Are we eating to death?

 Read a post from a Doctor on the above heading.

Set me on an interesting thought that in olden times, people used to fast - be it Lent or Navratri or Ramadan. They let the stomach rest and utilize the energy in the body to reboot itself, so to say. But now a days people are fasting only for some hours and a new  craze of intermittent fasting has come. Eat once in 12 hours.

The issue is that unfortunately after the fasting there is feasting which is not the right method of fasting. I have heard of patients who used to eat well and  who went into hospital with high BP, high Sugar etc and  reached a stage no medication could help and Doctors could not do much either except increase the medicine dosage.

But surprisingly there are cases  where by controlling food intake and practically no medicine and some exercise, people have lost weight, normalized their BP and controlled their Diabetes.

There is an interesting assignment for those who want to do a proper study. Fasting should be for 24 hours and should not be followed by feasting. There has to be a gradual intake of food - Be it light porridge or Rasam and some ghee. Fibrous foods to bring back movements in the stomach and bowels will help.

Another way is to avoid carbs soon after fasting. All these could probably make the person healthy and fit. Like in olden days, people had energy to work even during fasting without getting unduly tired.

Modern day problem is the excessive marketing of food and to give large discount on big sizes. Whopper burger or a triple or quadruple sundaes etc. These only increase the cravings and difficult to go on a diet as stomach is used to huge quantities of food. This then leads to continuous medicines. One tends to believe, Pharma companies may be encouraging food companies to increase quantity and high calories items to ensure customers become permanent pharma companies patients. 

Second modern day problem is the food delivery, as one gets at home the food one wants, rather than thinking twice to go and visit a restaurant.

Third modern day problem is food is gulped fast and in large quantity in front of TV or mobile pictures. In this case, the taste only matters and not the fullness of the stomach which is felt when eating dinner on the table or floor. If you are having dinner at the dining table, you will normally get up to watch a program or do some task. Food intake will thus be automatically restricted unlike food in front of TV or computer.

One should try 24 hour fasting followed by light non carb meals and done every 15 days to probably lead a healthy life.

Disclaimer: This is just a thought and not an advice or a recommendation. Best to consult a certified nutrition or a Doctor for food diets.

Cash and Cost - 2 Critical factors in Business

 

Cash and Costs are two critical factors in a business. With costs you need to be stingy, but not petty. i.e. you buy things which are essential, but do not be ostentatious in spending on things for show and which does not add value to the business.

Demand factor is also key. Keep the  advt. offer going through social media, so that at one point of time, the consumer when searching comes across the offer. At that point, he/she is more likely to buy and not search further for more options if he finds the offer is good.

Ensure sufficient cash is always available. Always have a safety net as Banks, while easy with giving facilities when doing well, pull out the rug and demand the money when it is most needed. Most of the business is evaluated (after revenue growth) by how much of cash is generated by the business. One has to be on top of the Debtors to ensure these are collected quickly in a matter of months or account blocked for further sales to avoid bad debts.

Investing Basics

Investing Basics

Every individual feels that it is easy to make huge amount in the stock market and with the ads and success stories being numerous - ala Rakesh Jhunjunwala, the Damanis, Warren Buffet etc- it is natural for ordinary humans to fall for the trap. Nobody talks of the huge daily losses people get in F&O and other areas like Crypto - stories of a Harshad Mehta, Ketan Parekh (who tried to game the system) or people like Porinju whose some investment like lloyd went bad.

So, what brings success to these stock market individuals. There are 3 primary analysis which these successful people do - Financial or Fundamental, Technical and not much talked about is Emotional. Further, you have to look at total Portfolio investment, rather than individual shares and thus there may be losses in some, but overall the investment should give a positive return. Along with Portfolio, key is the Quantity or Positioning as they call to invest. If you invest 5 shares in a stock and it goes from 100 to 150 you make 250 Rs. But if you had invested 500 shares then the return is 25,000. Thus Quantity, in what you believe is a good investment, is also the key.

What is Financial and Fundamental Analysis. This is basically studying the past of the company and also the potential future study of the industry to see the direction the Company could take. Financial analysis involves seeing what sales growth it had for last 5 years, Profit for last 5 years, Cash flows, Ratios, operating and financial leverages and many other financial data sculled from the balance sheet and Profit and loss. This gives the confidence that the company is on a firm footing with its feet firmly  on the ground.

