Equity Investing as a full time career?


(bharat.jain) #374

As the famous actor Raj kapoor said, Life is 90% hard work and 10% luck but without that 10% you cant succeed.
When you want to invest in equities you have to think like business men be shrewd, oppurtunistic etc etc. and as there are losses in business and people get wiped out you can get wiped out in stocks too.

People look at only successful people and try to emulate. Lot of people get sucked into this trap also and humans have overconfidence on themselves esp the educated ones are more overconfident.

Be careful. invest wisely. If you have a job to keep which pays you well keep doing it and invest only if you have the knack and time for it.


(Cshar) #375

Again I disagree with this opinion, yes it’s required to do job if you need to support your family, have loans to pay & save for future of kids. Here again want to put focus on a line which holds deep thoughts, “investing in stocks or investing in markets”. Even if you do jobs, business it whatever to earn a living, Job is most unsecured return on investment. It touchs your heart when you cross 10 years of experience, I hold 20 years of experience & work at a reputed MNC in Telecom domain, no need to give further explaination about job security in Telecom domain. Have seen colleagues earning between 40-60 lakhs per annum told to leave in one month with average 20 years experience. Would what is better. Return on investment in Job will decrease with time you invest more which is just opposite to stock market. In job as you grow, insecurities grow, in stocks you hold & companies grow, you get fortunes & your returns grow exponentially. It takes a harculian task to understand that investing in any company is partial ownership & we should let business grow if industry is good & can grow at more than 10% growth


(shreys) #376

Dear @Cshar,
I must applaud you for the returns you’ve generated. But, luck had a role to play, without an iota of doubt. I’ll reiterate emphatically, luck plays a crucial role in determining a person’s success.
We discuss companies that generated tremendous wealth for investors. For every 1 company that survived hundreds of companies shut down their operations. It’s the survivorship bias.
The family a child is born in, the family’s socioeconomic status, the nature of the nurturer(parents). Luck is involved practically everywhere.
Agreed, you are a skilled investor. But, it’s luck that the companies you invested in survived. You, as an individual had very little control in determining a company’s success. It was a wonderful combination of skill and luck in your case.
I’d like to ask a straightforward question humbly.
There are thousands, if not lakhs of highly educated investment professionals. Most fund managers have equipped themselves with various strategies of security analysis. They can assess a company in detail.
But, hardly anyone succeeds in generating significant outpferomance. Hardly anyone is able to sustain performance over long periods of time. Why so?
If investing is purely skill there has to be consistency in performance of fund managers.
How many succeed at that?
Yet again, an insignificant number of people.
Why is it so?


(Sarvesh Gupta) #377

@shreys

Read these anecdotes. To me, these are neither the case of good luck or bad luck nor the case of good skill or bad skill, these are cases of sheer stupidity & ignorance on behalf of two of your acquaintances.

It takes a lot of education (especially of finance, business etc.), practice, experience, ability to learn out of one’s own mistake etc. to become good at investing directly into stocks (by good I mean the ability to beat the markets CAGR over a 10 years plus duration by 2-3% or more). Unfortunately, because everybody is allowed to invest and because anybody who has even 100 Rs in his pocket can invest directly in stocks, people start thinking that they should invest directly into equities.

75% of the fund managers globally are unable to beat the benchmark, so how do people start believing that they can beat the market comfortably and hence should directly invest into equities without the required education, practice, experience and the ability. The larger problem with equity investing is this only. For most (and by most I mean 95% of population) it just doesn’t make any sense to invest in any stocks directly. These should just buy ETFs or MFs of reputed houses in direct plan or seek a smart adviser/PMS manager. It is that simple. And then hold them without checking prices every now and then just like they hold their other assets - real estate, family gold, PPF - hold it for 10-15 years or till your retirement. By doing this one can easily make atleast 12-13% (or much more if your adviser/PMS manager is good) compounded annually.

