In my view full time investing is for people who love investing. One should enjoy the process of investing. One should not try moving to full time investing just because they hate your job.
Also the percentage of people who succeed as investors are very low. Hence be doubly sure before you take a call.
Time pass ke liye parchoon ki dukaan khol lenge Raj Ji and Jain Ji⌠I am already giving maximum time that I want to give to studying companies and stocks. I would not give any extra time even if I quit the job.
So basically you guys are saying I should not think that the 10x (that I have right now) will be turned into 20x (through value investing and trading) untill it actually happens.
Point taken.
Thatâs a good idea 
Jokes apartâŚwhat I mean is one need to mentally and emotionally strong. Itâs the bear market(brief one in 2008) which tests the love for investing.
If you are so obsessed with investing and thinking of leaving your job, you can look at part time jobs to generate cash flow for day to day expenses. You can become a part time tutor. You can become a freelancer or develop apps on your own. Or choose a 10 to 6 stress free job. By doing this, maximum time can be spent on investing. Expenses can also be met.
Remember the 4pc rule
In any given year you are allowed to take only 4pc of the net worth of your investments for expenses and leave the remaining to grow
If you follow this simple maths you will have perpetual kitty to dip into after inflation and real growth
Leaving job to be a full-time private investor is a dream for many like me. And I am sure, if we have passion we are definitely going to reach there, sooner or later; and itâs not just because we hate our job (thatâs one reason too ;)) but we are passionate about investing too; Itâs more about being financially free and following your passion - " what we really love to do".
Now with my limited experience in equity investing want to share few points:
We need to experience full cycle of bear and bull market before going for full time.
once I leave job to be a full time investor, under any circumstances I donât to comeback and work again; hence my portfolio size should be atleast 30X of my annual expenditure, or if possible 50X.
Portfolio should be such a way so that, to meet our monthly expenses we dont need to sell our long term holdings.
For monthly expenses we have to maintain some portion in Debt/or dividend yield. If 2% dividend yield of overall portfolio meets our annual expense, thatâs enough.
We may take short term position in opportunistic bet, but strictly no for day-to-day trades. We should never depend on trading for our day to day spending. I really doubt anybody ever made any measurable money in trading.
Most have been through similar thoughts and this is the approach I have figured our for myself based on Warrenâs teaching. As per warren you should have not more than 30 investments through out your investing life. Though have been investing in stocks for last 10 years.
Spend 1 years to really understand and practice value investing with my savings. By the end of the year most of my saving (25 x of my annual expenses) were invested in value stocks as per my little knowledge. During this phase I took easy work in my office and spent most time in office and at home learning value investing. ( 12 -15 hours each day).
I decided to still pursue my job due the multi-dimensional learning platform it offers. Unless the other person on phone is Charlie Munger, you really need to talk to lot of people and learn from many mentors. Going to office really gives me platform to observe and identify patterns about young generation and industries. Not only you can get something from office, but you can also give a lot back to junior and have an enriching life. e.g. Prof Sanjay Bakshi.
With both my wife and I working, we live a simple disciplined life. With double income you can save one salary to grow your investing portfolio. If nothing works in life a simple SIP in equity and debt can save your life in uncertain times. Think not only about financial risks but other risks where we have no control ( health self, spouse , children education etc.)
Then think of it like a hard core business and apply the same principles of value investing on your own P&L, Cash flows, BS ) and be realistic on growth.
Slightly off topic: This is a common question when the market goes up. If you look at last year, first market went up to unrealistic levels of 30k. then market tanks on china slowdown concern. it goes up. then came fed interest hike. market falls, raises again. then came the oil crash, rajan, brexit etc. now suddenly it goes up for no reason. ( q1 earnings yet to come). people get excited. ( even twitter is full of such tweets. âwow stock x went up % today. disclosure: we own it and we recommendedâ). in my opinion both index and high quality individual companies are overvalued or priced for perfection. one should not read too much into the recent returns.
coming back to this topic, others like raj etc have already explained very nicely. i am no expert. but my advice is
This topic is so close to heart of each 1 of us out here & to me, specific for people who have just started their Careers or at young age of 25-30, without any Financial Liabilities or Additional Responsibilities, which again come by age & Financial Stability (Marriage, Parentâs take Care, Kids etc etcâŚ) & who have still not seen the entire Cycle of their Earning Potential say for at least a Decade, this thought process of quitting a Job seem to be totally a same analogy of Infatuation, on seeing a Girl at First sight & thinking that this is the Only Girl you would like to marry.
