My Investment Philosophy

 Every investor believes in how the world is going to move and reach a goal in future. Some may get it ight, while some may not.

For what it is worth, my logic of investment is as follows. Follow at your own peril even if you want to.

Stocks My investment philosophy 1) Data centers and AI to be future 2) Cloud computing large 3) 1 & 2 requires huge computing power and thus power is essential 4) Power, power distribution and electrical equipments in demand 5) Solar power key to increased power 6) Infra and pharma will be there for job generation and health 7) Beauty and beauty products and clothes as people want to look good 8) Fintech as ppl shun cash 9) To move all this around logistics & transportation 10) Defence to safeguard above 1) Data centers  HCL LTIM Tanla Route Techno Electric Kaynes 2) Power Tata power NTPC Havells Epac Msumi SWSolar Suzlon CG Elect 3) Infra KNR Kaisen Nerolac Heidengberg 4) Pharma Zydus SRF KIMS Indraprastha  5)  FMCG Emami Nykaa Ambika 6) Fintech Paytm jio Fin Oracle 7)Logistic TCI 8) Defence Bharat Forge 9) Auto IMPL Amarraja 10) Bank HDFC LIC HDFC life HBD ICICI 11) Mkt CAMS BSE/NSE CDSL IGIL Nobody can predict future. My selection is based on a)  likely trends i expetct b) promoter shareholding >50% (skin in the game) c) past sales and pbt record of 15% growth and 20% growth respectively d) PE lower than 25 e) Debt/Equity is <0.5 f) Market Cap of >1000 crores ( large companies only)  Too many data can cause Analysis - Paralysis

 

Mutual Fund My investment Philosophy 1) more debt funds as you age 2) Large cap, multi asset - steady and diversified 3) Mid cap and small cap for alpha 4) Sector - for alpha 5) Index fund - sleepy investing 6) Banking- more funds around more needs 7) Overseas diversification 1) Debt ABSL corp bond Absl money mgr ICICI liquid Icici ultra liquid Hdfc liquid ABSL Floating ABSL life saving Bandhan gilt Axis all season Nippon india AAA PGIM arbitrage DSP Arbitrage DSP Fmaturity ABSL long duration HDFC bal adv fund HDFC corp bond Nippon nivesh lakshaya ICIci Lterm Bond ICICI bal advtg Edel gov. sect ICICI Gilt sbi magnum UTI money mkt 2) Large cap Axis blue chip hdfc top 100 icici multi asset 2a) Hybrid PP Con hybrid Baroda con hybrid HDFC hybrid ICICI eq and debt ICIcI multi asset SBI multicap pp Flexi PP ELSS 3)mid and small DSP ABSL 4) Sector Nippon pharma SBI healthcare Nippon banking 5) Index UTI nifty UTI next nifty SBI Sensex 6) banking Nippon banking 7) Overseas Edelweiss china Edel weiss Europ kotak FoF-US Mosl S&P-US

Movement of investment

 An important classification on how market moves is critical to understand the markets

 

Short Term - Short term volatility of market is due to EVENTS. A war, or famine or some disruption causes the market to dip. Maybe it the right time to buy as things will get to normal later.

 Mid Term - Mid-term volatility of market is due to LIQUIDITY. A hike in int. rates, CRR etc. makes the liquidity suck out of market or infuses funds. Selective buying of stocks affected by this may be a good buy.

Long Term - Long term is defined by VALUATION. If long term investment is to be done valuation is critical to see if the purchase price justifies its valuation. These generally go through up and downs over a period of time and requires non emotional investing of not getting scared and dumping the share when it dips more than you thought it would.

 

Is it a boon or bane to be born poor

 Is it a bane to be born poor. Over the period have seen rich and powerful rapists getting bail and case is twisted or the people bought out to drop the case.At the same time a poor dalit laborer is hung for committing a crime or killed in an encounter.

While I am not an advocate for pardoning or for lower punishment for a criminal, the stark difference in how a rich and a poor is perceived by the courts need to  understood.

A crime is a crime irrespective of who it is and punishment is a necessity, but uniformity provides a comfort to people that justice will be done and not skewed towards rich.

A serious thought is to be put in at the judiciary level. Politicians prefer it that way. A person breaking the hospital or hitting doctors cannot be pardoned for any reason. It is the fault of politicians that govt. hospitals are not funded properly and relatives or known people are put in there. If  all govt. hospitals are a place of excellence, pvt medical hospitals and insurance issues that crop up will not be there.

Time for an independent judiciary and not dependent on govt. for posting. 

 

Time in the market

 Time in the market or Timing the market.

One often hears that Time in the market is essential than timing the market. Is that so?

I believe both are equally important. 

Time in the market refers to the compounding effect of putting in SIPs or investing and forgetting as it gains reinvestment and returns. But not necessarily that is true. Inflation beats down the compounding. Invest at 6% and inflation is 7% you will gain on compounding but lose on inflation.

Timing the market means buying when equity or whatever is low (generally refers to equity) and then selling when the equity is high making a good profit. The reason many discourage this (particularly sellers of equity with promising returns) is they feel a normal customer is not into checking the daily rates and quarterly reports. This timing is primarily for traders. As an investor, generally when bad news comes (like 500% tariff) or a calamity which temporarily blips a good stock and sees a dip, you may want to buy it for it to get over the bad news. Thus technically, you could time the market or when markets are down and index is bought at lower rates is also timing the market and selling when the market is hot.

Reason why many also do not encourage timing the market is our greed and uncertainty. Two key things that keep the investor group in a mediocre status is when to buy and when to sell.  Is the market too low or will it go lower (uncertainty) and when the market is high will it go still higher (greed). Once you set your goals (maybe 25% or 50%, rise and I will sell) sell it and do not worry- like only if i had kept it, I could have earned 1000%. These things happen in life- be it  to the topmost or bottom most investor. There is no fixed formula to achieve what top investor achieves. It all boils down to probability (some inside information) and amount of investment you bet. 10 Rs even with 100% return will get you 20 Rs. The same 50 Lakhs will get you 1 crore. Your ability to invest (needing a steady and ensuring a stable life or can be on the streets attitude) determines if you are a 10 Rs investor or 50 Lakh investor.

One final piece of advice- Do not go for the TIP, go for the DIP.

If market is really falling, good chance you could pick some stocks to ride it when the market is rising. So, to me, Timing is not bad idea.

See my blog on movement in the market. 

Recent studies have shown that timing the market at lowest (not always possible) and timing the market at the highest gave a differential return of 2.5% or there about. Not much considering one never knows the top or bottom. Only age old stats can be used for this.

My policy has been

a) 25-30% return in a fund. liquidate some.

b) 8-9% return in a fund. hold and steady investing.

c) -ve or 2% return. Invest more if good and non fraudulent companies.

Life can be two types. Either you believe no one will survive- a $ or a million $ is of no use to you then or believe that world will revisit normalcy and revert to normal after the blip and your investments will make money. Choice is yours.

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.