can you please mention the list of books provided in the image. It would be more helpful.
Post: How much monthly savings are enough?
So you are an investor. You are thinking Debt, Equity, MF’s et al. First you need to know what you will need in the future. That is how you set your investment goal.
So lets say, today your expenses are 1 Lac per month (take any figure which is your monthly expense).
Most people work until around 60 and can expect to live to around 90.
So for a 30 year old, 30 years to earn and then 30 years to live without earning.
So then basically, a person who spends 1 lac a month, must put aside 1 lac a month for their future to use every month when they cannot earn any more.
So the fact is, what is your expenses today will be your expenses even 30 years from today and if you do not save at least 50% of your income you are going about it wrong.
The other fact is, there is inflation but thankfully there is also income your money can earn (interest earned and compounding). So if you save 50% you will have exactly the same lifestyle as you have today when you are older.
Most people save 10 or 20% of their income. So they are without realizing it saying, we will be able to manage in the future on just 20% of what we can manage running a house on today.
If you cannot save, there is only one person who is at fault. Like it or not, this is true. No regular person can afford to spend more than 50% of their income.
The above is not applicable for financially successful business / salaried people who spend very little compared to their income so do not have to worry about inflation and compounding.
The above is slightly more complicated in real life, but I have kept it simple to give an overview of what your future will look like if you try to manage in only 10 or 20% of your real expense. Try managing it today, you will get an idea of how impossible it will be and you will have a clear idea in the next 30 days.
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Post: Portfolio Strategy - Diversified or Concentrated?
Both are excellent strategies for people who know what they are doing. Since a newer investor may have the risk of capital erosion in the early stages a diversified portfolio “might” make more sense. There are models which tell you minimum x number of stocks, then others that will tell you if you buy over x number of stocks then you have removed any benefit of buying stocks and will not get a good return.
You will hear many arguments in favor of each strategy. I will offer a simple comparison…
A. There is a saying by Warren Buffett “Diversification is protection against ignorance. It makes little sense if you know what you are doing.”
B. There is another fellow called Peter Lynch who is as fabulous an investor as Warren Buffett and he held a extremely diversified portfolio of at one time up-to (if I remember correctly) 1500 stocks. The running joke was Peter Lynch never met a stock he didn’t like.
The fact is, holding only 2 stocks does not make you a better investor than if you are a person holding 30 stocks or for that matter 200 stocks, if you can handle owning 200 stocks without going crazy that is.
For example, From the Nifty 500, around 200 stocks double every year. Which 200, no one guarantees; so a lot of stock movement is sometimes random too based on positive or negative sentiment, stock or industry specific news which no one knows in advance, but which will come all year round, and so many other factors.
There is no need to stress on achieving a concentrated or diversified strategy. It might actually be a product of the number of concurrent opportunities available or a risk tolerance profile that you find out you have.
With relevance to India, reading this slightly old article on a Mrs. Maheshwari might be interesting. She is India’s Peter Lynch; or more appropriately since she did it first, Mr. Lynch is America’s Mrs. Maheshwari 
So go with a strategy you are comfortable with, concentrated or diversified. There is no right answer really.
And yes, we know if so diversified then one can go to a mutual fund. That too is an option, this is a discussion only for people who want to attempt direct equity investment.
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Do not underestimate the power of compounding. If we assume a 8% rate of inflation, in 30 years you will need a little more than 10 Lacs instead of 1 Lac now. While if you can invest at CAGR of 15% only 16% of 1 Lac, i.e. 16000 invested for 30 years will give you more than the expenses of 10 Lacs. Key is investing at a rate higher than inflation and staying invested for longer period.
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From my little experience that I have gained so far in the market, I would urge the first time investors to understand some of the following points…
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Understand that there are 2 parts to investing, the most important as we know are the fundamentals and an equally important part is the technical analysis…
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On the other hand, there should be a balance of use of the type of analysis, technicals if given undue priority will shorten the duration of staying invested due to psychological factors and the design of the science, fundamental analysis in the beginning can be too overwhelming for a starter and I feel mastering it to independently usable level take considerable time and efforts and its very easy to step into a deleterious decision making.
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Both type of analysis should concurrently be used, if what you are seeing fundamentally attractive dosent, reflect in the market structure, you have a self rectifying system check that something is wrong, on the other hand if something which is technically attractive if dosent have a minimum fundamental backing to it, has absolutely no value at all… Basically going techno-funda, Is the best way for the beginners, and it creates a 2 point decision making.
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There are a lot of resources to read from regarding investing, buts let’s keep it simple…
Following are my suggestion.