Refraining myself to further say anything as per lack of my competencies & abilities on others Scenario, as it is all about Personal Finance. Personal Means related to 1âs own Individual Circumstances, Age, Risk Taking Appetite, Responsibilities & Obligations & so much of other related stuff.
Lemme now try to put things in Perspective & in continuation of the healthy discussion, initiated by so many respectable, knowledgeable, experienced fellow members.
I would like to share my own story & by any means its not to be followed blindly, or taken as any suggestion or methodology to be followed per se. I would try to keep things straight & simple & put in a Pointer Format.
1. There is no substitute of Reading & attaining knowledge in every walk of life. This knowledge coupled with your sincere efforts to implement or passion in that field (applicable to Investment/Stock Markets as well), in turn will impart Self-Confidence to first make wrong decisions (demonstrating passion to your own self), but my making such wrong decisions, you are learning vital & significant truth of life i.e. Experiences. Read a lot & make yourself equipped with ongoing learning mechanism Yes you read it rightâ I mean On-going!!! Again choice of reading lies with an Individual ranging from AR, Company Presentations, blogs, Books, Biographies of Great Investors of all times, watching movies or any other source of learning.
2. 2nd Baby step in this Investment Journey of yours should be to assess your Risk taking Appetite & also clarity of your investment rational or goal behind making this investment & how much time frame are you comfortable with, without touching this money or even to the extent, I would say forgetting that this money belongs to you even.
3. **Next Step is to start building your nviction in Businesses & Managements & not Stocks. You need to understand the basics of FinanceâWhat is Leverage, how is it gonna affect your company under analysis, Why its Revenues/Top-line is not increasing or is stagnant for past few Quarters, Is it Raw Material or something else, which is dragging the Operating Margins, Is the Company/Business operating on a Asset Light Model or Capital Intensive Model (i.e How frequently Capex is required & to what Quantum), Is Bottom Line growing in tandem with the Top-line & in turn EPS, What are the entry Barriers or reason behind monopoly of the Business,if it enjoys, Whay Margins are getting Squeezed, Promoters Integrity, Some Quantitative stuff, such as ROE, ROCE (in case Debt is Source of Funding), OPM, NPM, Valuations & so much other stuff. What I have quoted here is just a food for thought.
4. Then you need to set the Capital Allocation Right, based on your assessment of your own Self, based on point 1,2 & 3. Refrain yourself in comparing with the likes of Warrens, Soros, Mungerâs Kediaâs, Jhunjhunwalaâs & Dolly Khannâs of the world. You are you & its your style of Investment. If you are copying or following any Individualâs Investment Style even, use your own presence of mind or thinking before taking a stance on that Investment, as you can only know their entry points but exits will be not known to you so easily. Example is Mohnish Pabrai: He copies too with due diligence & understanding.
5. Last but not the least everybody IMHO, should start 1st with Debt, as it gives you assured return & some confidence & surplus to fall back upon as well in times of cruel realities of life or what ever you call it as Contingency or Emergency Fund.
Note: All these 5 Points have to coincide with your Primary/Active Source of Income, may be in form of Salary from your Job or Rental Income or any other Active Source of Income & has to be practiced religiously for at least a decade with your Ongoing Job & Results of Portfolio Performance (your Passion & reason to quit Job) need to be continuously evaluated.
I am sailing in the same boat, for quite a while now, but all 5 steps mentioned above, I have made those as a Bible for me, which I recite daily, devoting sufficient amount of time, along with my daily/Regular Job in IT. I am too a victim of IT Syndrome for now a Decade of Professional Job & in my Investment Journey of 7 years, I too have committed my own set of Mistakes, but now through experience attained on Ground Zero of Dalal Street, I am on a right track to achieve Financial Independence in the coming years.
Hope this helps.
For my thoughts on the similar topics in nature, please feel free to dig a bit more at the below mentioned links. I would be more than happy to assist or help anybody, from my own experience, if I could be of any help.
Imagine that you donât quit your job, imagine getting promoted every few years and increase in earnings proportionately. Imagine being at the helm of an organization in a very influential role after 10-15 years. Now compare that to being a full time investor. Perhaps the likelihood of the former happening is more than being rich doing the latter, especially due to your educational/professional background ?
Of course, our priorities vary and what we want from life vary. Perhaps you are already there, and donât enjoy corporate life any more. But like a Vice President once told me, you need to be in the profession long enough to be able to reach the top.
