Equity Investing as a full time career?

Sumeet Nagar, the managing director of Malabar Investments is an investor par excellence. He is known for his incredible understanding of the small and mid cap space. Like in all spheres of life, there’s always something to learn from others. Learning, without an iota of doubt, enables growth. I’d like to share some pointers kindly shared by Mr. Nagar which, I’m inclined to believe can help refine our investing strategies.
After the financial crisis, almost a decade ago, unprecedented liquidity boosted the economy.
It’s likely that quantitative easing could be concluding.

There’s a healthy chance that 2018 will see reduced liquidity.
There’s a straightforward relationship between liquidity and asset prices.
Increased liquidity leads to more money chasing assets. Demand goes up and hence prices appreciate.
By inversion, its obvious that a liquidity crunch leads to lower demand and hence lower prices.
However, rising earnings could cushion the fall.
Prices are a function of demand and supply.

Investing in general and investing in small and mid caps in particular should be for the long term. But, we should definitely keep an eye on short term risks.

Over 5-10 year periods, small companies typically outperform larger companies. The straightforward reason being their ability to grow faster.

During times of irrational exuberance, it may be a good strategy to reduce exposure.
During periods of immense pessimism, increase exposure.
Easier said than done.

A good, investible business is one which has the ability to compound sales over the long term. But, without needing to raise much outside capital. Growth, ideally, should be fuelled by internal accruals.

Why would competitors let the company grow sales? Wouldn’t they try their best to snatch market share

Here comes in to consideration the most around a business. There are varieties of moats. Even the ability to be the lowest cost producer is a moat. It varies from company to company.
The company should be a cash generator. And, generated cash should be utilised for growing. Its a virtuous cycle.
Also, there should be a runway for growth.

Management Team
As most veteran investors would say- For any investment thesis to fructify, of supreme importance is management quality.
a) Strong Operational Capability
Management should know the business inside out. There should be a drive for expanding the enterprise.
b) Capital Allocation Skill
c) Integrity
d) Quality Lower Level Management

Industry provides a tailwind to the business. But, it’s a good management that is able to harness it.
If sectoral tailwinds and good management are complimented by moat and hunger for growth, it could be the recipe for a blockbuster stock pick.

As always, if I’ve erred in my interpretation, it’s unintentional. My apologies if there are errors.


I have been regularly reading this thread in valuepickr -excellent contributions by all -I have recently quit my job and now full time into investing ,thanks to all members in this group for all the quantitative and qualitative insights …today i just came across a brilliant article ,please go thru if you haven’t yet -while all are covered earlier here but nice to refresh at one place


Dear all,
Today, I present the summary of a dialogue conducted by Mr. Khurana with a full time value investor. I’m not certain if it’s acceptable to disclose the investor’s details. Hence, I’ll address him as Mr. A.

Mr. A now manages money for himself and his clients. He has established himself as the source of coherent opinions on investing. His guidance is pure and does possess the potential to dramatically improve our process of investing.
The beginning of his investment journey is nothing but fascinating.

In his childhood, he witnessed his parent investing in companies, applying for stocks in initial public offerings. The process sure piqued his curiosity.
A monumental moment in his journey was the launch of a mutual fund by a major American company in 1994 . He witnessed delirium among applicants.
His desire to participate in capital markets continued to develop over the years.

Finally, in the years 1997-98, as a student of textile engineering, he made a foray in the bizarre yet enchanting world of capital markets.
He commenced with a capital of Rs. 10000.
Being a student of textile engineering, he had a reasonable understanding of the company Bombay Dyeing. It was in his circle of competence. This investment appreciated his corpus by 30%. Mr. A was delighted, exuberant.

In the meanwhile, he had established a habit of reading newspapers, magazines concerning the world of finance. However, he admits candidly, that he couldn’t comprehend a major portion of the content in these sources of information.
But, its precisely this inability to understand that stimulated him to persist. Also, on a lighter note, he shares that having reading as a hobby could prove to be entrancing to recruiters.

He graduated in the year 2000. Prior to graduation, in the run up to the IT boom, unprecedented recruiting activities were initiated by IT firms. As a result of that, he was offered a job by one of India’s leading information technology firms. But, in those days, he wasn’t very comfortable with technology.

Mr. A was pleased to get a job. But, there was a tinge of unhappiness since it wasn’t his calling. However, not to his displeasure, the IT bubble burst and the job offer was rescinded.

Post graduation, he was granted admission to a leading management institute in 2002. Mr. A was simultaneously investing in shares. He then went on to work with a leading professor as well as investor.

Investing Strategy
In the initial days, scanning BSE announcements, was a major source of investment ideas. He practised various investing styles and strategies- Deep value investing, cyclical investing, debt restructuring investing, etc.

