Random Thoughts

 Random Thoughts

 

A small correct prediction of stock going up gives a tremendous confidence to make investment mistakes. These mistakes get compounded with fear and a bravado feeling that nothing can go wrong and the small correct prediction becomes the booster for any future investment in stocks

 One should realize early that stock picking is a huge task that has at a minimum, the following parameters

- Regularly track the stock market and price

- Regularly analyse the management reports

- Regularly check the economic news and impact

- Regularly attend Conference calls

- Regularly find inside information

- Etc. etc.

Thus without  a full time job, no one can do the above and best is to stick to Mutual Funds or PMS or trusted RIA. For fun purpose, you can invest a small portion and see the growth or decline and not feel bad about it.

 I do not advocate that you should not read and keep yourself up to date with news flows as it validates your MF or PMS or RIA investor investments.

Human tendency is to mask failure and gloat over success, however little it may be.

Finance is unlike Physics, Chemistry or Medicine etc.  There is difficulty in drawing up failure analysis (called the Root Cause Analysis) . If a wrong medicine is given, the procedures to go to the root of the cause can be drawn and ensure in future the symptoms that determine the medicine to be given. So too in Physics and Chemistry we can have the Root Cause Analysis to determine why it happened and how it will behave in future.

Finance, except a few cases like bank checks checking, amount of Dr. Cr. etc, are most likely to be unpredictable. Who would have thought of events like 9/11, covid, 2008 crisis, great depression, tariffs of Trump, WWI/II and market falling and rising subsequently due to Hormuz blockage, Iran US war etc.

History can teach something, but not everything. History can be a guide not a predictor.

People's reaction to such singular events can be as follows: 

A Pessimist a) Market is falling - Sell everything

A highly Optimist  b) Market is falling - Buy everything 

A mediocre optimist c) Market is  falling - Wait for it to fall more 

A reasoned optimist d) Market falling - Wait for further news. and many more. 

Thus, market reaction is unpredictable and so too our decisions impacting those. This unpredictability is what makes the market swing like a YOYO. I remember some one in the investor community during covid time saying, "Becho (Sell)" Market is falling like crazy and companies may cease to exist. Another investor saying " Saare Kharido (Buy all)". End of the day the Kharido guy made money as Covid passed and company started making money and thus stock prices rose.

It should be known that even great investors hit a jackpot in probably 6 out of 10 stocks, but many less and even lose a lot, but overall they have more success than failures in value terms. Thus, they become trend setter like Warren Buffet, Rakesh Jhunjhunwala, PrashantJain etc. Its not necessarily their call was right, but maybe luck favoured them. 

My philosophy in life is when you wake up, think this is the last day in your life and see what all good can you do and achieve for mankind. 

If you want to see my investment philosophy, that is another blog. 

 

 

  

 

Money and Happiness

 

MONEY AND HAPPINESS 

It is but natural to relate money and happiness as when you shop and don't have to think about putting the item back because you do not have enough money. Money can lead to happiness (when you buy) or unhappiness (when you can't afford to buy). Or take the case of window shopping in Champs-Élysées in Paris looking at Hermes, Chanel and thinking wish you could afford it. Thus, we are wholly wired to thinking Money and Happiness are one and the same. But is that true.

Think of a family where wife is cooking with leftovers and children playing with home-made toys. They are also happy as they have no desire to compete and day to day needs are met.

Thus money brings happiness only if you have the capability to hold the amount needed to buy something you wished for. You may not buy the item, but the fact that you can afford the item, brings you the happiness because of money.

 I will again go to an example:

Imagine a family earning $10,000 or more a month. They have certain aspirations and lifestyle to live. Their income goes up to $20,000 a month. The aspirations increases and purchases increases and expect the good life to continue. Thus, as aspirations increases one can notice a significant decline in happiness as they are used to that lifestyle and any decrease in per month will cause them immense unhappiness.

Another family earning $1,000 per month. Their aspirations are not high. They are happy with what they have probably living in a small flat and just about managing their day-to-day life. Their happiness level is better as they have no aspirations.

The two examples show that mere Money does not bring in happiness as in first case despite having money there is a fear of losing it and staying poor, while in 2nd case they are not worried as they are living at the bottom of the pool, and it can't get much worse.

Or take another example:

Siddharth Shankar, an Indian-origin entrepreneur who sold his business for $500 million,Mr Shankar revealed that he found the transition tough after selling his company, mainly because he missed having a daily routine. After 15 years of being constantly engaged, he struggled with the sudden lack of purpose, joking about the limits of leisure activities like PlayStation and golf. He found it hard to switch off from his entrepreneurial mindset.

"How much PlayStation can one play? How much golf can I play? What more can I do? It's not that easy to switch off," he explained.

He has huge amount of money but no happiness

Many in Gulf, stay in a shared accommodation or small flat to save and build a large house to stay after retirement. The thought is I will enjoy after I retire. They are sacrificing today for a hopefully better tomorrow. Another may have a different view. Since I am going to spend a large part of my time here, I may as well enjoy life and manage with what I have in my little part of life after retirement.

