Saving and Retirement, Investing Q&A with One Of India's Great Investor, Best Investment Advice, Investing in Hot Industries
Premium Issue - 21
Hi, Welcome to the 21st Special Edition
Brief Overview of What We will cover in this Issue
Detailed Key Takeaways from the book I am reading Currently
5 Decent Articles to read and Key Takeaways from them.
Investing in “Hot” Industries
The Best Investment Advice
How to differentiate between structural growth (long term) and one-time growth (short term) - (Video Clip)
When you should Average Down and when you don't (Video Clip)
I Publish 4-5 quality Posts per month (2 Free, 2 Paid) so be assured that I take care in adding value to my free subscribers as well as paid ones. Do not unsubscribe in anticipation of the only paid newsletter :) will send a Free post Next Saturday
(Please choose to read a direct post from Our Blog to avoid missing some of the last section of content)
If you are a free subscriber but want to read the full issue, Do Subscribe to Paid Plan (If there is any error in payment then contact me at Twitter DM)
Everything You Need To Know About Saving For Retirement (Ben Carlson) - Part-1
Building wealth is so simple. Just live below your means, save the difference and invest for the long term.
Many aspects of life can be boiled down to simple principles or steps. So why isn’t everyone a scratch golfer walking around with six-pack abs and fabulously wealthy? Because simple is not the same thing as easy. Legendary golfer Bobby Jones once said, “Golf is played mainly on a five-and-a-half-inch course, the space between you rears.” Dieting and exercise each require an extraordinary amount of willpower and discipline. And getting your finances in order is more difficult than it seems because money impacts so many different aspects of your life.
Getting ahead in life is never as easy as a list of life hacks or motivational quotes set against a beautiful backdrop on Instagram. Saving for retirement is simple but it’s also exceedingly difficult in that delaying gratification is no fun. Former President Dwight Eisenhower once talked about how he would prioritize his presidential duties after getting elected:
I have two kinds of problems: the urgent and the important. The urgent are not important, and the important are never urgent. Financial problems that are important - retirement planning, saving, budgeting, etc. are easy to ignore because they don’t become urgent until it’s too late. Instead, there’s a long list of minor items you can check off your list that make you feel like you’ve accomplished something in the short run, even if they don’t help you to get ahead over the long run. It’s far easier to focus on the short term and ignore the long term when you don’t have an overarching plan in place to guide your actions.
Most people enjoy learning about personal finance as much as they enjoy getting a colonoscopy. Sure, people care a lot about money, but few people are interested in the actual nuts and bolts of personal finance or financial literacy. People want to learn how to get rich, not how asset allocation or tax-deferred retirement accounts work.
People want to make a handful of decisions about their finances and move on with their lives, not pay attention to this stuff on a regular basis. It’s perfectly normal if finance doesn’t interest you, but that doesn’t mean you can ignore this stuff and hope your finances magically improve on their own.
One of the reasons it’s so difficult to get your finances in order is your views on money management can be clouded by your circumstances, family history with money, beliefs, culture, and personal experiences. It’s nearly impossible to be objective about your own deficiencies because we humans are not objective when it comes to things we care deeply about.
What does this mean for your retirement savings? People are not objective when it comes to decisions or events that involve emotions and money is one of the most emotionally sensitive issues on the planet.
Financial market history, statistics, spreadsheets, and probabilities can all be helpful when crafting a financial plan but these topics are all pointless if you don’t understand yourself and the psychology of behavior and decision-making. Inside all of us is a lesser version of ourselves just waiting to screw up our financial decisions. They’re called blind spots for a reason -- we can’t see them in ourselves.
And there is nothing wrong with emotions. Emotions are what make us human. Financial writer Jason Zweig once wrote, “My own view is that people are neither rational nor irrational. We are human. We don’t like to think harder than we need to, and we have unceasing demands on our attention.”
There are three big things you need to get right in order to give yourself a chance at financial independence one day:
Save at least 10% of your income (preferably 15%-20%)
Make your saving and investing automatic
Think and act for the long term
These three things won’t make you rich overnight. They are simple, not easy. They require systems, not tactics. And they are boring, not sexy. The hardest part of this equation is it will be very easy to get off track.