For investing basics…
The intelligent investor–Benjamin graham
Rich dad poor dad- kiyosaki & lechter
Buffet’s letters to shareholders - berkshire hathaway
For technical analysis…
( the are a lot of schools of this analysis, this being a fundamental analysis heavy forum, I would like to elaborate a bit about this specific segement)
3 major used systems are
- Mathematical indicators devired from price using specific formulas
2.demand and supply analysis
3.crowd behaviour analysis
Personally I feel no 2, brings u more closer to price action than anything else…
My recommendations according to the above mentioned 3 points…
1.Profits in stock market by HM gartley
2. Wyckoff methods…
Back in 1920s wyckoff would only teach a select group of students and the system was kept as a secret for a very long time, hence I didn’t not find any authored textbooks to learn from, Google wyckoff power charting blog by fraser, go through the YouTube videos of wyckoff trading method, a site called wyckoffanalytics can be referred…
This needs a compilation of the materials available…
3.Elliott Wave Principle: Key to Stock Market Profits
By frost and prechter
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Study recent skeletons that came out of the closets-
Vakrangee, manpasand, dhfl, sankhaya infotech etc -
Besides following respective thread on value picker which is an excellent resource of both the bias side’s view, get access to analyst reports by various brokerage houses( some, rather most of the reports have a bias, never take any of their recommendations at face value without forming one’s own view about it), these reports have most of the quarterly activities and concall and annual report summaries which can be time saving tactic… I find a site called trendlyn useful in this regard…
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This is my personal tactic… Not a recommendation…
I scan though mutual fund holdings, a similar service called smallcase their specific segment holdings, scrips that come up in following thread here Hitesh portfolio, coffee can method, vivek gautam’s portfolio, commodity and cyclical plays and basically any portfolio in the Q&A segment, check the technical aspects of scrips, if I find something interesting, I start fundamental analysis on it… This save me a bit of time… -
From time to time, I feel there are alternative markets which can give handsome returns, bonds, commodities, real estate, crypto currencies etc.
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Last but not the least, stay away from the financial media at large, regarding analyst views on stocks and recommendations, i have a suspicion this is an all important vehicle for the institutions to influence us according to their needs, of course mostly against our advantage. No body is sitting on their time to help u make money.
As a parting statement, understand that there are the big institutions and then there are people like us, and we are in an ocean, the big fish feeds on the small fish…
Coming here in the money market is playing a game designed against us, what we all can do with all the analysis at hand is reduce the odds and surviving…
All the best…
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A very interesting thread. An important thing for new investors to learn is not just the “Do’s” but the “Don’ts”. So, here are a few from my own experience, you can add more to the list.
If the below list is diligently followed, not only will many an accident be avoided but you will also save a lot of time from being wasted in analysing the wrong stocks.
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Before you start out, decide on your asset allocation – what % you want to invest in equity. And don’t violate that rule, no matter what
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Don’t leverage, borrow, buy on margin etc. Make full payment upfront
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Don’t invest in lump sum. Gradually increase your exposure – to individual stocks as well as to the equity asset class
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Don’t buy small caps. In most cases, small caps are small caps because they deserve it
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Don’t buy leveraged stocks – for example, anything beyond Debt – Equity ratio of 1:1
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Don’t buy high P/E stocks – for example, ignore anything more than P/E of 30 (even this is aggressive I think)
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Don’t buy BFSI stocks
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Don’t average down
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Don’t watch business channels
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Don’t take free recommendations seriously (e.g. Moneycontrol, Economic Times, Twitter, Diwali Dhamaka stocks etc.)
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Don’t keep more than 20 stocks in your portfolio – you can’t monitor more than that
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Don’t compare your performance to anything – including market indices, mutual funds, your friends & relatives. Don’t try to beat others.
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Don’t retain a psychological attachment to your purchase price. Once you buy, your purchase price is irrelevant
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Don’t track your exposures to cost. Always mark to market
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And finally, if your stock goes up after you buy, don’t assume you are a genius. It was pure luck.
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on a lighter note, i would add to the last point
if your stock goes up like a parabola after you buy and if u start feeling like you are the future warren buffet , sell the damn stock, its the top…!!
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I would also like add few don’ts based on my experience of over 10 years:
- Aim to undestand fundamanetal concepts like Debt/Equity ratio, ROE, ROCE, OPM, NPM. This will help you to avoid poor quality businesses.
- Take exposure to business slowly and steadily, so that you have an advantage of buying in staggered manner. This will increase understanding of business over a period.
- Focus more on Large Caps and Mid Caps during initial years of your investment career. You can then venture into Small caps. Experience of investing will make you understand your risk appetite.
- Prefer buying stocks which have higher competitive advantage.
- Buy the stock when you are fully convinced that it is undervalued or if it can maintain the current high growth rate for prolonged period of time if it is having high P/E or P/B than most of its competitors.
- Don’t watch business channels for any recommendations. You may watch those for genreal knowledge and business concepts.
- Ignore Buy reports by business channels, brokerage houses, as most of those do not often tell you what to do with the stock if you are in huge loss, after buying.
- Have a portfolio of 15-20 stocks only so that you can keep improving understanding of these selected businesses, rather than expanding the list to more than 20.
- Keep tracking your performance on yearly basis, as that would give you an idea whether your investment efforts are worth it.
- You need to have lot of patience and be prepared to keep improving understanding of various businesses, and market cycles. Your aim should be to minimise losses to succeed in equity investing.
Disclaimer : I am not a registered financial advisor. Above list is based on my short experience. Also this is not an exhaustive list.
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Can you please explain why not to buy BFSI sector ?
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I have expressed my views on this elsewhere, and you may refer to the links below:
https://forum.valuepickr.com/t/yes-bank/1227/1110
https://forum.valuepickr.com/t/yes-bank/1227/1830
https://forum.valuepickr.com/t/arman-financial-services-ltd/980/342
Hope this helps !
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