Just 10 years ago, his portfolio comprised of 40-50 companies. Over the years, amends have been made and now, Mr. A’s portfolio now comprises 7-8 companies. A major source of investment ideas is screens, interactions with fellow investors, literature.

His recipe for investing success is good business, good management and a realistic expectation from investments
Mr. A desires a 17% IRR.

Selling decision
Mr. A lightens his holdings when market prices overshoot the intrinsic value. Booking profits is contingent on company quality and alternate opportunities. His selling decision isn’t dependent at all on the index levels. He takes a company specific view.

Determination of intrinsic value
He employs a discounted cash flow model after introducing very conservative numbers to estimate the fair value range. For further safety he takes a 25% margin of safety. He assumes a 10% discount rate.

Mr. A places great importance in the moat possessed by a business.

He considers selling when market price is 1.75-2 times the calculated intrinsic value
He initiates a fresh assessment, evaluation of the company once valuations exceed intrinsic value and become lofty. But, if investment thesis is wrong, have no hesitation in booking losses.

But, for Mr. A, it must be mentioned that valuation is just 20% of the investing process. 80% is contingent on business quality and management.

Business thesis is important but valuation is more important

How long to hold stocks?
Mr. A believes in having no timelines. He allows the market to take its own time to discover the
stock and accord fair valuations.
More often than not, if evaluation is correctly performed, returns will be delivered. Market may delay reward but not deny it.
Spend a lot of time before investing. But, once invested, be patient

Risk management strategies
Risk is the loss of capital and/or purchasing power.
Mr. A believes in developing a tremendous grasp of the business before investing. Also, diversification is crucial for him. He doesn’t invest more than 20% of portfolio in any stock at cost.

In depth understanding + Diversification = Risk Management

Are triggers required for stock to appreciate in price?
For investing styles like asset plays, triggers are requisite. But, when an investment is based on the mispricing of a excellent earnings generating company, business performance in itself will trigger price appreciation. But, patience is critical.

No investor is immune to mistakes.
Mr. A succinctly summarises his mistakes-

Investing in ideas with half baked conviction

Resist the Fear of Missing Out.

Calm mind is a prerequisite in investing

Derive nectar out of the investing process

Don’t aim after shooting. Understand and only then act

Is meeting management advisable?
Mr. A believes that management meets are unwarranted. Often, they may prove to be counterproductive. We may be entranced by the top manager and investing based on such superficial evaluation is often disastrous.
All the requisite information is available in public domain.
It isn’t value additive to meet top leadership. It often leads to wastage of time.

Try to understand the business, not management

Suggestions for overall development
To be a successful investor, it’s imperative to participate in non investing activities.
Excess of anything is detrimental.

Mr. A is an avid sportsperson. He reads extensively, interacts with friends and also spends time in other leisure activities.

Some leisure is absolutely necessary for high productivity

I’ve tried my best to restrict errors. If any, my apologies.


Very interesting. I have the a lot of the same philosophies this mysterious investor does.

Things I also do:

  1. Focused portfolio (I am currently invested in just 5 stocks. Out of that, 3 stocks make up 75% of my portfolio).
  2. I expect only a 15% CAGR throughout my investing career.
  3. I use a DCF to arrive at intrinsic values for stocks.
  4. I’m in no hurry to sell. I sell only if the price is at least 1.75x-2x my calculated intrinsic value, my story for arriving at the value changes or I find some better investments (Or in the process of tracking some).
  5. I rarely track my portfolio on a daily basis. I check in on it maybe once a week. I intend to stay invested in the companies I hold for a long time.
  6. I hardly give into FOMO. I’m dead calm most of the time.

Things I don’t do:

  1. I tend to give more weight to Valuation and Financial Analysis. Numbers don’t lie.
  2. My largest holding is almost 40% of my portfolio. But I agree with the fact that Risk is a protection against the unknown (WB’s “Risk comes from not knowing what you’re doing”). Nobody should invest 40% in something they don’t know.
  3. I don’t believe participating in non investing activities has anything to do with being successful at it. Or maybe I’m understanding this wrong. I read a lot of books and articles, but I believe that they indirectly contribute to my investing skills.

Pardon me if I sound too appreciative of myself, but this really surprises me. I would love to meet this person. I’ll get him a beer to boot.


Thanks for your views - interesting…Is it okay for you to disclose the holdings?

Here goes:

Would it be OK to add a lump sum amount into selected stocks at this elevated value of Nifty PE or should I be waiting for a lower PE on the Nifty.