The goal of this book is to help remove some of the stress, confusion, and anguish involved in the process. This stuff is not always easy but I am going to try to make it as painless as possible so you can make a handful of big decisions, have a better understanding of your options and allow you to move on with your life so you can focus on more important things and let your money do the work for you.
WHY YOU NEED TO SAVE
Frugal is just another word for cheap and no one wants to be labeled a cheapskate. And delaying gratification sounds awful when you can simply take your gratification now. Saving needs to hire a new advertising firm.
Time is the most valuable resource on the planet and the only asset where there is no inequality.
We all have a finite amount of time on any given day to work with. Saving money can give you more control over how you spend your time in the future. Time to spend doing what you love. Time with your family and friends. Time spent traveling to exciting destinations. Time not spent going to the office anymore.
Saving more now means replacing less of your current income when you finally become financially independent.
Saving is your front-row ticket to financial freedom.
Saving not only frees your time in the future but also gives you a buffer in the present. Saving money provides a margin of safety when life inevitably gets in the way of your best-laid plans.
The last thing you want to worry about when life throws you a curve ball is money. Money issues amplify stressful situations.
Getting rich sounds like a reasonable answer but living a rich life means different things to different people. A specific number doesn’t make you rich. If you’re constantly stressed out about money, it doesn’t matter how much you have, you aren’t rich if money still makes you worry.
Spending money may lead to a short-term burst in happiness but the thrill from buying material possessions wears off fairly quickly.
If you think about your savings in terms of buying units of time or freedom as opposed to units of money, it can help frame the decision into the proper context.
THE POWER OF SMALL WINS
There is a reason most financial advice doesn’t work - it makes people feel bad about themselves.
All financial advice sounds simple until you actually try it. Your finances can and should be simplified but they are never easy because of the human element.
Getting just 1% better a day would make you 37 times better over the course of the year. This is easier said than done but it shows how tiny improvements can have big results over time. No one starts out training for a marathon by running 26.2 miles on day one. The same is true for your savings.
Let’s say you start out saving 3% of your income with a goal of steadily increasing that rate in the future. If you go from saving 3% of your income in year one to 4% in the next, that’s a 33% increase in your savings rate. Go from 4% to 5% and you’ve given yourself a 25% annual jump in savings. Getting to 6% from 5% is a 20% jump. The goal when you’re just getting started is to see an increase in your savings rate each year that is bigger than the historical return on the stock market (which has averaged 8% to 10% returns over the past 90 years or so) until you reach your steady state savings rate
Early on in your financial lifecycle, the vast majority of your gains will come not from your investing prowess but from your savings rate.
WHEN SHOULD YOU START SAVING?
Most retirement calculators offer you fairly simple inputs. You enter in the amount you currently have saved, your future saving projections and a return assumption. Then the calculator spits out a future value based on those assumed inputs. This isn’t a perfect way to determine exactly how much money you will have saved up by retirement because life doesn’t work in a straight line. Retirement calculators are clean while the real world is messy. Retirement planning is more about accuracy (in the ballpark) than precision (on the bulls-eye) but running the numbers can give you a general idea of how your savings habits can impact your ability to generate long-term wealth.
Here’s a little secret about the compound interest that you cannot see in a retirement calculator - the majority of the growth comes once you build up a large enough balance as you get closer to retirement age.
Real wealth for normal retirement savers comes from a combination of saving, compounding and sitting on your hands. It takes time and it’s not easy. It could take decades to see extraordinary results, which is much longer than most people would prefer. Saving is more important than investing but saving is boring while investing is sexy.
It’s more exciting to focus on milking a few extra percentage points of investment returns out of the financial markets, but the amount you save in the first few decades of your career are far more important than your investment strategy. Increasing the savings rate on your income in this example from 12% to 15% has nearly the same effect on the ending balance as increasing investment performance by 1% per year. A savings rate of 20% instead of 12% equates to more than 2% a year in market returns. Earning higher returns on your investments is much more difficult than saving more money.
