If you focus on where you are going to be 10 years down the line and concentrate only towards that goal and importantly work towards it, then all the peripheral mumblings of family/relatives will sound noise to you.
In life you only get few opportunities in every field, be it sports, stock markets etc. and when the opportunity strikes, do not chicken out and if the risk rewards are in your favour then get your capital allocation right and sit tight as the story unfolds and cash out at some point which need not be the highest point.
PAST and FAMILY:
Personally, I’m financially independent and am in my early thirties. Quitting my comfortable, high paying job was not easy as I was fighting with my own inherent struggle ‘to-quit or not’ along with my family’s pressure to not quit at any cost. Speaking the struggle within yourself, there will be that ‘feeling’ in your mind which cannot be explained in words, once your get over that feeling and are strong in your mind, you need not look back ever in your life.
I have explained where I’m now, where I would like to be 10 years down the line and how I intend to achieve it and do I have a plan B if things go awry - to my wife and fortunately she is supportive of the plan and is ready to face consequences together. I put my papers in my company and I’m a free bird once the notice period was over. One belief that helped both of us is “We can run a family with 10 lakhs a month as well as with 10 thousand a month by adjusting our needs accordingly”.
Added to this, what made my decision easy was, I did NOT think I was using my time productively at office. I saw what a person who is 5 years ahead in life is doing in his work life and certainly I did not want to be doing it. Being a ‘yes’ man to clients and then screw team’s happiness because of your inefficiency in saying ‘no’ to impractical demands from client partly because you have your own goals to achieve and bosses to answer.
Also, once in managerial position, most of the time is people managing in my case and this did NOT add any value to my ‘spiritual’ being as well as personal development. Most of the office going people (not all) chit chat, have ample coffee breaks, crib over appraisals, compare, peer pressure and all this is going to waste your time even if you are immune to all this. You cannot start reading a book just because you have free time in office as your colleagues/bosses think you are being derelict. Basically, I did not like the work I’m doing, so it was easier for me. Each persons life is different and you certainly need to consider every burden - short or long term before you call it quits.
The most important thing is, you need to have undying passion towards equity and a great amount of emotional stability and insurmountable conviction on your picks. If you are a concentrated investor, you need to act fast, change when facts change fundamentally, don’t hinge on hope in investments. You need to be ahead of the curve. Secular growth stories makes more sense than hope based investing and capital allocation to fundamentally strong stocks should be of priority.
Personally, I sell a percentage of my holding each month to meet my expenses. I find it difficult to sit on cash but I’m ok to sell stocks each month no matter what the price is. Being in markets all the time is what I’m comfortable as of now. I currently am not doing any trading activities to meet my expenses. Being in markets of course work when the markets are in an broad uptrend. Anyway, I’m a keen and fast learner, so I change the strategies as and when but not very often.
It is not mandatory to have these traits but help in the process.
Being a bit of introvert also did help me wading through the time. I do not like partying too much while I like to spend quality time with family in outings etc.,
I would rather ‘not reply’ or ‘try to defend’ myself when during some relative gatherings people start giving me lectures or questions on how equity investing is landmine, it is STILL not late to get a job now, people sarcastically asking, ‘how much money have you lost’ and you can make out that some people do not want you to succeed so they can proclaim, ‘I told you so’! Relatives often ask how much you earn each month so they can compare with what their son/daughters earn and derive a mental gratification. I typically give the answer that they want to hear so they do not poke me any further. If I were to give the real answer, they would get more heart burn! Not all people are like this though, some people are more open minded thankfully and so this place earth is still liveable.
The most painful part is, my mother gets easily influenced by the above talk of relatives and I get some peace of her mind after coming home, which is difficult to manage.
To not get impacted by all the above you will need to have, I REPEAT, great amount of self belief, unending passion towards your chosen life (stocks in my case), think skinned, strong conviction in your stock picks, foresight to see future and work towards it tirelessly, family support, cultivate an alternate hobby to time pass, exercise as investing is a sit-on-bum job.
I wrote this as this might help someone who is in a similar situation as I did not have someone to speak to who already did this when I was contemplating my move.
