Wow! This is a number anyone can use to calculate his suitability…
Can I get the reference and few lines that describes it.
Wow! This is a number anyone can use to calculate his suitability…
Can I get the reference and few lines that describes it.
Current annual expenses / (Estimated annual return % - Estimated annual inflation %)
e.g. 12L / ( 12% - 7% ) = 2.4CR
Above estimates may seem too conservative (reflects my personality), you may tweak per your own view.
Excellent discussion on this topic.
Just want to add few questions which is essentially asking myself whenever i get this thought of becoming a full time investor and try to answer myself:
1.Do i have the analytical mind/capability to independently analyse the business and come up with my own thesis and ready to be challenged by others?
2.Do i have an investment methodology that would objectively analyse public listed companies and pick few businesses in which i can put my life savings?if not,can i acquire one through evolution over a period of time by studying/analysing/discussing businesses?
3.By some magic,if i am able to find 10-12 wonderful business in the first 2 years of becoming a full time investor,what will i do in the spare time for another few years?
4.How many people in India have made it successfully as a full time investor in the last 10-20 years?Like Warren Buffett jokingly said "when people look at Bill gates,they dont think they can become like him.But when they look at me,they feel it is easy to achieve whatever i have achieved in my life by becoming an investor."My thought on this one is since no question is asked when you are buying/selling a security,it is just a matter of clicking the button which makes us feel that it is easy to become an investor.Imagine,for every transaction if the exchange asks us to present our thesis before buying/selling and that will be vetted out before accepting the order,i dont think I will ever think of becoming an investor.
5.Even if i start with Rs.50 lakhs to make it to Rs.5 crores in 10 years,I need to compound my money at 26% CAGR which is big ask considering the challenge in picking the winners and sticking to them. Even big money managers are struggling to generate more than 10% to 15% over a period of time as the market is pretty efficient most of the time.What skillset i bring it to the table to generate this return?
Why i am talking about 26% here because if I progressively improve your skills in my current job,I might able to achieve 10% to 15% salary increment YOY and someday if I reach the helm of the company I might make even more.
6.Am i an eternal optimist to sleep peacefully no matter whatever happens to the market?Forget about 2008,most retailers sold their stocks when the nifty hit 6900 in Feb this year.It is difficult to go through the heartburn and mental stress during this period.I think one needs to have an optimistic mindset to convince themselves about the vagaries of market .
7.Atleast in the day to day office work,we can be little relaxed and do not need to give out 100% commitment,but here one needs to be brutally honest to hone their skills as we are swimming alongside big sharks.Markets do not care who we are and how much we have.We need to get smarter than most people and take a long term view without worrying about short term events.
Anyway,good luck in whatever you choose to do.
Luck favours those who have the appetite for risk.Me .an exbanker, left the bank at age of 32, settled in Bangalore.Went to the then booming real estate market and made a mini fortune there. Promoted a Tech company with an IItian which was finally sold to a big company for decent consideration. Free from the headache of monthly cash flows generation, I swung to Capital mkt and later to FNO trading…Now an active FNO trader with good holding in Long term stocks …Moral of the story is…The decision must be taken at the right age and right time
To give a little background , my father compounded at 14-15% in the stock market for last 25 years and had passed the baton over to me last year near my 22nd birthday to handle his portfolio. I would be lying if I say the networth of the portfolio is not huge. I do have (fair or unfair) advantage due to my father. However, my purpose is not to become a “beach bum” or “lazy kid” after attaining financial independence. The purpose is to be able to pursue an exciting R&D job which may not be high paying but worth every hour to do. Also, as I have changed my major in my masters degree, two important things very related to each other, have become clear to me:
a) “When you make your hobby a mainstream and mandatory activity, it no longer remains a hobby. It becomes extremely monotonous.”
b) “An electron and proton attract each other at a certain distance range. If they get too close, they start repelling each other. If they are too far, the force of attraction isn’t strong enough to keep them close.”
