Equity Investing as a full time career?


(Shailesh) #458

Right you hit the nail . 90% lack focus and discipline

But what I have given is practical . I was able to do it faster as my compensation grew > 20% instead of 10% with series of promotion that led to step up increase in incomes besides 10% annual rises …

Expenses never went up higher than 5% annually as one moves up the corporate ladder , lot of expenses are taken care through corporate perks … housing , car / driver / club expenses / telephone etc …


#459

@kb_snn I understand the calculation that you have mentioned, which emphasises on having your annual expenses fuelled by the dividend income from your portfolio.
Based on this calculation you would need 100x your annual expenses (including margin of safety). So if my annual expenses are 12 lacs (1 lac per month), then I will need 12 crores to have 1-2% dividend to fuel my lifestyle and expenses.

I have another naive question.
On this journey to be a full-time investor and also be financially independent, wouldn’t it be prudent to have 2 Cr of this portfolio into lifetime annuity options like LIC Jeevan Akshay for example which will give sureshot 14 Lacs per annum (7% approx.). I understand that this will not beat inflation over next 30 years. But this will make sure that you do not panic in situations of market crash and go into poverty mindset. Rest of the 10 Cr and dividends from it will take care of the additional surplus and also help beat inflation in the coming years.

I am sure people will be using some sort of steady income like house rent or annuity than to completely rely on dividend income with enough margin of safety. What are the other options?


(Shailesh) #460

I would not recommend LIC policy for investments , instead you can go for tax free bonds or debt funds ( which after 3 years are tax efficient )

Also once you have dividend income from stable diversified portfolio > 1.2 times your annual expenses , you need not worry about market crashes as dividend income from good companies keeps on increasing with inflation irrespective of stock market prices ( look at dividend per share for ITC , HUL , Infosys , Asian paints for last 15 - 20 years )


(Dinesh Sairam) #461

This thread is not my cup of tea (At least not right now). But I read this old interview by Seth Klarman and thought it was amazing.

Klarman Barrons 1991 - Value Hunter.pdf (1.1 MB)

Apologies if already posted here.


(sambandham82) #462

why you have mentioned it as 1.2 times instead of a generic 1 ?


(Shailesh) #463

Yes Dividend income 1X annual expenses is good enough in normal circumstances , but Margin of Safety 20% is required if you taking decision to quit day job @ peak of business cycle like 2007 . .

Also here my assumption is you are following good asset allocation ( Debt to equity ) depending upon your risk profile . The Debt portfolio gives you cash to invest in times of market correction . Plus its interest provides cushion for extra expenses …


(Wolf) #464

Full Time Career Investing is only feasible if you have 10 CR capital and willing to see it drop by 40%.
This would be apt for a 35 year old.

For sub 35, a 5 CR Portfolio, might be adequate, again if you are comfortable to see it drop by half.

If not, stick to a salary job and invest on the side with passion so that you may create enough wealth to quit your job.


(vij) #465

Completely disagree @Wolf … A 40 year old can comfortably quit an unfulfilling job if he has 3 cr apart from an own house. He can put 1 cr in fixed income plans, 1cr in hybrid funds and rest in equities. For a person who can live modestly, this will do just fine.


(Wolf) #466

Hi Vij
It varies from person to person.
I would prefer to stick with Basan Maheshwari’s theme of a corpus 50 x of annual expenses.
In this calculation 3 CR is certainly not sufficient. As I said, going forward, prepare to see a 50 percent drop in portfolio. In that case, are you comfortable seeing the portfolio at 1.5 CR? And what if it staggers at that level for 2-3 years? What if your forced to sell shares for personal expenses?
I Would prefer to stick to a higher corpus, to cushion me in bad times, through dividend yields, or sale of shares.


(vij) #467

if 2 out of the 3 crores are in fixed deposits and hybrid funds, there is limited downside. It depends on how the portfolio is structured.


