instead of 2% rental income- why can’t you earn 7% from tax free bonds (also enjoy capital appreciation as they move up with long term interest rates falling in India)- money comes automatically, no hassle of tenant, no legal, regulatory issues.
Even people from IIM/IIT/stock investors seem to have this strange love with real estate- which is just not rationale!
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You cant guarantee a stock like Nalco, REC (PSU) to hold a specific price (capital appreciation). Basically, after the dividend is stripped they correct to post dividend net worth. You have to time them (cyclical) to get capital appreciation unlike a HDFC or Asian paints.
Also, tax free bonds don’t appreciate in value (ignore your best case interest rate fall from 12% to 7%).
I may agree/disagree with you on a case by case basic on which asset class to choose. I generally prefer asset light models like stock, bonds over real estate. But currently, as the rental yields are high in Hyderabad 4-4.5% (2016) and property values stagnant, I believe it is not as bad an investment 5 years ago. Also, I don’t see interest rates falling further 6.25% considering fed hikes, inflation in growing rural economy like India and oil prices consolidating. Hence there would n’t be any appreciation due to bonds.
Now what kind of asset gives yield + most probably appreciates in value ?
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then you can buy and hold HDFC, and other high corp gov shares instead. As simple as it gets!
I have been reading this with a lot of interest.
Personally I feel that the Pareto principle of 80/20 is applicable everywhere including in this game. So top 20 percentile of population with generate 80% of the returns (not alpha) while bottom 80 percentile with have to be satisfied with a return significantly lower than even market. Such, is the name of any game in a world which is increasingly specialized, more so in stock markets.
My advice to all of you would be to please please assess yourself really well before becoming a full time investor - cause a) it is not that a noble profession and b) it is difficult for an average investor to even get average return - its an unfair scale
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8 years now as full time investor post quitting job.I agree 99% of the aspirants must try not to quit your job.For me personally now its difficult to contemplate being in a job again having tasted the other side.Plus i doubt i will survive in a job now .Those who have working wife or those with some level of spartan world view can survive the waiting period somehow.I think one gets used to the new life.Its a strange experience which the working employee might not understand.Its not theory.Its also not a straight road.
The problem is how to negotiate the waiting period till your stocks or your dreams actually happens.Its v v tough.My smoking has come down from my job days but i worry always if i will make it now that option of going back to job is almost gone.Chances of mistakes also more since one may make errors of exiting early as compared to being in job when one may not even look at stock prices on a busy work day.
My advice to 99% of readers-hold on to that job even if its tough.
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I feel elated to read through the discussion. It offers plentiful - a bag full of dreams and a wealth of worldly advice. Having gone through it, I couldn’t refrain myself from getting entangled. A recluse in my personal life, I never thought I’ll share about myself with complete strangers on a random forum, but life has funny ways, and so it brings me to you with my experiments with life. Pardon me if its long but I hope its worth a read. None of it is an advice but if someone happens to find anything worthy, my purpose is served.
Though it might not seem shameful for me to admit today that I was a poor student at school, it was the greatest embarrassment in my childhood throughout my teens. Passing exams was the only goal and surviving the year was my only dream. Finishing high-school with mediocrity and not revealing my twelfth results back home for a good time for fear of being reprimanded were only a few highlights. Though I loved writing, and pursuing sports, they were never considered worthy careers in my family.
Wise men say that character is built in testing times. Its only when I was faced with the dilemma of not having a future in life, the most adventurous transformation started shaping me. Somehow I managed to get in the University for Graduation. That was the first time ever I made a goal in life - that I would pass with first division. The day I achieved this goal (only by a small margin though), I realized what goals can do to you. They make you optimistic, confident and happy in life. It was my first victory and a stepping stone. After this small success, I went on to complete MBA in Finance with flying colors and got a job. That’s when I started my first SIP in mutual funds. Thereafter I started investing in stocks directly too. Meanwhile I got a big opportunity to work with the management consulting giant, Mckinsey. I worked with them for a few years before moving to Middle East to work for a private equity firm. During this period I had started investing on tips as I had no time to analyze stocks. In 2008 slowdown, I lost almost 70% of my portfolio. However, that didn’t bother me much as I was having a high paying job. I was not an extravagant spender which helped in building a corpus. But deep inside, I was doing my job only for money with little interest in working for corporates for long. I dreamed of being independent. Yes I was dreaming – After learning how to set goals and achieve them, the second most important thing I learnt during this period was to dream. There is a difference in goal-setting and dreaming. Simply put goal is like what your heart wants to have and your mind says ‘okay its possible’ while dream is what your heart wants to have and your mind says ‘maybe not’. One of my dreams was to retire and retirement meant doing what I love to do.
I came back to India and joined a management institute as an academician. The salary was less compared to corporate but it allowed me balance in life. My goal was to make time for my passion. Last year I took a sabbatical from job to pursue PhD from an IIT.
Starting as a mediocre student and going through a whole transformation, I am ending as a scholar from an institution of repute. Inside I feel it should redeem me from my childhood setbacks.
I am 35 now. I am independent, well-invested (MFs, equity market and real estate) and in a way retiring soon. For last 2-3 years, I have been investing good time in stock analysis. Although it’s a passion for me, its not what is closest to my heart. My first love is to write. I’ll be happy writing full-time from next year onwards although it hardly pays bills (already have a goal for this year). But I like investing too. So I’ll find time to manage my portfolio. Also with PhD completion my intellectual goals will be accomplished. After sorting out my financial, artistic and intellectual goals, I wish to someday set some spiritual goals too in future. But I’ll keep that for later. 
