If they make 20% LTCG then indexation benefits will be allowed right?
YOU NEED kit FOR Equity Investing
K-Knowledge I-Investment and T-Time
It is fact that "In market people with experience earn Money and people with Money earn the experience "
A move too early or too small or too late or too big can be fatal. As we know the risk of investing in equites is 100%. (You need to have proper capital allocation plan at place ) No theory or style or shorting of stock or being Long the stock is equality work 100 %. Only YOU can make the call of full time job or full time equity investment however it is really worth to put the safety net if you try to walk on the rope. Knowing oneself is the first thing You should do .
YOU are the product of your actions not of wishful thinking. You must not overdose yourself with Hopium drug (HOPE- drug). Ironically we know the world but not ourselves. First to know what are your situations and responsibilities you have. What will be the probable expenses in next three years ?
You can 100% control the controllable event but speculating about the madness of people is beyond your control only way to out is control YOU and Your Investment along with planning of sound Risk management before of market beat you and kick you out of the stock trading GAME of HUMAN emotions of greed and fear.
Knowledge: You have to be Jack of all although if you are master of ONE that is your Niche that will be fantastic. Own what you can understand and also any other Tom Dick Harry can understand well …In Indian market scenario only Margin of safety with sound understanding of technical analysis (help to make buying decision) coupled with fundamental research (To know the financial credibility company which is further subjected to in what accounting principles company uses) and knowledge of valuation work (To know the approximate optimum price you pay for ownership of stock) out .
Investment: You must have house to live. You should know how to live within means. You must have adequate capital for investment i.e that you don’t need for next 3 to 4 years .What are your expenses. If mr market rewards what will be your plan In case he Pushes your to kneel down you to your feet what will be your protection. Know the difference between diversification or deworrisification of you Portfolio
Time: You must have sufficient knowledge base, only your conviction on equity with your own capital can create Fortune and if YOU are using borrowed conviction with own or borrowed money you are just executing financial suicidal plan If you like the shortcuts or heavily relying on Tips or tricks than this should not be your cup of tea. Rightly one VP peer mentioned Investing is not ATM as and when require you can withdraw … you need discipline and plan and more importantly how to execute the plan …
You must have checklists for purchasing and selling
There is nothing that we human can’t do it. But it will be YOUR call first YOU should know YOURSELF and YOUR risk appetite …
I am still learning really amazed with knowledge shared by VP seniors and that YOU all
Just wondering, how many investors here would have made a million dollars purely in investing. It will help me understand the probability before I / others dedicate only to this path of being full time investor.
(Taking 1 lakh approx as monthly expense, 60 times of that to feel safe during bear markets and take care of medicals).
Although it’s a personal question for many to reply a particular number let me drive in different direction while not avoiding your question.
Yes, I know many (including me) who has created a sustained self-living out of pure act of investing only. This includes we could meet personal expenses, medical expenses and leisure trips. The extent of these expenses obviously depends on our habits we formed e.g. I won’t travel by business class abroad even if I can afford to unless there is a compulsive reason like medical emergency. If one wants to blow off no money will protect him, examples often repeat that bankruptcy for those with bad spending habits not earning lesser income.
I will disclose some interesting facts which I faced for 2 years:
- All my expenses have been met with 10% or less usage of capital. Please do not conclude my capital is huge, I was well paid but not over paid (99% of us are in same boat). I attempted to find how did it happen? It’s tightening of process to deploy minimum capital and squeeze maximum return. Earlier it was voluntary, I had excuse of salary income. Now I am the god, I am the servant. Either I can make excuse or make money. No third option available!
- Less than 10% of transactions contributed 90% of my profits. How did it happen? When I looked back same answer as 1. Process gets refined. It’s money management drives profit and loss not research (it supplements).
- Average profit margin marched ahead of average loss margin considerably. How? Same answer, process gets refined. I understood investing is a business, I need to behave like a businessman.
- I lost 65% of time still I could survive. How? Again, process gets refined. I realised when I need to be a loser let me try to best loser, winners take care of themselves.
Now one can have a question. Could have not this process got refined while in employment? Although I practiced act of investing since my article ship days plus employment it never happened. I could have been lazy relatively, but when I checked with people who traveled from employment to investing world I realised answer is same for all of us. What happened then?
