- Wealth PMS (50L+)
My first book releases today. Money Wise is where I write about building wealth by investing. It will help you think about how to make money, save money, invest money and even why you should spend it! The book takes you through a journey about how to grow your money by investing, the pitfalls and the things to watch out for.
A section called Suckered has many places where you’re likely to get scammed (we have a list, too) so that you don’t have to. From a conceptual understanding of mutual funds, to how stocks work and how to analyze them, to how you should build portfolios, diversify and even invest for your old age. The book has my trademark style, so you’re going to have to excuse some of the terrible jokes. But it’s been fun writing it, and I hope you’ll like reading it!
You can buy a signed copy at Flipkart for a short period:
Here’s an excerpt from the book:
People often find the investing style they like. This means they have to try different styles and then choose the one that suits them best. People like to follow their heroes, say, Warren Buffett.
But often, they don’t have the genetic make-up or the discipline of a Buffett to consistently stick to a process. They’ll try a few things and then something else and mix it all and get entirely lost. But if you give different styles a try, you might find that one of them works for you. Or perhaps a few of them. The different styles of operation of each of these mechanisms allow you to automatically diversify.
One way I have found easier to work with is price momentum along with fundamentals. You find stocks through the trend following mechanism. Stocks making new highs, or stocks going up strong. Then a deeper analysis is done through a check on the balance sheets, profits and cash flows. Another look at news and management quality. And then you have a set of stocks you might like. When the price momentum is lost, you reduce your position size and wait for the next opportunity to pick up more stocks.
There’s no fear of being in cash – when opportunities are few, there’s no need to be invested. You can find stocks at leisure and only participate when they are trending upwards. You might be a different person. You might love the concept of arbitrage and day trading. Buy stocks and sell them in five minutes. There are people who love this. Others make money through value investing by buying stocks that are severely underpriced and waiting for years to see them positively rerated.
Doing different things takes a little more effort than mastering one thing, but it gives you a lot more perspective. Looking at markets from different vantage points can be priceless from a technical charting perspective, from the fundamental analyst perspective, and even from the perspective of a special situations trader. You may have your own style, but the way to look at the market is not just to see how you react to news and changes but to also estimate how others see the same things.
This is horribly difficult to explain. It’s like telling a couple that parenting is insane, nearly suicidal, and yet the most amazingly rewarding thing ever. They will never understand. And yet, most parents, once they’re in the process, are naturally inclined to agree. It has to be experienced because of the complexity of the emotions. And it’s different for everyone.
I wouldn’t compare investing too closely to child-rearing because a child is your responsibility, whether you like it or not. You can always choose to ignore the concept of investing directly and choose mutual funds instead. The similarity is that the emotional roller coaster of investing has to be lived through to be properly understood. The most important thing, we realize over time, is the art of money management.
Money management: The idea of a portfolio return
We love to select stocks. Or mutual funds. What can I buy now is often the question, especially every time the markets go up. We love this concept of action all the time—every day.
Yet, money is made, all too often, by the simple act of just investing regularly with discipline.
Think about this. Say you invest in 10 stocks every month. It’s the same stocks, except you replace a few of them every three years. Some stocks will go up. Some stocks will fall. You choose to invest a little more in stocks that have gone up and a little less in stocks that have fallen. Over the years, this simple concept can make you far more money than any energetic action. You don’t need EVERY stock to give you phenomenal returns – just a few will do.
Since you don’t know which of these stocks will give you insane returns, you just invest in all, rewarding the ones that do well with a little more money every month.
A stock I liked in 2015 was a little company called Garware Wall-Ropes. Th ey made ropes and fishing nets and sports nets. Synthetic ropes. Boring business? Possibly, but they had very little competition in India. And the business was doing well, reducing debt and increasing profits regularly. The stock was at Rs 200 or so.
Within a couple of years, the stock was at Rs 600. Sounds great? Want to book your profits? Don’t, because a year later it was at Rs 1000. In early 2020, it crossed Rs 1500. And in early 2021, it was above 2600 per share.
This isn’t to say this trend will last forever. It’s had ups and downs. But when you have 10 stocks, if only one of them goes 10x in terms of returns, you want that stock to be the biggest in your portfolio. You don’t want to keep booking profits from that stock and putting more money in another stock which is great on paper but is just not moving at all.
The art of money management is to ride your profits and reduce your ownership of the stocks that aren’t winning.
You can buy the book online or at stores. Here are some links to help:
Hope you enjoy it!