Equity Investing as a full time career?

Gagan
Thanks for your valuable inputs. I am also contemplating doing something similar.

Could you please guide me where to look for perpetual bonds/govt bonds yielding 9-10%.
Also is there possibility of capital loss in perpetual bonds (due to liquidity) in case one needs to sell them.

Regards

Dear @jamit05 Bhai. Won’t I need to be able to be as capable as Warren Buffet who has returned 20% CAGR. Currently what we see are short term returns and most will never be as capable in reading numbers and bootstrapping like Yogesh. When thinking in a long range we have to think more in terms of the quality of the betting rather than the quality of the bettor.

1 Like

WB rolls the dice on fifty billion Dollars, and manages 18%… Ours is barely a grain of salt in comparison. Therefore, we have several advantages, that he can only wish for.

WB invests in US market which is not as hot as Asian markets. If it were Usian Bolt then I’d add 8 secs to his 9.46, but that is not the case.

About capabilities, investing in Nifty 50 is really not that demanding. Most of the risk is covered from the word go. Yogesh is beating the index because he has dropped the laggards. He picked reasonable good companies and thriving Industries. Left out cyclical PSUs, politically influenced and obvious laggards. And he is a really helpful guy, always responds to queries.

But the mid cap bit requires some sorcery; it will come with time. In the mean time, one can play it safe with Castrol like companies.

All’s well, in investing, that starts well. So wait for some correction, let the large cap space cool the heck down. While the large cap space is obviously so frothy, investing only your interest imcome is wise. It keeps you in the game and alert. You can also, offset losses, if any, against interest income from FDs. Give it a year after the election, for correction to start.

Folks at VP are vicious with their kindness. They will let you know totally upfront, when you are wrong about an investment. Run your ideas through them.

It can be done.

3 Likes

Hi Naren, all these bonds are listed in BSE, you can buy from Exchange itself, but as you know liquidity if very low, it takes weeks to get one order filled, alternatively, you can try below
https://www.goldenpi.com/explore-all-instruments
I am yet to order from these guys, pls do due diligence.

@jamit05 thank you Amit, theoretically yes that should be the right way given that you have temperament & skill to execute, my setup is current and intended for survival first, and i don’t intend to keep 50% fixed income always, I am capping this at 1cr as survival money- never touch, rest all income & interest will go back to equity.

Personal exp: I was invested heavily in metal stocks in 2015, all of my stocks went on to 5x to 10x later, but I could not capture any of it, as I lost my job at that time, and moved capital out of metal stocks to fixed income for safety reasons, although still made some money, but if had kept my positions my net-worth would have been minimum 5X, but life has diff turns which no one can expect and sanity always is not guaranteed, some situations may force irrational decision, so this setup is coming from that learning, I never want to be a forced seller again no matter what, and such safety gives peace of mind and better sleep as well…!

6 Likes

Investing in Nifty 50 ETF requires mostly awareness, won’t call it skill. But yes, temperament is required, which most adults can manage as they fully realize the impossibility of the task of putting together Crores working a full time job.

I have a friend who is working a premium job, and did his every bit to be defensive. I mean what could be more defensive than investing in houses. Or so we think. Then the housing crisis came along, he lost most of his savings! After working almost a decade, he was back to the square one.

All I am saying is, risk adjusted returns in the stock markets are far better if one understands the power of compounding. Look at the wide difference between 6 Cr and 40 Cr !

And what is the risk? Worst Case, one may face a 20% drawdown on the capital of 1 Cr, that is a Rs.20 lakh risk, for which one is willing to forgo 34 Crores…

PS: 40 Cr is clearly a hyperbole. If push comes to shove, I would happily settle for half of it. :slight_smile:

5 Likes

There are perpetual bonds like Tata steel 11.5 % , Tata power 10.5% etc . But value of each bond is 10 lacs . Also you need to pay some premium on them hence Yield to maturity will come to near 9.5% odd , but if you are patient enough you get them @ very small premium to par then YTM can be > 10%.

If you understand interest rate cycle then you can make > 10%+ CAGR in gilt funds and Govt securities . These have limited credit risk , but you need to study and leverage interest cycle .

2 Likes

If I FD or invest in liquid funds, then I am taxed annually, but in stocks I am taxed only when i book profit. So how does it work in case of perpetual bonds?

In Liquid and Gilt funds ( growth ) you are taxed when you sell . You get indexation benefits (if you hold for > 3 years ) so actually you pay tax only on real interest rate and not on Nominal interest like in FD . Hence these funds are better than FD for like to like interest rate …

Perpetual bonds are like FD with long term assured interest rates … say > 90 years … but many have call options … you need to factor that as risk when you invest in them esp premium you pay on par value

@gagandeep, Could you pls. suggest one or two liquid funds and how can we purchase them

@manoopatil there are a lot of liquid funds, you may consider SBI/UTI Liquid Cash Fund or Quantum Liquid Fund, you can directly buy online from their Mutual Fund websites.