- Vertical learning process- when you become focussed to one subject and one act it becomes vertical. People moves parabolic, it’s like lots of demand for your quest towards one aspect. For some it become focus like a dot, the 10000-hour rule deliberate practice gets smashed much earlier. Days gone by when you sit alone, glued to screen and realise chirping sounds outside. The night is over.
- Pain, lots of pain- there were days I got up in midnight and sat in bed. Not knowing how to manage aspiration, physical losses or even heroic dreams. Sometime the pain was so intense it liberates you from most of habits. Now I am told by mentor and others pain is necessary action for objective. Learn how to manage the pain, post the pain solution awaits. Some of the solution has made people like Ray Dalio and William O Neil as an example.
When you have one trough to pass through surrounded by so many valleys; process doesn’t have a choice. It has to improve, or I will perish. This is what one gets when you work full time on a narrowed objective. It’s not ephemeral but enduring, only can be experienced day and night. Again, and again!
Oh! Wonderful. I have been debating work vis-a-vis investing. Beautifully expressed. The process is the key and while I do have it in my mind in a hazy way, it needs considerable efforts on my part to articulate it clearly and refine.
Reading your posts. Somehow I feel you did a lot before taking up Investing as full time. Dividend = Take Home Salary. Considering your 21 year experience, it seems quite a lot. You had a high value portfolio already. If you just manage it carefully then there is no need for much pain. Am I correct? Still reading though.
Let me slightly rephrase, pain in the sense of pain management. Previously whenever I had pain I was trying to forget as soon as possible. Now the point I am emphasizing is ’ managing the pain’. Most of the time pain comes before you get a successful idea or about to implement an idea. Pain should be part of process, whether you are successful, starting or in middle.
Pain is mostly emotional pain, some times when right brain is activated it sends physical signal to body like a hand pain. I have never experienced though.
Second point is ‘time’. Though 21 sounds a lot, I managed to achieved that 2 decade below 40 years of age. Of course some of the years were clueless and hopeless. You get beaten down and almost throw your hope away. But trust me hanging on to nerves and re-visiting mistakes will make sure your survival intact. So start early, that will be a significant step.
High value of portfolio or low is a relative term. Isn’t it? My measurement is 1. I survive without compromising my basic expenses 2. Eat, sleep and drink on one subject like a unconventional and unbalanced human. So far, I don’t see any crisis.
What can be travesty a man owned a dining table where a helicopter can be landed finally shot himself. As long as we stay away from this imprudent behavioral failures we are the happiest people I guess.
I have taken full time investing very recently. The dividend income along with interest from 20%
of portfolio in liquid fund is enough to take care of my expenses. The invested capital is not required for my expenses. I have also decided to take 1% as fees for my effort as long as the capital grew by at least 15% that year. After all, mutual funds charge 2% for managing funds.
Charging of 1% fee to own portfolio is interesting concept. Thanks for one more good idea.
Yah. I think we should assume 2% instead of 1% since most of the MF charge that much. Add 1% dividend yield. So net we save 3% by doing it our self. ( i know mf’s have dividend option. but nothing like directly getting the dividend from the companies) This actually is a big money for large portfolios.
This is my first post in this thread after reading it for quite a while.
Like many of us, I too have an ambitious plan to take investing as a fulltime career, Right now working on it in building my equity portfolio for the last 6+ years. Once I reached the level of comfort, will get into it fulltime.
Idea is to take 10% of my portfolio value (after making it minimum of 2x) YoY to meet my living expenses (targeting for 15-18% CAGR).
Wanted to understand from all of you,
- Is there any systematic best practice/approach on how to take that 10%?
- How to identify the candidate to liquidate (very critical for me, due to strong conviction on some of the stocks)?
- Liquidate month on month or in one go yearly?
- My expectation is 15-18% CAGR – what if my portfolio not performed to this mark? Should I withdraw from capital?
Some of you would be doing it already, please share your thoughts/suggestions. Thank you.