You actually control your savings rate while no one controls what happens in the markets.
It may seem like every tick in the market is going to make or break your portfolio, when in reality the simple act of saving more money over the long run can have an enormous impact on the size of your wealth.
For the majority of the population, saving is more important than investing.
It doesn’t matter if you’re the second coming of Warren Buffett if you don’t save money. It takes money to compound money. Saving always comes before investing.
WHY INVEST IN THE FIRST PLACE?
Saving is more important than investing when it comes to getting started with your finances. But if you ever hope to increase your standard of living, you have to grow your money over and above the rate of inflation. If you were to bury your money in your backyard, it would take just 23 years to see the value of your savings cut in half from a 3% annual inflation rate. At 4%, the half-life of your money would be just 17 years.
Let’s look at one of the most popular shoe brands of all time to see why this is the case
After being selected third overall by the Chicago Bulls in the 1984 NBA Draft, Michael Jordan was signed to a five-year deal with Nike that was worth a reported $ 2.5 million, a hefty price tag at the time. A year later, Nike gave Jordan his own signature shoe. The Air Jordan was born. The rest is history as Jordan went on to win six NBA titles, and numerous MVP awards and become widely regarded as the best player to ever lace them up. There have since been over thirty different signature Air Jordan’s in hundreds of different variations. Jordan’s brand is so successful that he’s now made far more money through his partnership with Nike than he ever made playing in the NBA.
In 2019, the Jordan brand alone brought in more than $ 3 billion in revenue for Nike. That was good enough for roughly one-third of the total revenue for the entire company. The first pair sold for $ 65, which was by far the most expensive basketball shoe on the market at the time. These shoes now regularly sell for $200 or more a pair while certain models can fetch thousands of dollars. It’s now been well over thirty years since the first pair of AirJordan’s hit the market. A three-plus decade is a substantial amount of time so I wanted to see what would have happened had you taken that $ 65 investment in a pair of Jordan’s back in 1985 and matched it with a $ 65 investment in Nike (NKE) stock. The price of Air Jordan grew from $ 65 in 1985 to $ 235 in 2019. That’s an annual growth rate of 4% per year, outpacing the inflation rate of 2.5% over that time. But Nike’s stock appreciated at a rate of more than 21% per year from 1985-2019. Had you invested $ 65 in the company in 1985, it would have been worth more than $ 36,000 by the end of 2019. That’s an expensive pair of shoes.
This is an extreme example using one of the most successful companies in history but it illustrates the power of stock ownership over the long term and the need to invest in productive assets. The cost of stuff - houses, cars, food, clothing, etc. - generally goes up over time so you need to invest your money to protect your savings from the effects of inflation.
Time is your biggest enemy when it comes to the impact of inflation on your wealth. But time is also your biggest asset when it comes to growing your wealth.
YOUR BIGGEST ASSET
The best thing you can do as a young person is to start saving and investing as soon as possible to take advantage of your long time horizon. According to financial writer William Bernstein:
Each dollar you do not save at 25 will mean two inflation-adjusted dollars that you will need to save if you start at age 35, four if you begin at 45, and eight if you start at 55. In practice, if you lack substantial savings at 45, you are in serious trouble. Since a 25-year-old should be saving at least 10 percent of his or her salary, this means that a 45-year-old will need to save nearly half of his or her salary.
Starting at a young age not only helps you take advantage of compound interest, but it can also save you stress and financial strain later in life.
HOW MUCH SHOULD YOU SAVE?
It’s impossible to offer investment guidance if you don’t know someone’s goals, needs, desires, temperament, personality and current financial situation.
In lieu of knowing every reader’s circumstances, my only retirement rule of thumb is that your savings rate should be in the double digits as a percentage of income.
Look at saving money like a monthly bill or subscription, like paying for Netflix or a gym membership. temperament, personality and specific personal and financial A 401( k) plan make this easy and convenient because you set an amount or savings rate up front and don’t ever even see the money hit your checking account since it’s automatically routed to your retirement account. Once your saving is taken care of you don’t need permission to spend elsewhere. You can spend money guilt-free without worry because your savings goals are taken care of. This is a way to think about budgeting in reverse.