However, most people are greedy. They think just because they have heard stories (that too unaudited and without any proof, people everywhere just love to brag about their successes and hide their failures) like the one mentioned by @Cshar which in most cases is just because of luck/timing - they feel that they can earn similar return. Most of these people, by the way, hear these stories at the peak of the market and then loose big time as they are too late to the party. And then they vow never to come back to the market. But in India, population is huge - so new crop of young punters enter and the cycle goes on. The biggest beneficiary of this cycle are your brokers/investment bankers/savvy investors and unscrupulous promoters of dubious companies who recognize this cycle and offer/market their shares and the stories attached to these shares precisely at the time when the appetite to punt among masses is high. When I see so many small cap stories and SME IPO stoeies being touted on various online forums and blogs I feel a lot of unease - these are deadly weapons used against gullible investors to sell crappy unknown to them knowing they are greedy for the next 5 to 10 bagger.

Equity investing is an art and a science and both need to learned over time. I guess a total of 10 years of education/reading and investing is the minimum before one can even hope to beat the market on their own merit. And it is not a part time job unless one is follower of a coffee can investing approach (only invest in highest quality blue chips) which is also meritorious though in my opinion sub optimal to other philosophies of investing.

Both of your acquaintances deserved their fate - they should better know that stock markets is ultimately a zero sum game where the money flows from fools, less knowledgeable, less experienced and the less smart to the well read, smart, experienced practitioners with the right educational/psychological base. One should only participate with meaningful proportion of one’s net-worth if one truly believes (by a very objective assessment) that they are better than the average and that too distinctly better. So not only one has to be much better than average in an objective assessment of oneself but also do a cost-benefit analysis of their time spent in directly investing vs time spent in say doing better in one’s job, more social work etc. which can provide much higher tangible returns compared to few % points extra in stocks If people, actually do this analysis in a true manner, my guess is 90% will come to the conclusion that its not worth investing on their own and they should either search a smart adviser/PMS or do it via mutual funds/ETFs.

Sarvesh


(shreys) #378

Dear @8sarveshg Sir,
Absolutely. I couldn’t agree more. My acquaintances erred and bore the brunt of their ignorance. As you rightly mentioned, in investments too much attention does more harm than good.
Markets are seldom tolerant of mistakes and the outcomes are atrocious. For a majority of investors mutual fund investments would be a better proposition. At the end of the day, in my humble opinion, it’s imperative to acknowledge that prolonged out performance of the market is almost impossible. The past has taught us that long term returns of the index are seldom above 15%. Indices will without a doubt regress. Regression is the norm rather than an exception.
And, I feel having realistic expectations is of supreme importance. The bull run has elevated the average return expectation.
I am often a victim of a potent combination of affective forecasting, optimistic bias, overconfidence, illusion of control.
And, to prevent myself from taking hasty decisions I’ve minimised my investing and trying to focus on acquiring experience, knowledge.
And, finally, in my limited understanding, tempering optimism and acknowledging our limitations helps minimise suffering during testing times.


(Cshar) #379

@8sarveshg, I agree with what you have written in completion. Untill you go through a full bear cycle & see stock plummet to 80-90% to their peak valuation, you will not understand stock market & it’s behavior we call “greed & fear”. However once you have developed understanding of busniess, business cycles, company moat & longativity if busniess, things are easier. We can’t say Rakesh Jhuunjunwala created empire of 12000 cr by luck, this will be great disrespect to the great invester. Leave apart all hue & cry of political non sense, global factors, fiscal deficit. Look at industries which have strong apitite to grow 10-15 %, good honest management, debt controlled & you have done your 90% of Job. Liquidity will always be there in right sectors as per prevailing circumstances. It’s your vision to identify & leave the most favourite stock of your in a matter of day if you think triggers are negative.

Stock Markets are best places to create wealth. You become partial ownership of busniess without hassle to daily operations & leave that to promotor. :grinning::grinning::grinning:.

Still I totally disagree luck factor in a long equity investment career as if you are able to create huge wealth than it’s might not be luck. It will require strong art of valuation, buying good assets at cheaper valuations & waiting for other to realize & sell in euphoria or hold for longer if industry is sustainable for long term.