At the end, what really matters is, are you happy and are the people who depend on you for emotional support and financial needs are happy as well? If yes, don’t give a damn to people who bother you in your life’s journey. Just agree to what they say to avoid an argument and MOVE ON.
Through my journey, I have experienced the below and I would be happy if they help a newbie.
Experience is what you get AFTER you are taught a lesson BUT others’ experience is what you get BEFORE you are taught a lesson.
Count your actual portfolio at 0.6*PF as the actual value if you are in strong stocks and then take the decisions. Always makes sense to have enough buffer.
No matter whom you admire, no matter how great is some member of a forum do not blindly take his/her words on face value. Do you own analysis and only if you are convinced then take the decision. You never know what biases/prejudices the other person has that are not known even to him/her.
Just like loan sharks, there are ‘stock sharks’ everywhere on the internet blogs, forums. There is never a free lunch anywhere except you get it from your mother/wife/kids/siblings! People tend to push up stocks after they accumulate and then offload the same onto others. It’s the question on integrity. Of course there are people with golden character but you are not in the job of analysing other people character’s, right? If some one writes that a particular stock is the next multibagger and sweet talks about it, think what interest he/she has in marketing that to you. When in doubt, refrain!
I will keep updating my experiences here on this topic as we go along so this may act as a primer to the ones who are just beginning the journey while the seniors know all these facts anyway!
Based on the questions some of the forum members asked me in private, I’m writing down further information which could help others as well or at least provide a point of view. I will reveal as much personal information I’m comfortable with so you can understand my thought process, do not mis-understand the post and my intentions. I would like to be as humble as possible in real life. This post should not serve you as a SOLE deciding factor in your decision making process but should either help or inspire you or clear off some doubts and then you start working towards your goal.
(Remember: There are hundred ways to kiss a girl (replace with financial independence). The below is only one of them. You need to think do you really need to kiss this girl? Why? What for? What after this? Will I increase the quality and happiness quotient of my life? Answer these questions before you really want to quit your job). Also, it would be better if you are financially independent before you quit rather than try to earn income and plan financial independence through stocks instead of job UNLESS you have become an expert in trading). Again, living through only stock markets is emotionally and psychologically taxing. After sometime, you really have to give back to the society to achieve larger purpose in life, else there is no difference between you and …) I have not reached to such a situation yet but aspire to give back to society.
ACTUAL THOUGHT PROCESS:
I have an equity portfolio of X which in itself is sufficient for 30 years at the current expenditure of mine WITHOUT ANY inflation.
Assuming inflation of 6 percent is NOT correct as, as an economy if we reach a size of 5 trillion USD or a 10 trillion USD, the dynamics would be ENTIRELY different. Fixed deposits wont be 8%, Home loans wont be 10%, Inflation wont be 6%. The numbers would be much smaller.
Fixed deposits do not matter to me as I’m not into them now and neither will be in future and so is home loan (applicable now but wont be applicable 7 years later by when I would have paid all my EMIs).
Inflation certainly matters and it will be much lesser than 6%. Even otherwise, I’m OK eating 1 onion instead of 2 onions and size down my life if a cyclone were to pass through my life. How do I tide my kids life? Sell house, move to a modest rented place. Still need money, sell gold. They are just ornamental but immensely liquid and protection against inflation. Ok, this may NOT happen BUT you need to think all these scenarios and come up with a plan of what you would do.
Now, you are not in this situation yet? No worries, get back to work and concentrate on getting to this situation in say “Z number of years”.
All I need to do is beat inflation by at least 200 basis points (alpha). I believed I could otherwise, no questions asked, go back to work.
Equity : debt on my home is 70:30. Comfortable position. If it were 15:85, then get back to work. Where are my shoes and formals? House worth 0.3X. I’m paying EMIs each month for the next 7 years.
Gold in the form of jewellery. Not an investment but will help if I turn out to be utterly useless. 0.2X.
Apply some maths (subjective to your case) on the above and arrive at value added ‘numbers’ both conservatively and aggressively. Now decide dispassionately. No biases please nor over confidence. Passion is a must or else few months into it you will lose interest and you will get panicked!