Having a career and being a part time investor(so that hasty/rash decisions are not made due to having plenty of time and lack of activity) is a less risky option. Initial capital of tens of lakhs is a small amount for it to grow over the years when compared to what one could invest with a salary. Having a job to provide cash flows to investing will be much more of a sure shot way to build wealth.
Again, all of this depends on what one wants from life. It may be building wealth, it may be researching companies, it may be something in between.
Totally new to investing, but almost a decade in a job I mostly love.
Being a value investor, I would never consider going for it full time, how much ever money I have. Here are the reasons:
For me, the more I look at the market, or the more I watch TV channels, the more I get enthusiastic or negative on a stock and end up buying or selling without proper consideration.
Because I have a full time job, I do not bother about the stocks on a daily basis and this I think has helped my portfolio.
I dont think I will do better if I turn full time. Rather there is a risk of doing worse.
sit through a market cycle from peak to trough and back and then decide to take the plunge.
I feel that long term investing and full time investing contradict each other. Long term investing means minimum churning of the portfolio and holding on the bets for long. Reading news daily, following awesome forums and blogs like this one and having personalized screens in screener.in should be sufficient to track growth stories. I very much agree with @pankaj_vaidya. It helps me to stay away from stocks all for good reason and also generates extra cash which at times I deploy in small amounts in some very risky bets as gambling (my vegas trip). Having said that one day I would definitely like to retire, may be when my portfolio is well over 50x not to give more time for investing but because I am lazy, and want to travel the world (with my dividend yield).
There are few points which I want to highlight:
Retirement is 180 degrees different from Full Time Investing. I know many people interpret both as same. Retirement is more of leading a peaceful / Risk less life. Where as Full Time Investing (atleast below age 30), is more like starting a Business or a Start Up and want to Make it BIG. We all belong to second category.
Ask few âWhy?â questions yourself before quitting you Job. Is it the Job that you donât like ? Or are you more inclined to do Research & Analysis about companies etc ?
Why donât you combine both ? Take a break. Sharpen your Investment skills, take Financial Modeling coaching, Give CFA / FRM and then apply for Equity Research Jobs in Investment Banks / Brokerage firms. Its just more of a career shift.
I personally did it. I was a Techie 6 years back and slowly moved to Techno Funcitonal role, and finally as a Sr Credit Analyst in a French Investment Bank. Its more of fun now than in my previous job. Even though I donât do Equity Analysis here in my current job, but hearing the words like VaR, P&L, Risk, Forex etc keeps me moving than hearing words like Java, SQL, C++, OOPS (which completely shuts my mind) just like at previous company. I recommend you to try to look at it more like a career shift than completing quitting it.
Best Regards,
Krishna
I had been in same dilema when I was 24 yrs which was back in 2005 when the bull market was raging.
few points to consider:
Will you have had same thoughts in the bear market or lean period of 2008-2013 ? Think hard if you have not experienced investing during that time.
On average if you do well, you will make what say 25-30% being very optimistic. On ? your current portfolio .
Iff you dont make any efforts, you can still make 15% (in same conditions) by just passively investing in mutual funds.
Compare this extra 10-15% return on your portfolio to the earnings that your job CAN bring. I assume IIM Cal graduation will fetch you not less than 20-25 LPA in todayâs time.
And thats just of today you are thinking, this job salary will rise exponentially if you put all those efforts in your job career.
Now if you plan on to become fund manager or adviser then you have to evaluate it differently⌠That can be a rewarding career as well, but weigh the risks as success ratio is not too high.
Try switching to Mutual fund industry if you can with your IIM Cal degree and that way you can get in your loved profession in a planned and less risky way.
I would advise against quitting job at this stage.
I am sure, in last 4 days you would have got enough points to mull over!
But that is not going to stop me from sharing my viewsâŚ
I too was in the same boat few years agoâŚand let me share my thought process and learnings!
âYour work is going to fill a large part of your life, and the only way to be truly satisfied is to do what you believe is great work. And the only way to do great work is to love what you do. If you havenât found it yet, keep looking. Donât settle. As with all matters of the heart, youâll know when you find it. And, like any great relationship, it just gets better and better as the years roll on. So keep looking until you find it. Donât settle.â
AND
"Your time is limited, so donât waste it living someone elseâs life. Donât be trapped by dogma â which is living with the results of other peopleâs thinking. Donât let the noise of othersâ opinions drown out your own inner voice. And most important, have the courage to follow your heart and intuition. They somehow already know what you truly want to become. Everything else is secondary "_
So the question to ask yourself is are you indeed in love with investing as profession for next 30 years? Do you have passion so that the time and place become irrelevant for you when you are involved in analyzing business, understanding entrepreneurâs journey and whole lot of things connected to Investing process (and not earning multifold returns)? If the answer to the above question is in affirmative, you should definitely considering full time investing as career.