(shreys) #380

It truly baffles me why calling someone lucky is insulting. Warren Buffett, the deity of the investing community himself discusses the contribution of luck to his emergence as the world’s most admired investor.
Per your opinion, skill is the only determinant of a person’s success in markets then why is the number of fund managers consistently outperforming the index so small?
They are equipped with the most relevant skills and have to their disposal all the information they need to make informed decisions. Skill brings consistency in performance.
We’ll know if it’s skill or luck only after analysis of performance of a large sample over years.
And, studies have been performed on the performance of fund managers.
They showed hardly any consistency in their fund performance. It intrigues me.


(Jaclyn) #381

Success and failure doesn’t happen randomly. If anyone takes failure as stepping stone and as a learning opportunity, eventually he will succeed.

But that doesn’t mean doing things foolishly multiple times and expecting a better outcome. On every failure if you refine yourself and have the courage and faith to succeed, you will taste success.

And also it doesn’t mean they don’t need knowledge. They need to build that.

People say luck as a factor. It is small factor in my view. But the biggest factor is perseverance against all odds and at the same time application of mind.

And in investing you need, 1) patience to stay invested for a long time, 2) stay calm and revist your ideas rather than getting swayed by emotions, 3) accept your mistakes and move on, 4) be a learner all the time and 5) don’t be greedy or jealous instead be happy with whatever you have achieved.

Most people won’t have any of these. So it is safer for most of the people to stay away from direct equity and invest through a good advisor or on the advice of a knowledgeable friend. Most of the people are not even ready to listen, then what to talk about reading or equipping themselves.


(Kumar Saurabh) #382

I will summarise luck vs effort in simple sentences : Generating high returns may be luck (bcos you were in right country at right time ), generating high return for a small duration may be luck (bcos sample size not enough to justify effort ) but generating higher relative return for a longer period of time is pure and sheer effort blessed by luck


(shreys) #383

Dear @sgjaclyn Ji,
These are the golden words for a satisfied, meaningful life. Definitely worth imbibing in every person’s life.
But, what truly piques my interest is the question that is success or failure predictable?
Are there traits that could predict a person’s success or failure?
If there are indeed traits for success, it seems extremely unlikely to me that the traits for success are possessed only by those who achieve the pinnacle of success. On this earth of 7 billion people I find it a bit difficult to believe that only a few are endowed with these traits for achievements. But, let’s for a moment assume that there are some who are the chosen few- Then the question is why were those who reached the zenith blessed with those traits?
And, if there’s nothing like a trait for success what determines a person’s extraordinary achievement? Is it just effort?
My humble submission is that different aspects of life have different ratios of effort and luck.
Activities like chess have a very high effort/skill component and a low luck component. On the other hand, dice games have a low effort/ skill component and a high luck component.
In different activities the ratio keeps varying.
Basically, greater the contribution of effort, greater the predictability, we can observe the traits possessed by the person and learn from them.
Greater the contribution of luck to an activity, the lesser there is to learn.
The big question remaining to be answered is the skill to luck ratio in running businesses and stock investing.
These are questions that can be discussed for hours together without building a concensus. It’s indeed very tough to find the truth.
I’ve shared my thoughts from the little I know. My genuine apologies if I’ve erred.


(shreys) #384

Dear @suru27 Sir,
You have beautifully summarised a complex topic in simple terms. Many thanks.


(Jaclyn) #385

Philosophically success and failure are state of mind.

One person who has worked as railway guard all his life thinks he has succeeded, because he did his best to his spouse, children and others amidst a boring life sitting in a chamber most of the time alone.

Another person who rues such a job may think himself as failure.

Thus they are perceptions. A person with a good bank balance may have the worst fear in his mind than an ordinary guy. However satisfied he may appear outside, he will have the worst kind of fear running in his mind.

“Trupthi” comes through janam. Not through any other means, that is my learning.


(butun) #386

Luck plays a role because market can stay irrational over a long period of time. If market stays efficient or rational then probably skill is the key differentiator. Unfortunately, market can stay irrational longer than many market players can stay solvent.

In summary, in stock market the following definition of luck is probably most apt.

“Luck is what happens when preparation & courage meets opportunity”


(Jaclyn) #387

On short term market is voting machine and long term it is weighing machine. So where is luck here?