The other part of the analysis is the Fundamental analysis - studying the industry, potential growth, competitors, moat (or how easy or hard for competitors to do what you do), vision of what holds the future and finally the management (are they trustworthy- probably the most difficult to answer).

Technical analysis gives the direction/momentum (like RSI) of the shares and helps in accumulating or liquidating the stock. If the trend shows that it is higher, catch it at the beginning and not at the top. Also, sell close to the top and not when it is at the bottom. Use trend line, candlestick, Fibonacci to help with this type of analysis.

Emotional. This is the most crucial aspect of stock market. Each of us are wired differently. One might sell when a 5% profit is made, while other at 50%. Or one might want to cut short the losses at -5% or wait to fall to the bottom. This is where the difference between a brilliant investor and an average investor comes. A brilliant  investor knows when to move in or move out of a stock, while the average investor just follows the brilliant investor. Market perception of your stock should be much greater than your perception of stock, if money is to be made.

One of the critical investment mantra I give is not to compare what others made or copy blindly the investment gurus. Both add to issues of emotion in your decision making and not make you think rationally.

Be your own judge and avoid talking about it. Quietly invest and make money with a few losses in between.

Keep it simple: Focus say on ROCE last 5 years, Sales growth 5 years, dividend yield - consistent and average 3-4%, PE less than 20. Reasoning is if a company is doing well for past 5 years, logically it should do going forward. But you may get some losses if it does not happen. Eg. If someone had invested in Nokia on the above basis it was run over by Apple and Samsung with their smart phones. Same as Netscape - one of the earliest browser. But at least 50-60% chance is there it may not happen to all the companies.

Stocks- maximum of 10-15 stocks with couple in each sector like FMCG, Banks, Pharma, Engineering being the key.

Keep some ETFs in Gold also.

Give a time period of 15-20 years to generate wealth. In boom time you may liquidate some and in low time you can add more.

In mutual fund - Select max 2 in each. Keep small amount in small cap and mid cap. Preferably SIP.

 a) Index funds (Nifty, Nifty 50, Sensex, some international funds like S&P, Nasdaq, or China fund),

b) Large cap funds, (Steady, return in the range of max 10-12%)

c) Mid cap funds, (Slight risk, but extra return than Large cap in the range of 20-25%)

d) Flexi cap funds (Diversification)

e) Small cap funds (Risky, but more returns possible in the range of 35-40%

f) Corporate bond funds (Less risk, in the range of 6-8%)

g) Liquid funds (Minimal risk - in the range of 4-6%)

KEY FINANCIAL MANAGEMENT NEEDS

 Primary to above investment, some key things are to be taken care of.

1. Emergency Fund

2. Insurance- Both Term and Medical

3. WILL Preparation and registering

4. Excel of all financial details- House keeping

5. Start Early

The above 5 are enumerated further below.

1. Emergency Fund

The first saving should always be the Emergency fund. 12-24 months of average spend should be saved and put in Fixed deposit  to draw from it in case of job loss/med emergencies or any other emergencies. But ensure that after the event is over, it is refilled.

2. Insurance

One needs to give to medical a big importance. Like they say if Wealth is lost, nothing is lost but if Health is lost, everything is lost. If health is there, you worry about 10 things, If health is there you worry about only 1 thing.

Or as Steve job says, you can hire a driver to carry you from one place to another, you can hire a financial expert to earn your income, but you can't hire a person to carry the disease for you.

Thus before any investment, following insurance is key:

a) Pure Term insurance - a large amount to take care of family in the event something goes wrong. (not very expensive. Aim for 120 times the current salary- takes care of family for at least 8-10 years)

b)Base health policy like a floater for you and family, even if you have company policy. Current limit say 15 Lakhs which will go up every year with inflation. (a bit expensive but essential)

c) Top up or Super top up policy (not very expensive) to cover over and above the base policy in the rare event if the disease is such that requires long term medical treatment or replacements like liver etc. (See my blog on difference between Top up and Super Top up)

d) Cancer policy to cover the growing instance of cancer occurrence (separate for you and wife. Kids not required hopefully).