Lifestyle creep is one of the biggest deterrents to saving money because the more you make the more you feel you deserve. Making more money can make your life easier but you must ensure your spending rate doesn’t outpace your savings if you ever wish to truly build wealth.
Most financial experts preach the virtues of frugality to get ahead but earning more money is how you supercharge your savings. The best investment you’ll ever make is in yourself.
WHAT TO INVEST IN
Investing in stocks offers a big potential upside but it comes at the risk of big downside potential. Owning high-quality debt or bonds lowers the risk of large losses but that protection is offset by the fact that your upside potential is capped. Cash flows paid to the owners of stocks are also far more volatile than those for bondholders because corporations have their own unique business risks and can get into trouble if the economy struggles
There is no right or wrong answer in terms of how you deploy your capital between being an owner (stocks) and being a lender (bonds). But, how you allocate your retirement dollars between the two is one of the most important decisions you will make as an investor because it sets the tone for your portfolio’s risk profile.
You cannot earn high returns on your money over the long-run without accepting losses or bone-crushing volatility at times. And you cannot keep your money safe from losses and bone-crushing volatility over the short-run if you’re not willing to accept lower returns over the long-run. Risk never goes away completely, it just gets transferred somewhere else. This is the essence of risk and reward when investing your savings.
HOW THE STOCK MARKET WORKS
The stock market is the only place where anyone can invest in human ingenuity. It is a bet on the future being better than today. Stocks can be thought of as a way to ride the coattails of intelligent people and businesses as they continue to innovate and grow. Short of owning your own business, buying shares in the stock market is the simplest way to own a slice of the business world.
it is worth noting that even the worst annual returns over 30 years in the history of the U.S. stock market would have produced a total return of more than 850% This is the beauty of compounding. The worst 30-year return for the S& P 500 gave you more than 8x your initial investment.
The stock market is unrivaled when it comes to growing money. And the longer you’re in it the better your chances of compounding.
That $ 1 invested in 1950 would grow to $ 17 by the end of 1972 and subsequently drop to $ 10 by the fall of 1974. From there it would grow to $ 95 by the fall of 1987, only to drop to $ 62 over the course of a single week because of the Black Monday crash. That $ 62 would have turned into an unbelievable $ 604 by the spring of 2000. By the fall of 2002 that $ 604 would have been down to just $ 340. After slowly working its way all the way to $ 708 by the fall of 2007, over the next year-and-a-half it would be cut in half down to $ 347 by March 2009. By the end of December 2009 that initial $ 1 was worth $ 537, which is less than the $ 590 it was worth a decade earlier by the end of 1999. So $ 1 growing and turning into $ 2,000 sounds amazing until you realize the many fluctuations it took to get there. The stock market goes up a lot over the long term because sometimes it can go down by a lot over the short term.
The stock market is fueled by differences in opinions, goals, time horizons and personalities over the short term and fundamentals over the long term.
At times this means stocks overshoot to the upside and go higher than fundamentals would dictate. Other times stocks overshoot to the downside and go lower than fundamentals would dictate. The biggest reason for this is that people can lose their minds when they come together as a group. As long as markets are made up of human decisions it will always be like this. Think about how crazy fans can get when their team wins, loses or gets screwed over by the refs. These same emotions are at work when money is involved.
THE INVESTOR’S LIFECYCLE
You can never be sure of anything when it comes to the markets or economy
let’s use history as a rough guide on this. Over the 50 years from 1970-2019, there were 7 recessions, 10 bear markets and 4 legitimate market crashes with losses in excess of 30% for the U.S. stock market.
Over the previous 50 years from 1920-1969, there were 11 recessions, 15 bear markets, and 8 legitimate market crashes with losses in excess of 30% for the U.S. stock market.
Bear markets, brutal market crashes and recessions are a fact of life as an investor. They are a feature, not a bug of the system in which we save and invest our money. So you may as well get used to dealing with them because they’re not going away anytime soon. They can’t because the markets and economy are run by humans and humans always take everything, both good times and bad, too far. The risk of these crashes and economic downturns is not the same for everyone though. How you view the inevitable setbacks when dealing with your life savings has more to do with your station in life than how scary you think those times are. Risk means different things to different people depending on where they reside in the investor’s lifecycle.