Since we have discussed the desire of many to become full time investors, I must add. As a lot of senior and experienced members here have been saying - one should really test their desire to leave alternative careers and join markets only during the bear markets and not during the bull markets. A lot of my friends who were contemplating such a move - as they were all primarily small cap investors who made 3-5x in many stocks in the last 3-5 years - have now decided to continue with their respective careers (and rightly so) given the sharp fall in such stocks - many of them are now staring at losses of over 30-50% in their portfolios of small caps - an exhibit of bad skill during tough times while good luck during good times.

For a full time investor, the prospects of no income and steep fall in net-worth is a big double whammy. Such a whammy can only be taken by a very few whose hearts and minds are made up of a bit different metal. And this is what is proven in each of such bearish markets.

So one of my friends who was planning to become a full time investor has now joined the food industry in a senior position while another has opted for a stable BFSI career. I think both of them have taken the right decisions. They were just lured by the market and now that they have been smacked hard - they have understood that the reality over many years can’t be understood by extrapolating the good times into future.

To many who are still swayed by such lures, they should definitely try to meet up such people who thought about it and still didn’t go ahead with it for all the right reasons.


@8sarveshg Good to know this. I might also fall into one of those who started few years back and was contemplating on equity investing as a full time career after last years run up. But times like this are important as a test of the desire. But while my desire is still strong, I have realised that it is definitely not a one way path ahead. The numbers, fluctuations and underlying business strategies are always exciting to me.

What I would also like to know from you, other fellow members and senior members who have become full time investors is following:

  1. Initially when you had a separate career and were investing for wealth building or financial freedom and that might be pure investing, but as you turned to equity full time, did you also take up trading or F&O derivatives?
  2. During testing times like the current ones, where the midcaps, smallcaps and overall the majority of the markets are struggling, will the trading strategies help you maintain the cashflow needed?

Pardon me if my questions are naive.

Don’t rely on trading for cashflow for monthly expenses. It has to be dividend, interest, rental etc
Most endup with -ve instead of +ve cashflow (Exceptions are always there but are you one)


As I have said earlier also, there are only four conditions (or a combination of these four) under which taking the plunge to be a full time investor will be a logically justified act (mere want, desire, interest, fascination etc. are just fads of bull markets in 90%+ of cases and they fail you big time during the bear market):

a) you are a trader par excellence - remember in trading maybe only 1-2% people make money - some like @The_Confused_Consult are in my opinion very good short term traders. If you are great long/short trader - you can make money irrespective of market situations - but then very very few according to me qualify here

b) you have already built significant wealth (by that I mean atleast in excess of few crores in today’s expensive and inflationary metro environment) through investing or inheritance or your career and hence are not bothered by say a 25% draw-down year at all - your wealth is sufficient that if you keep taking out some from it for your expenses it doesn’t bother you at all

c) your partner is working in a way all operational expenditures are covered - this also means that your partner’s pedigree and experience in job is such that he/she can always be in a decent paying job - cause in a recession your portfolio can go for a toss and your partner’s job will be uncertain. So ideally it should also be a job where the beta to markets and economy is low. For example - a doctor is excellent low correlation. But an equity sales is pathetically high correlation. Also, your marriage should be stable :wink:

d) you start a business in the buy side domain which first of all means that you are already sufficiently ahead in investing in terms of pedigree, experience, track record and knowledge. This means you should not have been asking these questions in the first place. This also means that you should certainly be atleast employed in the sell side if not in the buy side in the first place.

In my case, three of the points - B, C and D worked so I took the plunge. The more points match - the better is the risk/return matrix (cause shit happens all the time) for this decision.

PS - As a corollary of what I am saying, you certainly can’t take up F&O and derivatives etc. just because now you are a full time investor now. You should have done that atleast 5 years back and you should have already been great at that (if that was the plan) before taking a plunge.

PS 1 - Buffett qualified in points B and D.

  1. I spend 5 years studying markets ( 2002- 2007 ) and started investing post Sept 2008 . Then for 7 years i invested 60% of my salary & bonus till my dividends exceeded my annual compensation from day job ( & total investment was > 100 X my annual expenses ) . I quit my job in 2015 and moved to full time investing . I have done F&O trading during early past of investment career 2008-2010 but realised it is zero sum game and takes away lot of time and induces too much stress

  2. No Trading is not for every one . One can lose money very fast . I have lost money though small amount in early part of my career .


This discussion is going on for almost two years and it has thrown many valuable insight into psychology of investing, money management etc. But one aspect that has strangely escaped this whole thread is - if someone leaves his day job to take investing full time, is he going to be gainfully engaged?