10% every year may be too high as per my opinion. What happens in a year when your portfolio is down 30% - say you started with 100 Rs and it went down to 70 Rs - 2.5 rs every month and you needed 0.8 rs per month for your expenses as well -> so you take out 3.3 rs per month and you are left with just 60% of portfolio. God forbid if there is another 20% down year - you will start taking 20+% of capital instead of 10%. Just a possibility, but such things can always happen in a long investing career. I would say target may be 5% or less - which means you may have to wait for portfolio to quadruple assuming no increase in expenses than double from currrent levels - an easy wait for 5 years atleast.
Thank you for the suggestion.
As of now, i am planning to start withdraw the money once my investment become 2x. In that way my capital is protected up to max of 35-37% downside for a year (37% down+10% withdraw, of course portfolio should recover in the next year otherwise i will further loose the capital invested), if anything beyond this would potentially impact my initial capital invested.
Essentially i assumed 10% withdraw considering my living expenses+inflation+some amount of monthly savings.
9% would be reasonable if i consider 1% dividend yield, however i need to rework for 5%.
Too aggressive. No margin of safety. Need more capital. Don’t think of withdrawing more than 4%.
Noted… thanks for the input.
Essentially I am looking on suggestions for how to withdraw whatever the percentage it is.
Like identifying the stocks… how to finalise the withdraw percentage on each of them etc.
Do we have any good framework/methodology please?
I dont mean to discourage you but the probability of this approach working is very low. Let me take a step back - the true meaning of financial freedom is that your passive income can fund your current lifestyle and future inflation.
Passive Income -> Interest from risk-free fixed income instruments / rent from real estate / income from any business that you own but not operate
In my opinion, if you need to be a full-time equity investor ( managing your own money ), you need the following things :
- Large enough starting capital
- Ability to embrace boredom
- Ability to embrace uncertainty, volatility, reduction in net worth.
- Passive income to take care of personal/family expenses
- Ability to generate cash from time to time to take advantage of new buying opportunities.
All the Best!!
Good thoughts Sandeep. Thank you.
Passive income - Yes, I have few real estate… agri income including LIC which will be converted to fixed deposits. Rich dad poor dad gave me those thoughts.
Mainly I am looking returns from equity to compensate my salary…targeting equity portfolio of 12x of my current CTC…
The challenge I see is how to systematically liquidate cash from my portfolio… is there any proven approach/ method available for that?
sandeep17 superb points by you
Large enough starting capital
Ability to embrace boredom
Ability to embrace uncertainty, volatility, reduction in net worth.
Passive income to take care of personal/family expenses
Ability to generate cash from time to time to take advantage of new buying opportunities.
As others have mentioned, 10% is too high. Assuming your portfolio can generate an IRR of 5% above inflation (real returns > 5%), you need a starting portfolio of 20x your average annual expenditure (while calculating this figure make sure you include the cost of purchasing one-time assets such as furniture, car etc).
Assuming your annual expenses are 15 lakhs, you need a starting investible surplus of 3 crores to become financially independent. As long as your IRR is greater than 5% (tax/inflation adjusted real returns), you can withdraw 15 lakhs (inflation adjusted) per year whenever you require the funds.
The problem arises if there is a bear market, especially during the initial stages of your full-time investment career and you are not able to generate an IRR of 5%. To safeguard against such a scenario, you might want to have 2-3 years expenses invested in liquid debt instruments. You can withdraw from your equity portfolio as long as IRR is greater than 5% and if/when it falls below 5%, use the savings from your debt investments to meet your expenditure.
I quit my job and became financially independent last year and I feel it is the best decision I’ve made in my life. The amount of time I get to spend with my family and the ability to pursue my passions without worrying about money, is absolutely amazing.
I wish you all the best in your endeavors.
Note: The 5% IRR mentioned is post tax, post inflation.
When you say you become financial independent and quit your job? Please can you details steps…like how do you have cash flow? How many years and the size of your corpus for expenses you have?
Are you fully invested all the time?
How you make top up to existing PF?
Please detail few words for guys like me
P.S I have 50L in a PL and 50L in liquid funds
My portfolio has given up 20% of gains in last one month given the fact the we haven’t had a 10% correction… that’s volatility for us…I have no debts…paid back house and car loan…
I think I have many more years to quit job and to become independent… please share thoughts