There’s an old saying that the stock market is the only business where the product goes on sale and all of the customers run out of the store. Your actions during down markets have larger say in your success or failure as an investor than how you act during rising markets.
The problem is during a market crash, it will always feel like it’s too late to sell but too early to buy.
If time is on your side, you shouldn’t worry about nailing the timing on your retirement contributions, especially during down markets.
The good thing about being a young person is you don’t need to worry about timing the market to succeed. You have the ability to wait out bear markets since you have such a long runway in front of you.
Your risk profile as an investor is determined by some combination of your ability, willingness and need to take risks. These three forces are rarely in a state of equilibrium so there will always have to be some trade-offs.
Your ability to take risks involves your time horizon, liquidity constraints, income profile and financial resources. Your willingness to take risks involves your risk appetite. It’s the difference between your desire to grow your wealth and your desire to protect your wealth. You need to take risks involves determining the required rate of return necessary to reach your goals.
There is no such thing as a perfect portfolio. The perfect portfolio only exists with the benefit of hindsight. And even if the perfect investment strategy did exist it would be useless if you couldn’t stick with it over the long term.
A half-decent investment strategy you can stick with is vastly superior to an extraordinary investment strategy you can’t stick with.
Discipline and a long time horizon are the big equalizers when it comes to financial success.
PICKING STOCKS IS HARDER THAN YOU THINK
General Electric was the largest company in the U.S. stock market in the
year 2000. Not only was it the biggest company in the market but it was
nearly double the size of the second largest corporation, Exxon. From the
start of the new century in 2000 through the fall of 2020, GE shares were
down 80% and that includes the reinvestment of all dividends. Retirees who
kept the bulk of their retirement assets in the stock are in a world of pain.
Nearly one-third of GE’s 401(k) plan were invested in company shares as
recently as 2016. And this is just a once great stock that had a fall from grace. Employees who had their retirement money in the stock of Enron or Lehman Brothers or WorldCom lost everything when these companies went under.
What do you think about this stock? Should I buy it?
This is probably the question I’ve been asked more than any other from people who know I work in the finance industry. There is typically a look of befuddlement on their faces when I politely decline to offer guidance with my standard “I don’t know.” And the truth is I really don’t know.
Picking stocks is ridiculously hard. One of the secrets to investing is that stock-picking isn’t nearly as important as people on financial television would have you believe.
Here’s a short list of things that are more important than stock-picking:
Your savings rate. Saving is the first step to investing.
Your asset allocation. The mix of stocks, bonds, cash and other investments will be the biggest determinant of your investment success beyond how much you save because it sets the tone for the risk profile of your portfolio.
Your investment plan. Financial writer Nick Murray says, “A portfolio is not, in and of itself, a plan. And a portfolio that isn’t in service to a plan is just a form of speculation; it can have no other goal than to beat most other people’s portfolios. But “outperformance” isn’t a financial goal.”
If a portfolio isn’t a plan then neither is stock-picking. I’ll admit, picking stocks is more fun than asset allocation but it’s also much harder to pull off. For every Amazon that turns a small initial investment into millions of dollars, there are thousands of companies that would decimate your life savings.
An eye-opening study from JP Morgan found roughly 40% of all stocks in the U.S. stock market have suffered a permanent 70% + decline from their peak value since 1980.
4 out of every 7 stocks in the United States have underperformed the return of cash sitting in a savings account since 1926. There are simply more opportunities to pick the losers than the winners in the stock market.
The key to diversification is that you don’t need to select the winners in advance. The cream rises to the top automatically. Normal investors should be happy to accept singles and doubles since it means you’re not at risk of one or two bad investments destroying your life savings.
The do-it-yourself approach is not for everyone.
Companies can go to zero. Target date funds and index funds do not.
Excerpts and Learning from Articles/Blogs
1) How Do You Know? (About Successful VC Investment)
Some lessons also apply in the secondary market as well
How do you know that new investment is going to generate great returns?
