoid paying this commission from my money to the MF Distributor.Again, counter argument would be that there are always people who will not know about direct investment and as long as one makes money, its good.
3.Become a Financial Advisor
- May be a good path but how do we charge customers.A one time advisory Fee?May be. There are CFP exams to be cleared and its too boring to do that. Idea worth pursuing. A certified Planner can create a good financial plan to customers that cover insurance,mutual funds(Debt & equity) and also act as an investment Coach.
4.Run a fixed fee based Portfolio Management service
There are quite a few folks who take money from you and provide stock tips either for trading or investment.I dont know how it works but looks like this is one side money that people can earn while just sharing with others what they do everyday.
There is a real PMS service that serious folks run. They take profit based fees and manage the client portfolios directly.That needs years of reputation to be built among clients.
5.After a number of years of experience in a Portfolio Management service, one can start a Fund house with some like minded partners and become a professional fund manager.A good reputation will ensure that friends/families trust their money with you and you can run a Mutual fund.This must be the ultimate goal. Warren Buffet started his fund when he was 25 years.
These are different possibilities that you can consider.None of these will give a ready pay check every month.I have been able to create a modest capital after working for 20 years + some inheritance + Wife working, so that i can take risk and build a career out of my passion.See whether you can run the show without any disruption if you quit.
Wish you good luck…
if you are a full time equity investor, you can always declare profits from
sale of shares as income instead of capital gains. Theoretically, a senior
citizen couple with a stock portfolio divided between themselves can easily
earn Rs 5 to 6 lakhs tax free from only on profit in selling their shares
and still pay no income, short-term or long-term capital gains tax.
Interesting. Although, I worry about the prospects of financial advisors. Objective robo-advisory platforms have made deep inroads in the wealth management space in the more developed markets abroad and are fast making human advisors redundant. I believe even fund management will soon go down that route with talks of ‘deep learning’ fast making inroads into the asset management space.
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