Hi Gagan, Liquid Fund tends to give around 6-7% pretax, wouldn’t it make sense to leverage savings accounts which also gives similar returns ?

Hi dipen,

The interest income from savings accounts are taxed at your normal IT rates (5%, 20%, 30% or 33%) and does not get indexation benefits. As the income is accuring to your bank accoun every quarter, it’s treated as realized and taxable earnings (If annual interest income >40k). This prevents compounding of earnings.

For debt mutual funds (liquid, gilt, corporate), you are purchasing mutual funds units and the earnings are only realized when you sell the mutual fund units. And if you hold the units for 3+ years, and then sell, you will only have to pay IT for the (interest amount - inflation amount).

7 Likes

@8sarveshg Can you elaborate point D?
While I revisited this post, I did not understand point D well.
What is buy side / sell side domain? Any examples?

1 Like

Buy side are the decision makers. Sell side are the people who help the decision makers to make the decision or execute the decision in return of a fee.

Example of buy side - PMS firm, Mutual funds, Various Industries
Example of sell side - Brokers, Consultants, Distributors

6 Likes

Hello all,
This thread is not very active and for obvious reasons. Markets are capable of testing our patience and strategy till the brink. I just wanted to ask if members of the forum can share their personal experiences which includes both money and psychology when they undergo such phase. Also what keeps you going or makes you feel supported . And finally when should one take a call that this will not work for me.
Also can this be used as a contra indicator to being a full time investor. If one can survive few bear markets then things should mostly work out .
Regards
Divyansh

My personal experience and the experiences of a few individuals suggest that,it is manageable,and actually as normally as other jobs in private sector in India and abroad (we do not have experiences of govt. jobs).There are only a few points to be kept in mind religiously like:

  1. Keep the cash for three years average expenses in debt (mixed of bank deposits and debt funds),
    2.Keep your lifestyle like a value investor,i.e. no unnecessary expenses(like showing off or bad habits),
  2. Make it a mix of investment and trading
  3. Have the investment in proven funds amounting to the sum which is 25 times your minimum annual expense (4% of withdrawal will keep the fund undiminished in terms of purchasing power)
    So far, it has worked for years more than a decade.I would love to hear experiences of other members.
13 Likes

Any stock can fall in a bear market, often to unreasonable levels. Question is - how confident you are that it will recover? One necessary condition for recovery is that its profit must remain intact, that the possibility of its business getting derailed is extremely small. That leaves us only a few businesses with competitive moat whose stock mostly quote on premium. We feel most fearful of holding such stocks, but if they fall drastically, we will be most optimistic of their recovery. So if they fall, and we have cash, then it would be a blessing. So always hold some cash for such opportunity besides holding your invested amount in quality stocks. I am 30% in liquid funds to be deployed only if my highest conviction picks falls drastically.

Yet, there are times when you feel fearful of steep fall. At such times it helps to buy an out of money put, on your largest holding or nifty. First, it helps limit your loss. Second, if the markets do fall steeply, you can convert your cash profits from selling put to accumulate your quality stocks at cheaper price. Such a good deal that I find myself changing from fearful to cheerful - cheering the market to fall. Yes, the option may expire worthless, but the peace of mind it gives is worth it.

So far, this process has helped me navigate this bear market with a calm mind. Instead of watching the index all the time and worrying about how much they can fall, or whether I should exit/enter now, I am spending my time studying stocks which are showing strength even in this market. The bear market acts as a good filter for identifying stocks with improving prospects, these are the ones most likely to lead next bull run. Bear also exposes a lot of frauds and weak business models; studying how they fooled investors in good time and how they could have been avoided, is a good source of practical learning.

This is my first bear run, so consider my process with caution.

5 Likes

As of now, I have not seen any impact to my source of funding, which are dividends and interest income from liquid funds/FD. I hold 30% in cash and it has been giving an yield of around 6%. I expect it to go to 5% but that is not a big impact. Dividend yield has not reduced until now (actually increased this year) but that might go down by 10% next year if there is no recovery or further slowdown. Overall as a full time investor, there is no trouble so far as recession is not visible yet (based on above parameters). We will have to see if this changes next year.

Disclosure: This is my 3rd bear run and 2 years of full time.

8 Likes

One needs to be clear why one wants to be full time investor .

If the drive is only money - then bear market can destroy the drive very easily …

In my case I love studying macro and micro and their effect on business I own … It feels great when they turn out to be right and I learn when they are wrong .

That keeps me going in both bull and bear market .

On monetary side - I quit my job only after my dividend income was significantly higher than annual expenses …

I add the excess amount ( Dividend + Interest - Annual expenses ) generated every year to my investment kitty …

16 Likes

Dear Shailesh… May I know how much would be your dividend income in % terms of your net portfolio.