How do you know if a founder can grow to become a great leader?
How do you know, after a huge gain, if you should continue holding?
How do you know when to sell or double down?
The first two questions are most relevant at the time of the initial investment. The latter two are more relevant for follow-on investment decisions, which we think about as a decision to hold, sell or buy more (i.e. double or triple down).
In the beginning, we never knew how things would turn out.
Even with the benefit of hindsight, it’s hard to know the truth due to cognitive biases such as hindsight bias and the narrative fallacy. According to Nassim Taleb, “human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictable.”
If we cannot be certain looking at the past, then it’s even more difficult to predict the future. All we can do is make decisions based on the information available at the time, and the outcome will be the outcome. The focus should be more on the journey rather than the destination.
That said, we can also focus on a few things that are within our control after we’ve already made the initial investment.
Four Simple Questions.
1. Does the company generate cash?
If you watch HBO’s Silicon Valley or follow the venture ecosystem in the press, you might think that VC-backed companies don’t need to make money. Growth trumps profits. Blitzscaling, or “go big or go home,” are common mantras (except during crashes).
Having survived multiple economic downturns, we prefer to take a different path. High burn rates make us nervous. After our investment, over time, if we do not see capital efficiency and a path to control our own destiny (through positive cash flow), the company would fail this first simple test.
2. What is the moat (or competitive advantages)?
Building a business that generates significant profits and free cash flow is not good enough. Capitalism can be cruel and creative destruction is common, especially in the tech industry. More important than profitability is defensibility which enables sustainability. What is the moat around your economic castle? If you don’t have one, marauders will take over and the compounding will stop.
Examples of moats are network effects, IP, distribution, brand and/or other competitive advantages. However, the most important moats often turn out to be secrets discovered along the way. This is one of the reasons that we do not (and cannot) know which companies will succeed ex ante.
3. How do we feel about the relationship?
For follow-on investments, there will be more business metrics and operating history to analyze. However, paradoxically, we’ve learned that the people and our relationship with them may end up being the most important factor, even at the later stages.
When we evaluate the relationship, we don’t just look at how we are treated. We observe and learn from the type of relationships with other stakeholders. How do they treat employees and customers? Is there trust? What are employee turnover and customer churn?
We might ask, will management call us to talk about an important problem? We certainly do not require them to have us on speed dial but if the relationship is not great, we will not know what is really going on. We would be like any other investor — an outsider looking in.
We will become increasingly uncomfortable holding onto an outsized, concentrated position in a company where we have little knowledge or influence. Therefore, any company with which we do not have a great relationship would no longer qualify to be a long-term hold.
4. How much liquidity do you need? How much liquidity do you want?
The fourth key question becomes relevant only after a company becomes somewhat successful. Only then, can we ask the question, “how much liquidity do you need?”
The answer often depends on the lifestyle and personal needs of employees.
If a company continues to do well, at some point, we might ask the next logical question -- “how much liquidity do you want?”
This is where it gets interesting. If the amount of “want” starts to exceed a certain level, it may be time to call it a day.
However, every once in a while, we come across entrepreneurs for whom it’s no longer about money. It’s about loving the work itself, making a difference, and fulfilling a mission. Such entrepreneurs (who we have called Hedgehogs), always feel like they are just getting started.
So, the next time you wonder “how do you know?” The answer is simple. We may not know in the beginning. But over time, we learn and make adjustments, sometimes dramatic, to the capital we allocate across the companies in our portfolio. Rather than trying our luck at venture lotto, we prefer to commit our time and money to companies where we have the most conviction, which also tends to be where we develop the best and most enduring relationships.
2) Investing in “Hot” Industries
(Detailed Article with lots of examples)
“A lot of the places where the industries are doing a great job for the world, it’s very hard to make money out of it. Because these wild enthusiasms come into it. I don’t have a favorite industry.” – Charlie Munger
In the depths of the ocean, the glow from a small lure stands out among the darkness. Fish from the surrounding waters swim toward the lure, tempted with the promise of a free lunch. Little do they realize that they are swimming right into the jaws of an angler fish and their impending doom.