Other way around, you are lucky when you do more right/correct things and less stupid things. Why call it luck when you had the control in your hands?

What Buffet said as luck is what is not in his control, that is his birth in America.

We were also lucky to be born in India, we were also lucky to connect with like minded people through VP, we were lucky to be born in an age of internet, we were lucky to be born in country and culture which has thousands and thousands of years of history and keeps us rooted to certain principles like accepting diversity without inhibition. That is luck.

Remember Sani bhagawan? That which is not under your control, that is luck.

Have faith in yourself than on the luck.


(shreys) #388

Dear @sgjaclyn Ji,
It’s true. Success or failure is a state of mind. But, as unfortunate as it is, most members of the society judge a person’s worth, success by his/her networth. The wealthy are considered exalted while the relatively unprivileged become the object of ridicule.
Consumerism and the movement of romanticism have made us subservient to materials and expensive experiences. Luxuries have become essentials.
And, to cater to our wants we’ve to work even harder. We, mankind, sold our time, our peace of mind to earn even more money.
It’d be truly liberating when instead of earning more money, we could live a life with fewer wants, a little less money, more time and an overall quieter life.
And, somewhere in my heart, there’s optimism that a life of minimalism can be lived.
After all, our ancestors lived a simple life, with few artefacts for lakhs of years before becoming agrarian societies.


(bharat.jain) #389

@shreys A must better way of approaching the issue of investing is use this forum. Find companies which are investible and let others dissect. You will benefits and so will others :wink: and in the process if you get the Top Contributor tag you will know that you are worth it.


(shreys) #390

Dear @bharat.jain Ji,
That sure is a great proposition.
And, I’m truly sorry if my posts have been irrelevant to the thread. I’ll exercise caution now onwards. My intention definitely was not to spam the thread.


#391

There have been so much discussion about CAGR etc so I thought of calculating my own but the volume of transactions was so large that I loaded onto a premium website providing me these calculations. I thought of sharing it here. I am not full time in the market yet but plan to do so at some point of time. My CAGR over the last 5 yrs is 29% and last 10yrs even higher but I would ignore due to its small size then. My only asset is passion for equity over the last 10-11 yrs. The best thing happened to me (in hindsight) was Lehman collapse just 6 months after I started. My PF was down by 75% and I could not even sell few stocks since I was travelling. So even if you aren’t working full time, it is possible to generate high return over time. Mind you, I am terrible in allocation and holding stocks longer despite decent stock selection. I have made so many mistakes that I can write a whole book how not to make money in the market. :slight_smile:


(Bheeshma Sanghani, PhD) #392

Hi all

The grass is always greener on the other side. My experience suggests that one should spend considerable time on honing the process and developing a framework around ones process of investing in the initial years rather than focusing on the outcome. A well developed process and the commitment to that process is a must for those who are in it for a longer duration. There should be a well defined framework for evaluating the business quality, mgt quality and the valuation. Furthermore, you should be able to apply that process consistently with good results. Some investors I know are focused on valuation and that ranks at the top of their process. Some pay up for quality and some spend a lot of time in evaluating the quality of the business and are ok with questionable mgt. Some are good at reading charts and aim for 20-40% moves and move on to the next. These are all investment styles and time needs to allocated to develop ones system which acts as an anchor.

Developing and coming to terms with ones framework takes a couple of years at least but the effort is well worth it. VP has some excellent threads on business quality and mgt quality which serve as starting points - but its imperative to learn to know which style you naturally lean towards. It’s a process which takes a couple of years and one should expect to fail more than succeed in this phase. I myself am in this self discovery mode being a relatively new entrant but I have a framework now and I stick to it. It’s alright to dream and dreams are the fuel that drive you. If done systematically and purposefully there is no reason one cannot go full time in ten years from day 0.

The formula is simple - find a process that you like, use it multiple times and see what the outcome is, keep on refining the processes till you are satisfied with the outcome and trust the process, Scale up. Till such time you reach this penultimate stage keep the fire alive. Luck is always there to spoil the party or help you along but a good process will save you from the vagaries of investing.