Which is right? No one knows. Both, in their own ways are right. Saving money or spending it. Thus, for one holding money gives happiness, while for another spending it. The issue comes only if the huge house is a liability as due to old age and the lower physical fitness does not enable to enjoy the house. In case of the other having lived in a big flat, now going back to staying in a smaller one becomes an issue in old age.

 

 

 

 JOB SITUATION

As, AI intrudes into our life quiet fast, the impact is felt a lot in the job market as traditional jobs redundancy is there replaced by AI.

This was already felt when inhouse Support centers started getting replaced and replying to queries and was outsourced by Companies for cheaper labor in India, Philiphines, Malyasia etc centers.

The above was a preview of what was to happen. Now these centers are replaced by auto call (press 1 for task 1, press 2 for task 2 and no option to go to an operator also). Further, replies to email, WA, Twitter are now done through BOTS and human interface is gone.

The 3rd wave is now on its way, replacing standard jobs with AI tasks. Like presentation on a power point, data analysis, coding etc. etc. which has started but may soon open up like a flood with accounting, legal, secretarial (already medical records or known as transcriptions are being dictated and type automatically).

So, only jobs where it requires creativity or newness which AI cannot be taught will be the jobs that will be in the market. Learning new things and bringing in a different perspective to  work will matter more. 

Even movies, thought to be the most creative and difficult, are now coming with so many options and people are using editors and uploading them and getting them eye-balls. Already, AI generated heroes and heroines can b created.

 Investing

Investing can mean many things for many people and even for 1 person at different times. Normally, investing means to practically all people, the ability to put MONEY in an asset class and hope that the returns on the asset class is fairly large over a period of time.

I would prefer to take a holistic approach of investing and not just the MONEY.

Lets begin when you are a student.

Student investing requires you to study a field where you can be employable. Along with it, fitness like playing games, is also key to understand people and behave with them. Leadership, group tasks are key factors that need to be invested in this stage by understanding and looking around.

Earning investing. The next stage after your student time and getting a decent degree and landing a job. Instinct is to spend as much money that is available as  your home, household expenses are generally taken care of when you are with parents and you feel rich with your income and no expenses except what you spend. Here is where, caution is to be exercised and investment of a certain sum is to be made. Albeit small, but the seed of investment is set. Apart from EPF, PPF, investment in Equity Mutual fund, direct equity etc. can be tried apart from other standard sources of investment like RD/FD of banks

Marriage/Family investing. This phase is the next phase. Once you are earning fairly well, you are married and while marriage, when young, has its own charm and money spent on travel, parties, going out etc, investing horizon should be there and not left out. Children, education cost etc will eat up a major part of your salaries and unlike earning investing, the free cash available may not be as much. This forces many to borrow to keep up the lifestyle and this may be the biggest mistake you ever make. I believe and there are many like me, that debt should not be taken for meeting expenses. Debt, if ever taken should be to buy asset like house or gold etc which later can be liquidated. Debt taken for expenses, puts you in a whirlpool of interest, more debt and difficult to get out. Like Abhimanyu's chakravyuh easier to get it but difficult to get out. Investing may not be much in this phase, but some amount has to be set aside to save. One more investment that is to be taken at this stage is a PURE TERM POLICY for a large amount to prepare for any unwarranted event.

50's investing. This phase is critical in investment as one has to invest both money (for retirement phase) as well as emotional phase investing. Why emotional phase investing - because like you look at financial plan for retirement and enough money to get you through that phase, people generally, overlook, it is time to build relations with family and in particular Wife. While marriage, when young has its own charm as mentioned earlier, this is a phase where common liking between partners are to be enhanced and nurtured - eg going for walks, listening to same type of music, appreciating and helping and thus create a togetherness. The reason for this is, as you get older, while you may have invested financially, you will be lost without a purpose and no common thread between husband and wife. This EMOTIONAL INVESTMENT is crucial part of retirement scheme which people generally forget. Will show in the next phase how useful this investment is. Another crucial investment in this phase is MEDICAL INSURANCE. Later this will become expensive and difficult to get and with so many pre existing disease clauses.

60's and above investing. This phase requires you to reschedule your asset plan (equity/debt ratio) to a more conservative debt plan to avoid equity risk impact due to covid type hit or 2008 financial crisis hit. Debt/FDs are generally considered lower risk and a big fall in value is not expected in these investments. As one retires, one feels a lot of time and a missing purpose in life. If you have not invested emotionally, there is a great chance of going into disease like Dementia and Depression. This is because your kids have gone out of the house to settle elsewhere, your wife is buzy with her own work and there could be a disconnect if you had not invested in the emotional investment in the 50's.  Thus this investment is critical for your well being. You may have been a smart Financial Investor, but if you had not invested in Emotional Investment, it could cause a bigger pain in terms of health. Unlike earlier times of 1 bedroom for all, we are building 3-4 bedrooms and these will have a tv, a set top box, mobile and SM and husband and wife will lead a disconnected life leading to various medical issues. Thus EMOTIONAL INVESTMENT CANNOT BUT BE OVER EMPHASISED.