Likewise, “Hot” industries have historically acted like angler fish, attracting investors who unwittingly swim into the jaws of poor investment returns
Even though those industries had favorable long-term tail-winds, industry returns were abysmal and left thousands of bankrupt companies in its wake. Why?
Two key reasons:
Durable Moats are Illusive: “Hot” industries are defined by growth and rapid change. This constantly evolving environment makes it incredibly hard to predict winners and losers. The best product or service today may become obsolete tomorrow. And a perceived competitive advantage today may vanish overnight.
Wild Enthusiasm Attracts Too Much Capital: Wild enthusiasm attracts massive amounts of capital into hot industries. This in turn increases competitive pressures and drives down the returns on invested capital.
Hot industries are like a fluid with low viscosity. They are fluid, in a state of change, and have little resistance to deformation by (industry) stress. All of which makes them hard to predict.
What happens when you invest in hot industries
Why you shouldn’t rely on Historical Valuation
This has implications regarding the usefulness of a company’s historical financials. As an industry’s “temperature” increases (i.e. becomes more fluid and subject to change), a company’s historical figures may no longer be an accurate representation of its future performance. Using a company’s historical financials in this new environment invites error and potential over-valuation. (Or under-valuation if the reverse is true; low viscosity moving to high viscosity)
Investment Lessons:
Avoid “Hot” Industries: Subject to intense competition and an ever-shifting environment, it is challenging if not impossible to predict winners and losers in a hot industry.
“We make no attempt to pick the few winners that will emerge from an ocean of unproven enterprises. We’re not smart enough to do that, and we know it.” – Warren Buffett
“…we try to apply Aesop’s 2,600-year-old equation to opportunities in which we have reasonable confidence as to how many birds are in the bush and when they will emerge.” – Warren Buffett
“The big problem is not aggregate costs, but costs versus competitors. If your costs are out of line, you’re going to get killed eventually.” – Charlie Munger
“The worst sort of business is one that grows rapidly, requires significant capital to engender the growth, and then earns little or no money.” – Warren Buffett
“A majority of life’s errors are caused by forgetting what one is really trying to do.” – Charlie Munger
3) Game of Stocks (A Wonderful Read about investing style and perspectives of Techno-Funda, Must read)
4) Solidarity Q2 FY 23 Letter to Partners
Discussion on the macro environment
Thesis and reason behind their investment in Star Health Insurance
Why did they choose PVT Banks vs PSU
View on Gold
5)The Best Investment Advice
6) Basic understanding of a company’s financial statements (PWC Report)
Small Video Clips
➢Mohnish Pabrai's Q&A Session with Ironhold Capital
Why you should always discuss investment ideas before investing in them? (Groupthink) (19:25 To 22:35)
How to identify great businesses and moats? (23:13 to 26:56)
Mohnish Pabrai on meeting the Management team is it beneficial or not for investors? (28:48 to 31:42)
➢ Alpha Moguls With Karma Capital's Rushabh Sheth
Bottom-Up investing and macro (04:22 to 06:21)
Why they are bullish on Pharma Business? (Rationale) (12:02 to 14:46)
Where media sector stand in terms of the market cycle and why is karma capital invested in the media sector (15:52 To 22:00)
➢ E A Sundaram interview with BQ Prime (Niraj Shah)
4 common mistakes to avoid while investing (20:02 To 24:09)
➢ Q&A Session with Mr. Basant Maheshwari
Must Watch Session! Lots of case study points! And Amazing Clarity of thoughts 👌
Covered Topics
Understand Growth Company valuation (PE Expansion)
Why Mind share is more important than market share (Brand Value)
What do you should look for when the company is doing M&A
Portfolio Concentration of 4-5 Growth Companies and its risks
How to differentiate between structural growth (long term) and one-time growth (short term)
Analysis-Paralysis
Idea Generation
When to sell
Managing Volatility
How to grow limited capital
When to look at FCF
Which is better Volume Growth or Value Growth?
When you should Average Down and when you don't
View on corporate governance
Investing mistakes to avoid
🙂🙌🙌