Best
Bheeshma


(shreys) #394

Dear all, I’ve deleted a previous post of mine in which I tried to relate philosophy and investing. I did receive some feedback that by discussing topics I have hardly any understanding of I was treading on thin ice. I deem my act irresponsible to share content about which I’ve hardly any knowledge. And, I wouldn’t want to distort the author’s intended meaning. I’ll probably initiate a new thread on that topic when I understand better. Also, yesterday I had shared my thoughts on the contribution of stock markets, trading and investing to one’s life. I was advised by Moderator Sir to merge my thread with the thread here.
My respectful greetings to fellow ValuePickr forum participants.
Today, what I’m sharing is an aspect of life close to my heart. The events I’ll be sharing below have been life shaping ones. They’ve transformed me into a different version of myself, albeit a better one. And, the stock market has had an influential role to play.
I do realise that I post excessively. The reason being the lack of creative channels my entire life. ValuePickr forum has given me an opportunity to learn from the veterans, the experienced, from like minded fellow members and express my thoughts. Please bear with me and help me become a better person.

So, I had, in another post shared myexperience of a break of 3 months I had taken last year to learn more on investing. I was opposed but I persisted. And, it was a truly enlightening experience. But, the reason for this immense desire to learn more on investing has its roots in another monumental event of my life.
The Monumental Event:
I’m a student in my very early twenties. Some years back, I was a student of the 12th grade. Its believed that performance in the 12th grade is crucial for admission to a decent college. I’ve, since childhood struggled with mathematics. However, I had been able to do score well in mathematics exams by working extremely hard. But, in the 12th grade, the syllabus was beyond my comprehension. I’d spend hours staring at the formulae of differentiation, integration understanding nothing. My basics were weak. I memorised formulae but wouldn’t be able to solve problems. What good is memorisation of formulae if I’ve no understanding on how to use them? I couldn’t share my fear of poor basics in mathematics with anyone for the fear of scolding. My parents would have supported me and helped me understand better. But, my mind had concocted horrifying stories. I put on a facade of being confident of calculus. Exams were approaching. My nervousness was skyrocketing. I appeared for the exam. I had worked hard but wasn’t sure I’d score well.
2 months hence, results were declared. I had scored a mere 42% marks in mathematics. My family members were devastated. But, their concerns were assuaged when I was granted admission to a decent college on merit because my performance in physics and chemistry was very good. Things got better. But, I was a mental wreck. Struggling from the within. Doubting myself. First year of graduation passed quickly. Results were declared and I had failed in multiple subjects. I couldn’t believe my eyes. But, that was the truth. It was difficult for my parents to come to with terms with this failure. My mind had expected this failure but my heart wasn’t able to accept it. I then reappeared for the exams. Worked hard and passed them. Fortunately, I was eligible for promotion to second year of graduation. On academics front things got better but on the inside I was at the nadir. A broken person. I had no hope from life. It was during those days I got even more involved in investing. At college some of my friends would discuss trading. I’d just listen quietly. It alleviated some of my troubles. I decided to try a bit of trading. I requested a very small amount from my parents. They obviously refused to grant it to me. But, I kept trying and finally they relented. I was granted Rs. 2000 ( Two thousand). It may not seem like a big amount to fellow members. But, for me, it was life changing. It gave meaning to my meaningless life. I started trading and as expected I lost most of it in some time. But, it motivated me to learn more. I spent time reading, tracking investments, discussing with my friends stocks and academics. My feelings of hollowness, meaninglessness were replaced with vigour. A desire to achieve something. It’s trading/investing that helped me recover from the lowest point of my life. The stock market is not something abstract for me but it’s a friend who prevented me from giving up on life. I didn’t earn money but I earned a reason to live happily. I’m forever indebted to the stock market. It has helped me transform from a feeble, low self esteem person to someone who is patient, dedicated, optimistic.
It has made me who I am. Rescuing me from the dark hallways of my mind.
It’s an event that’ll remain etched in my memory for my entire life. I shall be forever grateful.
And, as a consequence of this development I took a break last year in May, 2017 to delve deeper in investing. I’ve shared my experience in a post above.
This is the way my life changed for the better.
Has the stock market or trading/ investing played a contributory role in your life?
Please share your thoughts.