Once you have decided to pursue full time investing, the next question would be, what is the right time to take the plunge (or rather I should say leapâŚ!)? I feel, it is much better, if one does this in planned manner,than taking a plunge based on impulse. This may mean controlling your urge for few years before you prepare yourself. However, it will save you from many troubles and sabotages! I feel, it well worth the wait. However, there is plenty to accomplish during this preparation phaseâŚ
You should be able to satisfy yourself with demonstrable track record over reasonable period of time (3-5 years) that you can generate superior risk adjusted returns reasonably consistentlyâŚfor the right reasons (and not sheer luck playing out). Because, only value addition from you for all the time and energy that you spend as full time investor would be the excess returns generated above benchmarks (due to active investing) without taking undue risks.Try to quantify the excess returns generated. It will give you a good idea for the income earned by youâŚin the business of full time investing.
Start planning out financials. I suggest, having at least 3-4 yearsâ expected expenses kept aside(After counting inflation)âŚand some contingency funds apart from portfolio. This is extremely essential as it gives you psychological armor to fight the urge of getting into short term investing/timing the market. You may come across many examples where investors who have started from Rs. 5000 and are billionaires today. But remember survivorship bias⌠As Taleb says in Anti fragileâŚthe longer you surviveâŚhigher is the probability of survival! More so in market!!
Wear a thinking hat to find out ways of leveraging your professional experience/skill set (other than investing) to generate some additional income on the side without getting tied down to a job. Take up work that gives you enough flexibility to decide the quantum and timing of your work. You may look for taking up work from Guru or Upwork; Consider teaching as visiting faculty; Freelancing possibility in your profession. I am sure, if one is sincere enough, one will find many such avenues. This again is very useful, as it gives you some comfort on cash flow side and will also reduce the social pressure (that comes along with having lumpy and unsecured income stream).
As some body mentioned, it is a job where you are quite lonely and work schedule can be as relaxed or as daunting as you want it to be. To remain focused, plan your day for various activitiesâŚAR reading; Industry tracking, Conference call attending; Reading books across various areas; Networking with like minded people. Attach time slots and have discipline to stick to it. I have learnt it hard way that planning a day is very crucial else one tends to fritter away a lot of time doing unproductive things
Last but not least, start preparing the close family members for transition. Set the right expectations (lower the betterâŚ
) and take them into confidence by explaining them your plan on how you want to pull it off without trouble.
Even after this, there will be many blind spots that will come, as you take a leap of faith, so be prepared for challenges. I can vouch for that it is not an easy pathâŚbut very well worth it, if investing is what you love to do.
All the best for future
In my opinion, a simple test would be to have this discussion during a bear phase. If you are equally enthusiastic about full time investing thenâŚthere is a good chance it is the right decision for you. In a bull phase, it looks very justified.
In my opinion it is better to work in industry and contribute to growth of the economy. Already in last 3-4 decades lot many people than necessarily have entered into this field (for example before 1980 investment as a career is not popular even in USA and till 2000 in India it is not considered good career choice). My guess is that we are already near peak of investment as a career and it cannot sustain any longer at this level of activity and across the world it is seeing declining trend. After all ideally we donât need more than 1000 good investor for stock market and 10 good mutual funds.If same level of energy is put in creating a new company in rising sector it is more worthwhile which can be wealth creator of future. Too much emphasis on any thing is not good for society and least of all in investing which is at end of day is zero sum game. Any youth put 3-4 years of efforts in any activities likely to succeed in today India as global skill, knowledge and market is open to everybody. Most of current star of indian stock market belong to era when indian market is very inefficient and not very popular and this activities was confined to some cosy club in and around Mumbai and Gujarat because information access is not very transparent (for example formation of NSE and SEBI after Harshad Mehta Scam is opposed by all broker of BSE at that point of time). Only after popularity of online trading platform investing becomes more democratic and information access becomes more transparent across still insider trading and manipulation of stocks is very common in market. Still some people can earn big money through investing but earning money only cannot be top priority of humane endiveour but impacting life of society is much more fulfilling. I do understand that due to peculiar nature of india education system and job market many people get struct in job which they dont enjoy for long and unlike west we dont have good career opportunities for career shift in latter phase of life. I guess popularity of investing is mainly because it dont need much infra investment to start with and most people perceive it as easy activity.
Very nice sir ,excellent article and worth reading.