Lets do a scenario analysis. Suppose one has a portfolio size of Rs. 5-15 crore, which depending on expense profile and lifestyle, mixed in debt and equity, I think is the minimum to sustain a family and still being able to grow the portfolio. In such a portfolio, if debt is 40% and equity component is 60%, that means an equity size of Rs. 3-9 crore with a portfolio size of 10-30 shares and with a tracking portfolio of may be 30 shares maximum. To manage such a portfolio, I think one hour per day with couple of extra hours in the weekend will be more than sufficient. If one is a value investor or even trend/swing trader, one will have to sit tight for months, years or even decades. Similarly, debt will be mostly a mix of FDs, Long term bond funds, NCDs and liquid funds which do not require day to day monitoring.

So the question is what will the investor do in his day job time for 4-6 hours a day, five days a week. Daily or hourly monitoring of the portfolio may lead to excessive portfolio churning which may ultimately reduce the total return.

So, IMHO, if one does not do extensive trading and does investment only, one does not need to leave his day job to focus on investing.So, if one is rich enough to leave his day job and start investing without worrying about salary or monthly income (which I am not :grin:) the best option is to do something productive side by side like teaching, consultancy or farming. As much fun as moneymaking is, who wants to be remembered in his obituary as just a guy who doubled the money every two years and nothing else.


There is a lot that can be done; play a sport, hit the gym, travel, spend time with family, play video games etc

Nothing translates beyond the grave. Nothing matters once you are dead. One life to live - might as well have some fun while it lasts, without worrying about what people will think after you are dead :slight_smile:


Full time for next two decades? One would get bored in a year.

A person is both a living being and confluence of ideas, some of which deserve to live longer than his body. :slight_smile:

Not really. Been doing it for a lot more than a year. Definitely not bored! The only time in life that I was bored was when I had to work to meet my expenses.

I respect your opinion but unfortunately do not share your beliefs.


I haven’t reached the stage of financial independence yet. But, have been following this thread with great interest. To me it’s astounding how Internet strangers benevolently share their insights. It truly is fascinating. There’s no dearth of useful advice on this thread.

But, in my humble opinion, there can’t be a one size fits all answer. Reason may suggest that it’s imprudent to become a full time investor. On the other hand, our impulses may encourage us to retire. We are beings of impulses as much as we are of reason.
At the end of the day, it all boils down to what each one us thinks is best for oneself.

If we continue with our jobs we’ll be remorseful of not trying full time investing.

If we become full time investors we’ll regret not continuing with our jobs.

We’ll have to introspect and decide what we value most in life. Different people, different thought processes.

In such cases, I don’t think there’s a right or a wrong decision.

We’re, each one of us, such unique creations, that none but ourselves know what’s best.


Lovely thoughts! This is one of my favorite threads!

IMHO, Work and workplace(Boss, stress, travelling etc.) is a fun/passion for very few people. Most of the people work only because they have to earn their living. If there is enough money to earn decent living for the lifetime, very few of us would want to continue to work. Honestly I am one of those and have no regrets about it. Passion for equity investing and compulsion to work in undesired profession(due to reasons mentioned above) generally gives rise to the thought of being a full time investor.

As Peter Lynch has said similar like - Invest the money which you don’t need. From the advice I have read on this very thread, I am required to first get adequate amount which can sustain my living (e.g. 3 Crores at min. so that interest amount from it can keep monthly expenses) & adequate pension arrangement(e.g. another 1.5 crore worth corpus in PF/NPS which will provide another additional income post retirement age)

After attaining the above mentioned pre-requisite, one needs to get adequate capital for equity investing. Because after these pre-requisite, you would not care much even if deeper corrections such as on-going in small/mid caps occur.

I personally agree with @peepin2me in thinking Gym, Travel, Hobbies can provide you fulfilling experience of life. Besides, helping needy in some way can provide additional meaning to it.

I am quite naive and relatively new to VP. My thoughts might need corrections.


I think you are spot on portfolio size for Avg Middle class professional ( the other way to look @ is, it should 100 X your annual expenses ie your expenses are 1 lacs a month ie 12 lacs annually - Your investable surplus should be 12 crores before quitting your job ) .

Now how much time is required to manage this portfolio. If you decide manage your portfolio then you are competing with professionals who have many edges , so you need to develop your own investment code & edges . This requires lot of hardwork , reading industry journals & annual reports, documenting experiences , meeting managements and then again rework on your investment code. This is time consuming exercise .

If one does not enjoy the above Investing can be boring activity.

Additionally most of people who quit jobs for full time investing , they made do to also invest in Health and Relationships . Often while @ work we ignore our health ( irregular eating and sleep ) and family .

You need to have your reason to shift careers - Full time investing is a career choice with its pros and cons .

IMHO, 100 times annual expenses is too high and out of reach for most salaried professionals depending on salary alone. I have seen in the above posts that 30X annual expenses is a sweet spot which I agree. If you want to be more conservative better to have 10X annual expenses more in a house and debt instruments just to diversify risk and not depend too much on equity returns.