    Critical Notes for insurance policies:

Ensure you provide all the medical information to the company, before policy issue (to avoid claims being rejected on flimsy grounds)

Ensure you take your policy by 35 years of age as older you get life style disease may prevent you from getting medical insurance or it will be excluded or wait period may be 3-5 years.

Reach your expected insurance limit (provide for future inflation) by the time you are 60 years of age. Insurance companies may not cover for a higher increase beyond 60 years.

Diff on top up and super top up. Super top is cumulatively you are covered, while top up is one time. Eg. if you are hospitalized and expenses exceed base policy, top up helps. But in the same year you are hospitalized again top will not help, but super top up will.

Some key sayings by many famous investors

Be an optimist. Otherwise do not invest in stocks

Expect a realistic return. Don't go by the SM messages of 250% plus in a few days etc. Those are high risk and lucky bets.

Don't over analyse- stick to PE, ROI, Growth. not what macro/micro economics, future potential etc. These are undefinable and good only on excel extrapolations

Don't risk all you have. Positioning is important, but in relation to what you have. Not everything you have. Ensure enough money to get you through simple living for 10 years and then invest 

Be patient. Some stocks go through ups and downs. But if it has been performing well for many years, you can reasonably expect to perform well.

Don't thing 100% of your pickings will be a success. Maybe 50% of it. 

Buy at right price which can be gauged by many factors, but primarily PE. At 80-100 PE, it is not worth it. Check out PE of the market. Below 20 is fine, 20-25 it is a bit risky, above 25 it is dangerous.

When market is too frothy, pull out a portion of the funds.

Diversify across companies and across sectors for a safe investment. A number of big investors like say Buffet may say and I Quote him "You know, we think diversification is—as practiced generally—makes very little sense for anyone that knows what they’re doing...it is a protection against ignorance." Unfortunately, we do not have the time or the investing inclination like them to invest in Selected companies in large quantities that a risk of collapse would bankrupt us. Risk and diversification are inversely proportional. A certain element of diversification is recommended does not mean if you have 100 Rs you put 1 Re in 100 companies. Diversification means you put 20 in one sector in 1 or 2 cpy, 20 in another sector in 1 or 2 cpy and so on. This will help generate wealth if those 1 or 2 cpy do well as Positioning (quantity of investment as discussed above) gives you a better return.

3. Will Preparation-

 This is quiet essential to avoid fights in the family as well as preventing a 3rd party filing a frivolous claim on the family asset. 

Though nowadays family is not large like olden days and no longer a joint family but a capsule family of wife/husband and 1 or maximum 2 children, will may not seem essential, but to avoid any disputes it is better to have one. Preferably a simple WILL (can be got from internet), but witnessed by a young doctor and another young witness (older witness may not outlive you) and better to get it registered and kept in a safe place.

4. Housekeeping.

 

 This is the most essential part of investment. If you invest and make lots of money, but in the rare event of your demise your family is unaware then your primary goal of keeping your family off the streets is lost. 

    THUS IT IS ESSENTIAL TO PUT ALL YOUR INVESTMENT DETAILS IN             AN EXCEL AND SHARED WITH WIFE AND CHILDREN.

The excel can be simple with following columns

a. Type of investment (FD/Savings Account/MF/Stock broker etc)

b. Party with whom invst - Name of Bank/ Mutual fund (or kuvera)/geojit/reliance etc.

c. Address/contact name of above - preferably with telephone/email.

d. Folio or reference number

e. Amount ( can be a rough current amount)

f. Nominee assigned ( ensure nominee is there in all- preferably two)

You can, if you desire have further details added above, but the above are essential ones.

5. Start Early

Your investment journey has to begin early( preferably 25 years when you start earning) to have the effect of compounding and creating wealth after 20 -25 years to make you comfortable.

The early start is required as the journey is long and  there will be ups and downs in the market and in order to take advantage to stay invested.

The biggest argument for not saving is I do not make enough to save. But like in Rich Dad Poor Dad he says, that what you get, shave off some savings and believe you have that much only.

Disclaimer: Nobody in the world can predict what is going to happen,. Shares, if any, mentioned is not a recommendation to buy or sell, but an information package which each individual has to study and take a call.