I feel if someone as mediocre as me can take writing as a full time job, then investing is far more paying to anyone who has a passion for it. So if you think its an advice feel free to, but I would encourage anyone to take up the profession they love. Just take a moment to ask yourself if you can do something over and over in life without getting bored with reasonable success, and if the answer is yes then just do it without making it too complex. I do not know how rich you would become but I know for sure you’ll be most happy with your choice of work (its not work actually, its play)
My learnings
- Your bad times is your learning ground. Keep persisting, keep surviving. Clouds will clear and the sun will shine. It taught me patience.
- Most of us in India are not allowed to choose our profession unless we are a prodigy. We have to play on someone else’ turf and win there before we do what we want to do. It taught me perseverance.
- Set goals in life and work for them sincerely. It taught me hardwork.
- Time and again people keep discouraging me about my decisions in life. It does not bother me anymore. Going against the tide and proving others wrong time and again has given me confidence.
- Dream. It teaches me to stretch and to better myself.
Today Independence for me is to be able to ask my heart what it dreams of and to be able to instruct my mind to do what it takes to achieve it. My best wishes to everyone for your goals and dreams.
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@Nolan, thanks for sharing your life experience, it is an interesting read.
I felt more connected to your thoughts and life experiences as I also been to similar experinces. Patience ( during cloudy years of the journey still being optimistic about the sunshine) and courage ( to stand by your dreams when everyone else is discouraging and times testing your beliefs) are precious assets to navigate through the tough times in once life.
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Hey Nolan, thanks for sharing your life experience.
Prasanna
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Hi ! More than the equities, it is the story of your becoming a profitable writer that is more interesting. I shall be very curious to hear more about it. And a shot in the dark, has books, writing or literature influenced your investing style?
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Hi, I am not sure about being a profitable writer, it has more to do with intangibles…but I won’t complain if I make some money in future 
No there is no direct impact I’ve felt on investing decisions. But once I make an investment decision, writing helps me forget about it for a while. It helps in avoiding any panic calls on short-term movements. Also the waiting period is not that stressful either.
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One thing that I would also want to share that some of the members are contemplating leaving their current job to focus on just their own portfolio. Now unless one has made some decent money already (which means own comfortable house without EMI plus atleast 5 cr of corpus in today’s time), I think quitting your own job for just getting returns from portfolio may not be the right decision for most of the people. The simple truth is that in today’s age I dont think less than 5 cr leaves you with any margin of safety irrespective of your spending pattern.
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And Even after applying all filters suggested in this thread,
leave the market after minimum consistent down period of 3 Months.
That will be more matured decision and one will have real will power to make the shift work in favour rather than regretting it.
When you have guys like Sunil Singhania, Vinit Sambre, Madhu Kela, Ramdeo Aggarwal and a host of other such people who are committed to this full time, I wonder whats the point in trying to do the same thing with your own money. Whats the chance that one will be able to outperform these guys?
Investing as a full-time occupation only makes sense if you intend to set up a PMS - otherwise whats the point?
Individual stock picking as a hobby though is a different thing altogether. It keeps you mentally engrossed, its fulfilling and most importantly, you wont lose your sleep ( unless you do something really stupid ).
What would be the CAGR returns of the 4 guys that you mentioned?
Lot of them have done 30% plus CAGR over the last 5 years and an average of 15-20% over the last 15-20 years. If one is aspiring to become a full-time investor ( to manage his own money ), this should be the benchmark and not the NIFTY indexes.
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But Nifty’s 15 yr CAGR itself is 18.5% (17%+1.5% dividend yield). Does it mean the experts are not competent enough to beat index by 4% to get > 23% ?
Fund managers do have following constraints:
- huge Asset Under Management (AUM)
- Higher amount of inflow and outflow during bull and bear market respectively which is against value investing principle.
- need for liquidity due to redemption pressure.
Hence PF of these experts hold mostly index stocks,of course, at a different weightage. But we, the retail investors, are not vulnerable to these constraints and should be able to beat their fund, if one has adequate temperament and basic financial knowledge.
The ability of these experts are impeccable and their personal portfolio may be fetching 30%+ returns for long period but that’s not applicable to the bulk fund they manage.
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I dont think its a hobby @sandeep17
And good stock pickers are not born, they are created. If you know what i mean.
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That is what I was thinking.
Only people who have invested in these mutual funds can tell us the real returns i.e. after tax, after entry/exit load and after any other management fees.
From what I have read and heard, real returns from investing in NIFTY ETF are more than real returns from any MF for the same period!
Well, I used the word hobby for lack of a better word.
More importantly, I am saying this in the context of someone trying to become a stock picker at the expense of a regular income. In my opinion, that’s a huge expense. This expense would need to be offset by the alpha you generate over the returns from any of top fund managers. To that extent, I am saying this may not be possible for most of us. Again, I am saying this in the context of individuals managing their own money ( without an alternative income ).
I am not belittling individual stock picking here. I have built my own portfolio as well over the last 2 years. My allocation at this point of time is ( 40% mutual funds - 30% individual stocks - 30% cash ). What I am seeing right now is my own portfolio returns are in line with my mutual fund returns ( mid-cap funds). But then I do know that we have been going through a purple patch. In-spite of having a decent portfolio ( which is what i think I have ), I am not outperforming the funds I am invested in. For me, its fulfilling though since I am paying myself huge fees ( in the form of a salary ) to do so. Without the fees, I am not so sure it would be worth it.
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