Point b) is very critical for me. I have 2 serious hobbies now: Managing my father’s portfolio and Weight lifting (and cooking to complement the required nutrition). Keeping them at a level of serious hobbies is just the right amount of distance to make me pursue them whole heartedly and consistently. If I decide to make any one of the two hobbies as my job, i would be screwed. I am sure i would start hating it. i might even give up and hand over the portfolio to Basant Maheshwari’s PMS.
I love reading value pickr forum, doing quantitative as well as little qualitative analysis on stocks for days without any deadlines or expectations. I like lifting weights and having proper nutrition to complement it. Its my hobby. These activities make my life so much better and purposeful. And I want to keep it that way for a long long period of time, until destiny or you may say fruits of karma change my path.
Not sure, if this would help you directly @django , but I just felt sharing my own live anecdote after reading so many awesome posts by fellow valuepickrs on this thread
Interesting viewpoint if you consider your investing career as a startup!
‘The 10% Entrepreneur’: Going Part-time with Your Startup:
“Any industry where you can get going and you can do it in a highly flexible manner, in which you don’t need a ton of capital, really lends itself to 10% entrepreneurship.”
I have thought about this, here’s a summary of my thoughts -
First up my profile - 34 years, single with no loans/liabilities. I’ve been making more money from my portfolio than from salary over the past 3 years, made my first crore at 31. Not a single paisa in real estate, believe in running concentrated portfolios instead where the payoff matrix is asymmetric.
What keeps me working -
I am a wealth manager by profession, something I have chosen and struggled a bit for, could have easily gone off to the US and settled there, moved into wealth management 5 years ago. My profession gives me access to people with deep pockets and the opportunity to understand how a rich man thinks
There is a decent amount of overlap between what I love most (equity investing) and what I do for a living - advising HNI’s on how to build portfolios. Though my role is 80% sales and 20% content, stress levels are minimal since I can handle most customer queries in my sleep. Work sometimes does look like fun occasionally
I have become a good stock picker due to the worldly wisdom I have accumulated due to being a business manager who has run P&L. This is something one can never pickup if he sits at home and only “thinks” about business models and ideas.
I have always believed that concentrated portfolios do not need full time effort. Incremental output by focusing on investing full time may not be high when all you want to do is hold 12 good stocks which can compound your net worth by 30%+
As a full time investor the lack of activity can get to you. I have seen this happen to people who sell businesses for hefty valuations and then take some decisions just to keep themselves busy.
It is always a good idea to keep major decisions pending for some time to keep optionality open, do not commit to lifestyle decisions too early in life before you have known yourself
I guess points 3, 4,5 & 6 are applicable to most people. If I were you I’d spend some time running the rat race and build up some more corpus before considering the decision. You also get to know yourself between the age of 30 - 35, in the Indian context we are all immature till we get to our 30’s.
ATB in making your decision, do take your time
@zygo23554 it will be good if you can share your current portfolio which you feel can compound @30%
I am curious to know if you have come across any client who has at least some knowledge on personal finance or equity.
Recently I met with my bank relationship manager. He tells me that even people in top jobs are financially illiterate. All they know is stock ticker name and stock price. I just wanted to validate his arguments
Agree there is a lot of difference in watching a game of chess and ipl cricket game. Sometimes markets will place you on back foot. To navigate those tough will be a mental challenge. So when you have a job something is there to take ur attention
Even though I read it last night itself, but could not refrain myself from posting my POV (point of View), which I have already shared above in the thread.
What amazes me is the way you have described the Positive Journey of life, which definitely would encourage, a lot many youngsters, who would have just started their careers, or are 2-3 years in the industry, but started feeling boredom, with their regular jobs & start looking for an alternative way of making money & stock market seems, from outer world, to be a very easy place to be in.
What I would suggest is citing such a kind of journey, where you have achieved something to the tune of say 1 Crore, you should always be highlighting the pain areas too & the kind of behind the scene scenarios, which definitely would have not been favorable, all the times.
As there are lot many avid readers, of this wonderful platform, most of them may get carried away, the way your journey portrays, that Money can be minted so easily.
Wishing you luck for your future endeavors.
@KrishnaA What I currently hold - Cera, Amara Raja, Kajaria, Mayur, Sanghvi Movers, Greenply, AIA Engineering, APL Apollo, Garware Wall ropes, Lg Balakrishnan, TCPL Packaging
I make it a point to hold stocks that are at various stages in the rerating/discovery process, the last 4 names above are recent buys (post 2014), all other are pre 2013 buys
@gautham1 I would generally agree to what your RM’s said. Success in other aspects of life does not translate to smartness in personal finance/markets, I deal with some people who are CEO’s but just don’t understand how money works, these folks are smart in pockets but very average otherwise. There are some customers though who are damn smart and know how compounding works, these are people who score very high on worldly widsom.
The average customer gets taken for a ride by their RM’s who in turn aren’t the smartest lot you will find. The average RM hardly inspires confidence since beyond a threshold knowledge doesn’t really help you as an RM. As long as you can find customers who are dumber than you are the game continues
Reason being investing ain’t a simple function like engineering where if the inputs are known and the function is designed well, output can be predicted with a fair degree of certainty. In markets I can do everything right by the book and concepts and still get hammered, very few people (even those with high IQ) can grasp the concepts of range of outcomes and likelihood of events happening and fixing your buy price based on that
@bsahni When I moved to wealth management I took a pay cut and moved to a firm most people wouldn’t have heard of from a bluechip name in IT. Whenever I mention this to people (even today) they look at me like I am an idiot. In fact those who do not know my net worth would probably think I am a big loser especially with the tech and startup noise all around in India.For the average guy this ain’t easy to deal with, it does help that I am a bit aloof by nature and don’t get influenced easily. I also almost got fired in my first stint in wealth management, it’s only now that I am more settled in this field.
Coming to how compounding has worked for me -
I finished an MBA in 2008 and started with 0 after settling my edu loan
In 2010 I had 10L in my SB account when a phone banking guy mocked me on a call and said I was being too generous to my banker. Then started reading on investments etc
Did the usual nonsense in the first 2 years where I picked genuine losers like Bartronics, MIC Electronics, Edserv, Hanung Toys and Alok Industries
By 2011 I figured I hated my then career and quit my job without an alternative in hand - very brave but potentially stupid decision when I look back. Got lucky to land a break in wealth management
2011 - 2013 is where my life started centering around stock picking, all I would do was read and analyse businesses. Social life became nil and still continues to be minimal
By 2013 I knew I had something good going, figured out areas of improvement and started addressing them in a structured manner. I also developed a macro world view by reading various sources on bonds, commodities across the world
2014 onward has been a purple patch. Bulk of my net worth has been created from 2013 onward. First 3 years was all hard work with no great results to show for, I was reading 5-6 hrs a day while others of my age were busy getting married and starting a family
Like all things in life investing has been a step function for me, I believe one needs to put in 2-3 years of good effort to even get to a decent base, there on knowledge and wisdom are cumulative and results can accrue in a non linear fashion.
Conviction - I have seen days where the MTM in my portfolio in one day (Aug 24, 2015) set me back by more than 1 year’s salary. On a volatile day my portfolio swings by an amount more than my one month salary. The only way I have dealt with this is to know my businesses well and understand my own temperament better, without conviction it is tough to hold fort during testing times
Role of Luck - First 3 stock picks that worked out were more due to luck than any great analysis. Vikram Somany, Jayadev Galla & Ashok Kajaria have done more for me than all my bosses, colleagues and relatives put together. Once I saw initial success I started putting in more effort and the virtuous cycle started. It is very tough to be passionate about something that you do not see success at, I persevered through the bad stock picks before I got my approach and focus right
I am still single and continue to make my weekends miserable in the search for the next multibagger. I still do not have an answer to “what did you do over the weekend?”, people have stopped asking me that question. If this is what it takes to become a $ millionaire by 40 and become even better at what I do, so be it - this is a price I am willing to pay
Guess that was long post but I had to put this out here. Very valid point raised by @bsahni, the behind the scenes story needs to be laid out objectively lest people think it’s easy. It’s simple, but not easy
I think you are a bit obsessed with money. Dude give yourself a break. There is more to life than stocks and money. Get a gal, some babies and you already have good money. If you do not intend to marry than do some philanthropy over the weekend…But dont be so obsessed with the market. Friendly advice through into dustbin after reading…
If money is what motivates someone to do more of what they are passionate about. Let be it. Bravo zygo23554. You are inspirational. Please share more of your wisdom when you could to the underprivileged.
I din’t say “no gals”, I only said no wife and kinds yet
Anyway you are right to some extent since my life had become very imbalanced. The obsession wasn’t with money with but with being excellent at something and finding my identity in the process. I can now say without blinking an eyelid that if I hadn’t discovered my love for the market I probably would’ve been miserable by now running the rat race and wasting my time with things I don’t believe in.
In short, imbalanced for sure but by choice. I may choose to get more “balanced” going forward, just not very sure yet!
Always good to hear counter views, that’s why I like online forums. People I known in real life wouldn’t be so upfront and call a spade a spade.
Awesome post Zygo. I am curious though on one thing. You spend so much incremental time on finding new ideas, yet have not found any better than what you have in teh last 2 years or so. How do you kkeep going? That’s incredible patience mate…Are you more in the PM side of WM businesS?
I could totally relate to you over the weekend quote. I am a INTJ personality type, which helps a lot.
The only thing is, as far as I am concerned money is just a no. In my bank account. The greater joy is seeing a strategy that plays out exactly as planned over a long term. Also researching companies and macro events lead to having a " bulb glow " moment which is kind of addictive in itself.
Thanks @ zygo23554, for taking my point of view in positive spirit & explaining the back door scene of your success.
Intention was solely to give an impression to the audience that it requires a lot of conviction & passion, to be in a position & state of mind, where people would definitely to be a blind follower of such success story, without even giving a second thought, to take any call, without any rational judgement & get totally screwed up.
I too have been on the same path, as you already described & my strategy too is too sacrifice little in terms of hard work, effort, time & value now & then reap the dividends in the future.
I echo you & now it perfectly looks in the context, with your elaborate explanation ,which definitely should help the readers.
It should not.be taken like you didn’t succeed in.one part of life…it’s always about choice. I also had couple of.picks like.you in 2012. I sold some.to buy a house and held some…though not a crorepati now I have decent assets. What you did is right for u may not be right for someone else…don’t worry about ppl.who call u money minded…at core most of us are selfish some are selfish about.money some about love some about how to enjoy next weekend…
On an average I’ve made 2-3 investments every year, it can sometimes get frustrating when you go months together without finding an interesting idea worth going deeper into. Patience is something I’ve learned to develop over the years, asymmetric payoff opportunities by definition come once in a while - when you see one you have to swing big and commit. This in turn means you have to comfortable doing nothing for long periods of time and build up cash during the period.
One of my biggest learnings has been that activity is not the same as progress, the corporate world drills so many bad concepts into us. We are taught that you should always be doing something which works against us when it comes to investing. I’ve picked up a couple of recent hobbies - fitness and travel related which satiate my need for activity, seems to be working for me else I’d end up putting too much pressure on myself to constantly “keep doing something constructive”
I am a salesman btw whose job is to acquire customers and manage their portfolios through third party products - MF, bonds, structures, PMS etc. I do not do any direct portfolio management as part of my role