(Wolf) #468

If you are looking at a full time career in equities please do not lock up your cash in FDs. your better off sitting on cash, and waiting for the opportunities which invariable comes a few times a year when the market bleeds. Even buying into blue chips has proved very rewarding in the short term using this strategy.


(1.5cr) #469

I personally believe for the layman 1.5cr is sufficient. 50L should be put into REITS (whenever they come on board) or fixed income securities generating 7-9% p.a. This would result in 3.5-4.5L per annum before taxes. This should take care of ones monthly expenses assuming one is comfortable living off of approximately 30k per month pre tax. 1cr should be invested in equities (not MFs since we are discussing a full time equity career). A dividend yield of 1% on avg would result in an additional 1L per annum in disposable income. You will most likely be an investor who’s returns arent dependent on dividends. I think this is a realistic way to look at this idea. If your residence is paid for then all the better. You will also have to account for kids education and marriage. So ideally we are looking at 2cr. But for someone who wants to get to a point where they comfortably do this full time then I think 1.5cr is a good place to start. This figure is of course in today’s worth. Looking forward you may index with inflation.


(zygo23554) #470

This is probably the best time to consider this question!

I did end up moving out of my full time job last month, so I have walked the talk to some extent. Idea is to start managing external capital soon, so in a sense I am not becoming a full time investor who plans to just live off his portfolio - though I will be doing full time investing as a career here on.

Now that I look back my motivations for doing this were grounded to a large extent, hence I haven’t lost any sleep due to the market correction underway (yet). If the current correction however has spooked some of those who were planning to get into this full time, chances are they may not be mentally and emotionally ready for it yet.


(Shailesh) #471

Best of Luck .

Timing market is difficult … Just don’t RISK WHAT YOU NEED FOR WHAT YOU DON’t NEED …


(Amit Jain) #472

If I were to depend on Equity Investments as a source of income, then certainly, most of my investments would be in large-caps. And therefore the least I could do is wait to start a portfolio when the Nifty PE was at least reasonable, if not 2008 kind dirt cheap.

Reasonable Nifty Pe is when its below 20. Near about 17. Such a portfolio would return 15% annually.

Ones job would be to grow his capital at a minimum rate of 10% each year. So, 5% of it could be spend. At 10% the portfolio would double in seven years, and so goes the math.

So if one had 50L as capital. Then he would get 2.5L a year for expenses, which is a little over 20K a month. Tight quarters I’d say.


(Mahendra243) #473

50L invested in liquid fund at 7.3% can give you 3.75L per year…why to take risk for additional 3 or 5%
in equity? we have to believe in equity if we are to be made at least 13 to 15% on longer term basis


(Amit Jain) #474

It is my opinion that as far as safety is concerned, Investing in large cap stocks is as good as FD or liquid fund.

Returns are expected to be 15%, against 7.30% pre-tax. Hence, more than double.


(sambandham82) #475

Between 1993-2003, almost half of the period, nifty traded at < 17 PE. But in the past 12 years of time b/w 2006-2018, roughly 1 yr is the total sum of period for which nifty traded < 17 PE. So we have to be very patient and we get such opportunity only once in a decade, going by modern trend.


#476

PE has seen an increasing trend for decades now in US. If we I notice from S&P500, PE has been consistently high from 1992 (taken on 1st Jan) compared to what it used to be in earlier decades. Check this out, http://www.multpl.com/table

I can guess a few reasons like equity establishing as credible investment option, less of commodity companies, more of brand & technology companies, winner takes it all nature of dominant companies, better margins, better corp governance.

But there seems to be a definite shift to higher band of PE in US. Good to investigate this for India.


(Shailesh) #477

True …
++ Interest rate has declined since 1980s ( from 15% + to less than 4% )
++ Commodities , Textile , Mfg and other low ROCE business moved to emerging countries
++ Equity investing gain acceptance and there was more competition for same stock …