How have I reached this position:
Need vs. Want: From the day I got my job until the last working day, I differentiated between “need and want”, “need and show off”, most of the times. I bought what I need. I always had in my mind that I would not work all my life. I paid more for quality not for ‘brand’. Sometimes, I splurged, of course, I’m not a ‘thing’ in life but a ‘life’ in itself. And, I do have my oops moments, wrong decisions, but exited as soon as I’m wrong or apologised if I’m wrong. Basically, you need to change the approach to your life until you reach your goal and then re-evaluate.
Decide NOW: Do you want to splurge money NOW and continue to work for ever or do you want to spend judiciously NOW and invest it and attain financial freedom before your peers could?
Spending: I do not maintain a log of my spending because before I spend I think if it’s needed and only the I will. Impulse spenders need to maintain log and analyse the spending patterns. Need based spending is efficient spending. That does not mean ‘live on bread, milk, eggs’. In fact my spending on food is very high. All quality, nutrient dense and of course useless stuff like chocolates. Also, I spend on transportation (cabs etc.) because I value comfort over inconvenience and wasting an hour sweating. TIME is my most precious thing. I would rather reach home an hour early and utilise the time productively either reading or spend with family. But if you are in absolutely ‘cut down’ stage, then it’s fine to save here as well.
Calculated risks: I took calculated risk in stocks with highly concentrated positions and exited 15% below the top. I waited patiently and did not trade in and out. Again, the stocks in which you are should be decided with utmost importance and stick with it.
Books, books and books and more books: If there is anything that I have to stress as many times I could, it is “READ BOOKS”. As many books in as many genres and grasp what you are reading. Don’t read them like a novel or like you were preparing for a quiz! Comprehend them. Below I have listed the books that I have read completely or in progress. Books open your eyes towards wisdom. They are not ‘data’, they are ‘informational’ There is a difference between ‘data’ and ‘information’. Google it if you don’t know.
To be continued…
Books list.docx (118.8 KB)
- Buy them from Amazon/Kindle, Flipkart and any other legal source. Money spent on this is invaluable.
Most important websites/documents are
- Respective Company websites
- NSE & BSE websites
Annual reports: Initially, everything was greek and latin to me but now over time I have mastered the art of annual reports which I’m sure many seniors here are much more adept at it than me.
Websites like valuepicker BUT certainly NOT (repeat 100 times) most of the ‘multibagger’ recommendation blogs.
This is more of a personal note (my personal thought process post the incident) but has lessons on financial side as well. Particularly, the newbie investors have to get the below straight in their minds before they start the investing journey.
Today my daughter fell on a sharp object and suffered quite a deep cut above her eye brow.
I had to rush the baby to hospital for a fix. I returned happy as she was attended to properly and the wound would heal in a week and with an appointment next week. Bought her some ice creams, lolly pops for immediate gratification. Pic attached.
Lessons from this episode:
So far, I did not have enough buffer in my savings account to attend to a big personal emergency. Since this incident was a small scare, I need not have to worry about money. Had this been a severe emergency (touch wood), I had to arrange money which of course I could return in “T+2+count of (non trading days)”, no matter how huge the amount is. BUT, I had to scramble, right? It is NOT the way. Not morally correct as well. I need to be prepared and not dependant on others, even if he/she were my immediate family members. They anyway are there to support you emotionally!
I immediately sold a very minute amount of my portfolio for “T” delivery and the order was a ‘market’ order. I got my lesson and did not want to wait any further. Period. Though the emergency fund might be small compared to the overall portfolio, the peace of mind it gives is ‘infinite’.
Never have entire portfolio in illiquid stocks only. I did not have but I thought what if others have? It is a problem if you want to sell, there would be no buyers even if you want to mark it down by 50%.
I again, and again, and again understood the importance of fundamentally strong stocks which are available at reasonable price that have the qualities of sustainability, predictability, safety. They do not fall much in corrections. I know why Gruh Finance is valued so highly. Track record and management credence play a very important role in according valuations. At least, I would pay a premium, of course not bubble valuations. A stock which have a track record of a decade and went through multiple cycles would be accorded premium valuations. The amount of monitoring that I need to do on the stock is much lesser compared to other nondescript, funny stocks!
So, get your basics right before you start your emotional investing journey.
Pic below, though not relevant to the forum, the impact would be long lasting for some one who is just starting his/her journey: