"NO" does not necessarily mean NO

A story of persistence by a small child is all about this blog. It also tells us how persistent this colored child in achieving in what she wants

Mr. Darby received his degree from the university of Hard Knocks. One day he was helping his uncle in an old fashioned mill in grinding wheat. Darby's uncle owned a very large farm and there lived large number of sharecrop farmers. He also rented his place and had many tenants and their kids lived there

When Darby was helping his uncle in the mill, a colored child (who was a child of one of the tenants) came opened the door silently and stood near the door. Darby's uncle looked at the child barked at the child roughly "What do you want ?"

The child replied, "My Mammy asked to get fifty cents"

Uncle replied, "I will not do it, now you can run home"

"Yas sah", the child replied but she did not move even a inch

Darby's uncle carried with his work and he ignored the child completely. But the child did not respond anything nor did not move from the place. She is very much persistent in getting what she wanted 

Darby's uncle took up a barrel stave and showed infront of the child and made his expression in a way that he is going to trouble the child and shouted many times to ask her go away. Again the little girl replied "Yas Sah" and stood in the same place without any movement

Later, when Darby's uncle reached the place where the child was standing, the child came one step forward, looked at his eyes and screamed "My Mammy need that Fifty Cents". Uncle looked for a minute, dropped the barrel stave on the floor, put his hand in his pocket, took out half a dollar and gave it to her. The child took the money, slowly backed towards the door, never taking her eyes off from the man and after reaching the door, she ran away

Darby's uncle was looking at the window after the child left, pondering for a while and then returned back to work. This is a small story of a colored girl, who won the big rude man and achieved what she wants with her strong persistence. If she ran back when the man first shouted, she would have not achieved what she wants 

We will face this in our real world. when we need to achieve something or seeking something from someone or trying to sell something to someone, we would most probably get rejected initially. It is our persistence and our desire to achieve something will make us win.

Have a Great Day

B G Nareshkumar

Ediphone - Edition Dictating Machine

We all might be knowing the name "Thomas Alva Edison (11th February 1847 to 18 October 1931)", he was an American famous inventor of Electrical Power Generation, Mass Communication, Sound Recording, Motion Picture and so on

Ediphone

He also invested the Ediphone which is a drum memory from sound, voice vibrations would be recorded on a wax cylinder. There was a great history on marketing and selling this product, lets see below

Edwin C. Barnes had a burning desire that he needs to work with Edison on a business project. He had a great desire on this but had no money to travel to New Jersey. Due to his strong desire he found a way to travel through a freight train. He somehow reached Edison's laboratory and seeking for an opportunity

Initially he had no clue on how and where to start but he had his strong burning desire. One day, Edison found this Edison Dictating Machine (Ediphone) but his salespersons are not comfortable / enthusiastic to sell this machine. They thought it needs great effort to sell this machine

Barnes now saw this as an opportunity. He thought he can sell this across the united states and told his interest to Edison and got the opportunity. Edison gave him a contract to distribute and market all over the united states. Barnes Desire and his thinking power made him to achieve this great milestone. There will always be an opportunity in everything but the question is how we make use of this

Out of the Business Association grew the slogan, "Made by Edison and Installed by Barnes."

Later, Barnes made some around 2 or 3 million dollars out of this contract. He initially had no money to begin with but he believed and had a strong desire on his thought to achieve this great milestone.

Have a Great Day

B G Nareshkumar

The Inflation Fighters - REITs & TIPS

According to Benjamin Graham, author of the famous book "The Intelligent Investor" and mentor of Warren Buffet. The 2 inflation fighters are REITs and TIPS

REITs - Real Estate Investment Trusts

These are companies which collect rent from the commercial and residential properties and distribute to its share holders. They are bundled into real-estate mutual funds. When the inflation rate is higher to the returns received from the famous index funds, these REITs play a major role in beating the inflation

The rent collected from the properties also rise as per the inflation rate in the country. Hence the amount received matches the expenses. These will not decrease the purchase power of any investor due to inflation

TIPS - Treasury Inflation-Protection Securities

These are US government bonds, first issued in 1997 that automatically go up in value when inflation rises. All treasury bonds are safe from the risk of defaults. TIPS also guarantee that the value of your investment won't be eroded by inflation. TIPS will make sure you will not suffer from the financial losses or loss in purchasing power on what ever the inflation is. The catch related to this TIPS are taxes. When the value of TIPS rises, the taxes will play its role as well. So TIPS are best suited for the tax deferred retirement accounts

Have a Great Day

B G Nareshkumar

Intelligent Investor

There is a general investor mentality, he/she feels very happy when the stock price goes up /in the bull market adds more positions to their portfolio and when the stock reverses and gets down, they sell almost all their positions in the portfolio and wait for the market to bounce back. Intelligent Investor is the one who does not panic when the stock price comes down, infact they accumulate more of their stocks slowly in an SIP manner. They know a quality stock with their own analysis and when the stock price goes below their intrinsic value, they buy more to have greater "Margin of Safety"

"All of human unhappiness comes from one single thing: not knowing how to remain at rest in a room" - Blaise Pascal

"An Investment operation is one which, upon thorough analysis, promises safety principal and an adequate return" - Benjamin Graham

Imagine that two places are at a distance of 200 kms. If i drive at 100kmph, i will reach in 2 hours. But if i drive 200kmph, i can get there in 1 hour, only if i try this an survive. Which has the most possible way of survival. Now we need to ask ourself should i survive or reach fast ? Should i be an Investor or Speculator ?

There is a standard belief by people, if we invest in gold it will definitely go higher in price over time. One should also consider does gold gives an dividend or any extra bonuses ? Does Gold compounds over time ? If so at what percentage ?. It is always advisable to diversify our investment but believing gold is the best investment option and investing all money in gold is definitely not a wise option

An intelligent investor will consider the below inflation concept

• Let's say if a person gets 2% hike in his pay when the inflation is at 4% higher compared to previous year. The person will definitely be happy because he got a hike of 2%

• When the inflation is at 2% and if the person doesn't get any hike in his pay. He will definitely fell bad. This is nothing but the normal psychology of a person

In both the cases, the shortage is 2% in his pay compared to the inflation but the intelligent investor will look at these concepts

The wealth generation and investment doesn't depend on how much we earn, it all depends on how much we save. Each and every penny saved and invested in a proper channel now is the secret of wealth generation and happy living.

Have a Great Day

B G Nareshkumar

The Foolish Four - Stock picking concept

In Mid 1990s, the Motley Fool website and several books hyped the technique called "The Foolish Four". According their website, sharemarket investors can crack the market returns over the 25 years by simply following the foolish four concept. They also portrayed shareholders can crack their Mutual Fund returns by spending only 15 minutes a year

By just spending very minimal time a year and having very minimal risk, this foolish four concept went very viral among investors. All you need to do was the below 6 steps

1. Take the 5 stocks in the Dow Jones Industrial Average with the lowest stock prices and highest dividend yields
2. Discard the one with the lowest price
3. Put 40% of your money in the stock with the second-lowest price
4. Put 20% in each of the three remaining stocks
5. One year later, sort the Dow the same way and reset the portfolio according to steps 1 through 4
6. Repeat until wealthy

Over 25 years period, the Motley Fool claimed, this technique would have beaten the market by a remarkable 10.1 percentage annually. Over the next 2 decades they suggested $20,000 invested in the Foolish Four should flower into $17,91,000

Let's consider whether this strategy will meet safe investment criteria:

• What kind of "Thorough analysis" could justify in discarding the stocks with the single most attractive price and dividend ?

• How could putting 40% of your money into only one stock can be a minimal risk ?

• How could a portfolio of only 4 stocks be diversified enough to provide "Safety of Principal" ?

This Foolish Four, in short was one of the most ridiculous stock picking formula. This formula made many investors a real fool of their lifetime. This can work in only high amount of luck is in favor of anyone but still it wont last long

In 2000 alone, the foolish four stock - Caterpillar, Eastman Kodak, SBC and General Motors lost 14% while the Dow dropped by just 4.7%

Don't fall into any of these foolish and lazy ideas. Great Investments needs lot of learning and lot of patience in holding to it. 

Have a Great Day

B G Nareshkumar

Petrol & Diesel Price Calculation

We are not completely out of Covid. After second wave, we all know the price of Petrol and Diesel increased very rapidly. One main reason for this is the increase in the Indirect Tax on Petrol and Diesel, which directly fall on the head of every citizen. Below is the calculation made by considering the price of raw material (Crude Oil) and other operational cost on August 2021

By end of Market hour today (24.08.2021), the price of Crude Oil closed at Rs.5000 / Barrel. We comfortably crossed Rs.100 per Litre on Petrol now. The data below is near approximate as the price changes day by day

Increase in Petrol and Diesel price will directly increase cost of every product, which is mainly due to the increased price of transportation. This increase will increase the inflation rate. This is one of the biggest issue, which our government should look into

People may also argue, if we get electric vehicles the cost might decrease. Certainly not, Electric vehicles are currently not possible for trucks and long distance transport vehicles in India. Electric vehicles can be used for personal transportation. Hence they need to depend on Diesel trucks and those are the vehicles used for grocery to industrial raw materials transportation, which has already increased their transportation cost 

* Data subjected to change as raw material and tax price changes

This is how the price of petrol and diesel calculated in India. You can see the price difference before and after tax. There is a need of finding an alternate or we need to use the fuel very efficiently inorder to reduce the expense and save more to invest

Now, think about the inflation rate. If we travel with this kind of increased cost in petrol and diesel, will our salary alone be sufficient to run a family going forward or do we need to invest in a business which can work 24/7 even when we sleep ?

Let us see what is the Tax imposed on 2014, 2017 and 2021

Tax Paid Vs Total cost of the Fuel

Price of Petrol and Diesel in other major cities in India

Let us think of generating great wealth later. First, let us think of the Inflation rate and plan well in advance and be prepared.

Have a Great Day

B G Nareshkumar

The Power of Compounding

According to Gautam Baid (Author of The Joys of Compounding), Compounding not only refers to wealth. Compounding should also be done with other factors, which are more important to life

• Compounding Positive Thoughts
• Compounding Good Health
• Compounding Good Habits
• Compounding Wealth
• Compounding Knowledge
• Compounding Goodwill

All the above 6 factors are equally important and compounding these leads to Happy Living. I would like to share few quotes by few famous people as i read in the book

            Compounding Positive Thoughts

"Whenever the mind of of man can conceive and believe, it can achieve. Thoughts are things! And powerful things at that, when mixed with definiteness of purpose, and burning desire, can be translated into riches"- Napoleon Hill

"The mind is everything. What you think, you become"- Gautama Buddha

"Our life is what our thoughts make it"- Marcus Aurelius

            Compounding Good Health

"To keep the body in good health is a duty, otherwise we shall not be able to keep our mind strong and clear"- Gautama Buddha

"Take care of your body, It's the only place you have to live"- Jim Rohn

            Compounding Good Habits

"What you are is what you have been. What you'll be is what you do now"- Gautama Buddha

            Compounding Wealth

"Good Investing isn't necessarily about earning the highest returns, because the highest returns tend to be one-off hits that kill your confidence when they end. It's about earning pretty good returns that you can stick with for a long period of time. That's when compounding runs wild"- Morgan Housel

            Compounding Knowledge

"When we bought See's Candy, we didn't know the power of a good brand. Over time, we just discovered that we could raise prices 10 percent a year and no one cared. Learning that changed Berkshire. It was really important. You have to be a lifelong learner to appreciate this stuff. We think of it as a moral duty. Increasing rationality and improving as mush as you can no matter your age or experience is a moral duty"- Charlie Munger

            Compounding Goodwill

"Let no one ever come to you without leaving better and happier"- Mother Teresa

My Opinion on compounding is multiplication over time. I strongly believe this

If you add 9+9+9+9+9+9+9+9+9 = 81

If you multiple 9*9*9*9*9*9*9*9*9 = 38,74,20,489

Compounding always takes time but the power of compounding is what the whole universe is all about.

Have a Great Day

B G Nareshkumar

5 Years data of Nifty

Below is the data of Nifty for the past 5 years. Below data is based on the expiry day for every month. By still having 4 months for the current year, Nifty seems to be on the higher end of the graph. Will there be any correction ? Let's wait.

Have a Great Day

B G Nareshkumar

The thin line between the Power of Hanuman Vs Raavanan

Hanuman

One of the great epic of Indian history "Ramayana" cannot be fulfilled without speaking about Hanuman. Hanuman was strong devotee of Rama. The most powerful, who used all his powers for good things. Rama believed fully on Hanuman more than anyone in rescuing sita from Raavanan

In his early age, Hanuman having the full powers playfully used it without knowing the seriousness of it. Hence it was hidden from him. Hanuman grew up without knowing his special powers. The wise bear king Jambavan told Hanuman about his powers which can help him to cross the sea to reach Lanka in just a jump

Initially, Hanuman did hesitated to believe that he had special powers. Later, Vayu Bhagavan, father of Hanuman told him the secret of his powers and also told him why he was not reminded about his powers for such long years

If the powers were used wrongly without seriousness & strong belief, it leads to the great destruction. First those powers will kill the near and dear ones. Later, it will become a big threat for the entire world. Hence one should use the powers wisely to achieve wisdom in life

Raavanan was a strong devotee of Lord Shiva and had all powers in life. He controlled everything in all 3 worlds. Raavanan used his powers in wrong / unethical ways. However, Lanka was a beautiful place then, which he maintained very well with all wealth. The worst thing he did in his life is committing a crime by taking sita from rama

Raavanan

Hanuman and Raavanan both had enormous powers and the thin line between the powers of Hanuman and Powers of Raavanan is that Hanuman used it wisely and for the well being of everyone. Powers of Raavanan was used with entirely selfishness and in unethical manner. Though he is a strong disciple of Lord Shiva, he end up in great disaster due to his bad actions

I would like to end this great lesson from Ramayana in understanding the important lesson in investing. Everyone has the great power of investing our hard earned money in Stockmarket or Bonds or any kind of deposits but if we don't use that power wisely it will all end up in disaster

Use the power of Investing in compounding wealth by controlling time. Time can only be controlled with high amount of patience & continuous learning. Controlling time is the highest power one can get in his lifetime.

Have a Great Day

B G Nareshkumar

Howard Marks - 3 Stages of Bull Market

Howard Stanley Marks
American Investor & Writer

Howard Stanley Marks defines the Bull Market in 3 stage

• STAGE 1: Few Forward looking people begin to believe things will get better

• STAGE 2: Most investors realize improvement is actually underway

• STAGE 3: Everyone is sure things will get better forever

How IPO's will behave during the 3 stages of Bull Market

• During the First stage: Good companies come with Initial Public Offerings (IPO's) at cheap valuation

• During the Second stage: Good companies come with Initial Public Offerings (IPO's) at expensive valuation

• During the Third stage: Bad companies (who do not have any earnings or loss making companies) come up with very high valuations and still have over subscriptions with retail investors

We see many companies come up with IPO's these days. Let us identify the quality of these companies by analyzing their books in past and we can identify in which stage are we in this bull market. Inspite of covid crisis, we are able to climb this high and there should be some hard stop and let us not be the prey

Have a Great Day

B G Nareshkumar

Spinoff

Company with multiple subsidiaries decide to demerge its one of the subsidiaries, this process is called Spinoff. Mainly the parent company decide to demerge the company which do not perform extremely well. Spinoff is one of the reason for the parent company to increase its numbers in reporting and attract more stake holders

These spinoffs, after the de-merge process will trade very less than its intrinsic value. Might be it will be very cheap compared to its similar companies in the market. One should carefully study these kind of spinoffs to get invested

We should see if the new management is purchasing the shares of the spinoffs. If so, it has the greater possibility of being a multi-bagger. These kind of spinoff companies has the greater margin of safety. Margin of safety is the main aspect in any investing, which can be easily achieved in quality spinoffs

A demerger process in India involves below steps:

• Board Approval
• Stock Exchange Approval
• Creditors & Shareholders Approval
• National Company Law Tribunal (NCLT) Approval 
• Record date announcement by board
• Listing of the De-merged entity

What will happen to the existing shareholders of the Parent company during Spinoff ? The shareholders of the parent company will get certain number of shares of the spinoff company as the special divided during the spinoff. This is sometimes considered as positive and sometimes as negative, depends on the company

Types of Spinoff:

• No Ownership Spinoff: The parent company maintains Zero ownership of the spun off company. All shares are distributed among existing shareholders

• 
  Partial Ownership Spinoff: Parent company can retain upto 20% of ownership in the spun of company

Few famous companies which underwent Spinoffs are

• In 1999, Hewlett-Packard Co spun off Agilent technologies Inc
• In 2011, Expedia created spinoff company TripAdvisor
• In 2017, eBay created spinoff company PayPal

Few recent spinoff companies in India, took place in 2020:

• Suven Pharmaceutical Limited - 22nd January 2020
• Tata Chemicals Limited - 5th March 2020
• Max India - 15th June 2020

Let's have a look on these companies stock performance

Have a Great Day

B G Nareshkumar

Power of Incentives & Commission

Incentives are not just financials, it also include Prestige, Freedom, Time, Titles, Power & Admiration. Incentives plays a major roles in getting job done fast and efficiently. Federal Express business is to deliver the couriers to different countries on time. If there was any delay in delivery, it destroys their trust and business. All planes of the FedEx comes to one place and the couriers are exchanged between planes

The biggest challenge is they could never get this done on time. The company tried all possible ways to get the job done on time, nothing worked. Later, the company identified a solution and they started paying their employees based on shifts and not on hour. Once the workers completed their job, they all can go home. By this practice, the companies problem cleared up overnight. This is the power of incentive

"Perhaps the most important rule in management is to get the incentives right" - Charlie Munger

Linking incentives to a system is like the system takes care of itself. It also builds win-win relationship between the management and its employees. Any product which gives more commission is going to sell more. No matter how harm the product is. It all depends on the commission and incentives.

Have a Great Day

B G Nareshkumar

3 Laughing Monks & Stock Highlights

Stock Highlights - 16.08.2021 (Monday)

• Eicher Motors fell another 2.00% (50.95 points) and closed at 2495.85. Before the Q1 results it was trading around 2730 and undergone huge profit booking and trading around 250 points lower
• Cummins India gained reasonable price after the result and closed around 984.00 today. Though it has not touched all time high, it is trading at good numbers with good volume
• Bata has gained reasonably after the Q1 results and closed at 1691.35. Today it was on the negative side, but can be a stock for long term investors
• Reliance Industries gone up 1.30% (27.85 points) today and closed at 2173.50. It touched its crucial resistance of 2203 and need to observe for further moves
• HDFC Bank was very neutral today and closed at 1530.60, It is always a stock for long term investors
• Infosys and few IT stocks were dragged down. Infy closed at 1704.40, which is 7.80 points (0.46%) down

Laughing Monks 

Many years ago in china there lived 3 laughing monks, their names were not known to anyone and they never cared of disclosing their names to anyone. Their job is to visit new places and just laugh. They never talked to anyone nor responded to anyone who came to talk to them. They answer people with their laugh

These 3 monks go to the center of any village and laugh at each other loud, they never laugh by criticizing anyone nor their laugh never discouraged anyone for their action

They just spread the positive vibration through their laugh. By knowing these 3 monks activity, everyone across china liked these monks and infact many people start laughing with these monks

Many years passed, one fine day, one of the monks died when they were laughing. People in the village working in the field came running to see what was the reaction of the other 2 monk for the loss of their good friend. They were thinking these 2 monks will be filled with sorrow but for their surprise, the other 2 monks were laughing still louder and they can't resist their laughter

When asked why they were still laughing when their friend just died, for the first time they replied, last evening when they were walking to this village, the monk who died now was the one asking who will be the first one to die and he won. So, these 2 monks were laughing that his friend won

There was a custom to clean the body of the dead and then they fire the body but the monk who died told their friends before his death that he was always clean and never been filthy, so don't change my clothes after i was dead. As his friend's wish, they kept the body with the same old clothes which he was wearing and carried away with the funeral. when the body was fired with the old clothes they saw great fireworks came from him and lighted the whole sky with colors. The other 2 monks started laughing still louder and told he again won by making them stop laughing for a while

These 3 monks told the world through their laugh, humans are the only animals who are gifted with laughing skills and this world is made for spreading the laughter and happiness. When we feel lost or when we feel disturbed through any actions, just take some time to stand in front of the mirror and laugh, it will give a different feeling and you would get new energy flowing through out the body

Similarly, there might be many situations in investing world where people go wrong in taking wrong positions. This happens most of the time in trading and would make people to wait longer to come out in breakeven. During those time, take a deep breath and laugh. we will get new energy and our mind gets freshed up

Don't panic and take immediate position to cover the losses. Investing world doesn't work that way. Everyday is a new day and people work in the finance system to cover the losses tend to book more losses. Always we should try to take one step forward from where we are, and we need to maintain the consistency which will give us the joy of compounding wealth.

Have a Great Day

B G Nareshkumar

Checklist & Decision Fatigue

Checklist is not a new thing for most of us, sometimes we follow checklist process without our knowledge but it would be more effective if we are able to use it with our knowledge. If we are able to manage and create our checklist simple as possible for all the main decision makings, it is the great tool in doing most effective job

Let's say if we are in the field of investing and trading, having very simple checklist as below will enhance ourself in taking any important decision

• What is the history of the company ?
• How does management perform during Good and Bad times ?
• Cash flow of the company ?
• Stakeholder relationship with the company ?
• CAGR of the company in long term ?
• Vision & Leadership team attitude of the company ?

Above are very few and simple questions which will not take more time to ask ourself before investing in any company. There can be different set of questions which can be framed for trading. The point is we should ask ourself with certain questions before investing / trading in any company. This can be achieved by having a checklist

If we are not following any checklist then we will be involved in multiple decision making without a process. Let's say if i want to take 1 or 2 decisions in a day or a week, will that be effective or making 10 decisions a day will be effective ? Definitely taking less decisions be more effective by following a checklist or process

Similarly, we should not take multiple positions in stockmarket a day or a week and try to achieve profits in that. If we are capable to reduce our number of decisions making, it will take care of the quality of that decisions. Also taking a process or following the checklist to take that decision will make more efficient in performing that action

If we notice closely, when a person making multiple decisions a day, he/she will end up with decision fatigue. His/her brain will not work as it would work under normal situation. It is very important to pre-program our brain / mind with certain information in the form of checklist or process, so that it will have a readymade questionnaire in case of making any new decision and it will work effectively and one can avoid this decision fatigue

Checklist is widely used among our Indian women's in many situations to avoid stress and fatigue. I have noticed ladies going to supermarket always carry a piece of paper or some information stored on their mobile phone on what to purchase, so that they don't miss out buying it and regret after going home. By this way they also manage their time wisely and avoid visiting the store multiple times a day to buy groceries

They are good planners. isn't it ?

"The difference between successful people and very successful people is that very successful people say no to almost everything" - Warren Buffet

When we have proper checklist in place, we will automatically adapt ourself to say 'NO' to most things which are not necessary and non-relevant, which helps in better decision making.

Have a Great Day

B G Nareshkumar

Reasonable Thinking (Vs) Rational Thinking

Julius Wagner - Jauregg

Noble Price in Medicine - 1927

In 19th century, most commonly known psychiatrist Julius Wagner - Jauregg was specialized in treating patients with Syphilis. During those time there were very few doctors who can treat this kind of fatal disease and Wagner Jauregg was one among them

In early 19th century, Wagner started injecting patients with low end strains of typhoid, Malaria and Small pox to trigger high fever to kill syphilis. Some of his patients died through his treatment but the success ratio was higher. He found patients treated with "Malariotherapy" get cured from Syphilis and for this he was awarded the Noble Price in Medicine in the year 1927. So, we understand in some cases, triggering a high fever cures a fatal disease

We also know, fever have marginal benefits in fighting infections. Fevers turn on the body's immune system. They help the body to fight infections. Normal fever between 100 to 104 degree Fahrenheit are good for children. By knowing this factor, if we have a high fever will we keep ourself under the blanket and wait for it to recover itself or will we go to the doctor and have the necessary medicines to cure it soon as possible ? Definitely if we have the pain which is not barrable, we will go and consult a doctor

The Rational thinking is, we know this fever will get us build our immune system but the Reasonable factor is to get ourself cured from fever. Likewise, we should consider the reasonable factors instead of rational factors in decision making

Harry Markowitz - Noble Price in 1990 for
Evaluating Stockmarket between Risk and Return

Rational Investor - Makes decision based on Numeric Facts

Reasonable Investor - Makes decision by considering his co-workers, spouse, relatives and friends would never get hurt because of the decision he/she makes in investing

Harry Markowitz was an American economics and finance educator. He was also awarded the Noble price for evaluating the Risk and Return in stockmarket. He was an Reasonable investor. He doesn't want to lose the return which he would get in investing in the stockmarket when the market is going high, likewise he also doesn't want to get hurt when the market is going against his portfolio

How to keep this balanced ? He always done his investing 50/50. He invested 50% in equities and 50% in bonds. When the market is going high, he would get more benefits from equities and the normal predicted return from his bonds. When the market goes against his portfolio, still he is saved with his bonds as it would give the pre-defined benefits and he would wait for the equities to give better returns

He is never Rational or Irrational. He is Reasonable

Let us have this in our mind before we start any investing process.

"Man is not a Rational Animal, he is rationalizing animal" - Robert Heinlein

Have a Great Day

B G Nareshkumar

Ponzi Scheme

If a person or a company has many investors for a period of time and it takes money from the new investor and pays the old investors without making money from selling its products or providing any service to the customers will definitely in long term go bankrupt and end up cheating their customer. This is called Ponzi Scam or Ponzi Scheme

This is noticed in few businesses in late 19th century, however the name ponzi was well known when Charles Ponzi carried out this behavior in United States in early 20th century. He Mainly concentrated on getting new investors and got their money and paid his dues and old investors without carrying out actual business, this was later identified and penalized

Charles Ponzi

When investing, one should watch out for this Ponzi activity and be very careful before investing in any company. By reading the Annual statement of a company, it can be easily identified, we should concentrate on the 

• Cash flow of the company
• What is the debt of the company before and now
• How that debt's are handled 
• How are revenue and profit generated 
• Does the customers accept the price of the products ?
• Does the tax paid are in par with the industrial standards 

If a company generates more income than the competitor company, then the company to be analyzed well, before investing in it. I'm not saying wrong about any company which generates more income compared to industrial standards but we should not fall into trap like satyam scam and so on

Dividends are important, most investors get attracted to companies which pay good dividends but one should also analyze how those dividends are paid to its share holders. Is it taken from the profit generated by the company ? or it is given by adding new debts ?

Analyzing on the behavior of any company's CEO is crucial important. If the top management has a greater vision for long term, it is ok to compromise few percentage on dividends and returns in short term, else it is better to avoid such companies

Let's say if the CEO of the company has less salary compared to its competitor company but he / she has greater share holding percentage in the company, this means the top management believes in the long term value of the company than the short term benefits, this kind of company is better for investing

It is always important to understand if the company is behaving in any of the schemes like Ponzi before investing, company should generate its profitable income by selling its products or providing service to its customer, this will generate wealth

Have a Great Day

B G Nareshkumar

Emperor Penguin

Recently we hear more about global warming and its impact over humans. We see flood in china and European countries, which never happened like this in many years. We see forest fire happening in most of the countries. Research indicates changes in climate create warmer and drier conditions

Emperor Penguin

This on the other side melts the snow in the Antarctic region and will intern increases the sea level. United Nations (UN) has indicated this as a Red alert, we, humans should take care of this very seriously else this will create a big destruction in next 50 years and also predicted many living beings will go non-existence by 2100

When considering the Emperor Penguin which mostly live in the Antarctic Region, will be the first few living beings to encounter this drastic climate change. If this condition prevails, these penguin's will not exist by 2100

It was also told that many Indian cities will be flooded with heavy rains and Tsunami kind of situation can be seen every year. It took years to recover from a single disaster, think if we are going to encounter this every year

Bill Gates written a book named "How to avoid a climate Disaster", this was one of the best selling books. We can avoid this climate disaster by having Zero emission. If this Zero emission cannot be practically achieved, atleast we can reduce the emission. Let's use our vehicles only when necessary, this can be a small step which we can contribute for this climate disaster

To make this earth a better place to live for our next generations, we should consider this climate change very seriously and take atleast a small step against this drastic climate change

Have a Great Day

B G Nareshkumar

J - Curve & Delayed Gratification

The J curve, we all need that in our life in all situations, mainly when talking about financial deals, we always looks for investments which can give us J curve in our portfolio but the important factor which can make us achieve is time, when we don't have enough time to our portfolio, then this is not achievable 

We should remember, when we give 3 years to our portfolio, we will be competing with many competitors. However, if we give 7 years to our portfolio, we will have less competitors and as we stretch our time, the number of competitors reduce and the compounding plays its better role

Chinese Bamboo tree don't grow taller for first 5 years, it takes its own time to show progress. After 5 years, it can grow 8 feet in 6 weeks. This is the J curve which takes time. So, we can define as J Curve is directly proportional to Time

The concept is very simple but not easy. Focusing on small step consistently over time builds wealth

Delayed gratification was tested with an experiment widely known as Sanford marshmallow experiment, kids with the age group of 4 to 5 were chosen and they were told, they will be given 1 marshmallow if they want it now or they can wait for 15 minutes to get as 2. It was noticed that, kids who had the patience and gained the delayed gratification has achievement much more benefits in life compared to the one who showed interest on instant gratification. This was observed for over 40 years by their actions

To avoid panic and to avoid stress on the portfolio movements, we should know that investing small over the longer period of time will help us to have the Delayed Gratification. This delayed gratification make time to work in our favor and which in turn make the compounding work better for us

This concept is very simple but not easy.

Have a Great Day

B G Nareshkumar

New Moon

Sun and Moon are on the same side of the Earth and the Moon crosses the sky with Sun during the day and hence moon was not spotted at night. People call this as 'New Moon Day' or 'No Moon Day'. Since Moon was not spotted with our naked eyes, it is referred as No Moon Day. Let's refer this in a positive note as New Moon Day, as the new rotation of the moon over earth begins today

People like Steve Jobs, Mark Zuckerberg, Bill Gates take week off and spend time with family in middle of their busy schedule to have a clear thinking and focus on their plans. They call this as "Think Week". I'm not sure they do this on the New Moon Day, but it is good to do this on this day to have some universal power as Moon does

People who believe in Yoga and Wellness harnesses the power of New Moon. New Moon is like Zero Starting point and to start anything new this day could be a great time. Get clear idea and build a strong vision and start anything new today will bring abundance

3 Keys to Harness this power today

• Set Your Intentions
• Take a Fast and Relax
• Plant Leafy Greens, herbs or decorative plants

Science and Spirituality are same. Our ancestors and most people even now take a day off today and relax. This time is not only used as family outing to temple but also used to set new intention and to plan for the future

As per astrology, New moon is the moment of Re-birth. This is also referred as the second chance given, if any mistakes were made during the Full Moon. Those mistakes can be corrected and do a fresh start during the New Moon by having a clear intention and idea

Moon is a spherical rocky object in space revolving around the earth in a slightly eccentric orbit at a mean distance of about 3,84,000 kms. Its equatorial radius is 1,738 kms. Moon is commonly described as orbiting earth, it is more accurate to say that both Moon and Earth orbit each other about a common center of Mass called Barycenter, this point lies inside earth about 4,700 kms

By this way Moon and Earth has very close relation to each other. Since this New Moon day is one of the auspicious day or we can also define as the Birth Day of Moon (I definitely don't know its age now). So let's celebrate this with New clear Intentions and Ideas by having Peace and Rest with family. This day can also be used as Think Day.

Have a Great New Moon Day

B G Nareshkumar

Ultralight / Microlight Aviation

If i say, around 20 years from now, there wont be any aircraft which carries 300 passengers and all those will be replaced by ultralight or microlight aviation with most advancement and most people will hold a pilot license like we hold the driving license now. will you believe me ?

We notice most of our cities are flooded with cars and other road transport vehicles which are used for business and personal purposes. With the amount of new cars being launched every year by many auto companies across the globe, will there be any possibility of continuing this ? Will we have space to park those in cities ?

People started to go for a space tour. We know Richard Branson went for a space tour on 11th July 2021. Jeff Bezos went to space tour on 20th July 2021. There are few other billionaires planning for this kind of space tour

When the electricity was invented, people thought it is for the rich and it will be a dream for middle class and the poor. Now, almost everyone uses electricity, Infact everyone is very much used to internet and its advancements

Going forward this space tour will also become an pleasure trip for most of the population in the world. This may look very weird to agree now but imagine if this trial trip was very much experienced and success rate is more than 99%, then it will become an money making business too

When speaking about the space trip. why not ultralight aviation traveling between countries and cities to avoid traffic and to reach the destination sooner. People these days are very much looking forward and ready to spend more to save time

I believe one can concentrate on the companies of this kind of business to invest. Else think of company which provide spare parts to make ultralight aviation (That's the clue).

Have a Great Day

B G Nareshkumar

The Circle of Competence

One should concentrate only on the areas which are known well to him, ignore the areas which are not comfortable enough when dealing with financial markets

However, should try to learn and gain more knowledge on any new topic. Not everyone can be expert in all areas. In Investing, many people invest in companies which are very new to them and end up in lot of confusions about the companies' performance and book losses

For example, I'm not aware on how pharma companies work. In that case why should I invest in pharma companies because covid is rising. How does that matter ? Anyway I'm not aware of what is happening in these companies. I can't spell any tablets name properly, then why pharma ?. Definitely I'm not against pharma companies

May be I like and know much about IT & FMCG companies. Do I ? 🤔. In that case why not invest in IT & FMCG companies which might have futuristic approach / greater demand on its products and services? Does this sounds good and reasonable?

To build / know our circle of competence, we need to work exactly opposite. We need to understand the reverse. For example: if we don't want to attract any loses in financial markets, we need to write down, all the factors which will attract loses in financial markets and make sure we never do that. This is one of the idea to achieve success. Try this out

Warren Buffet's investing process involves

• IN (simple and easy to understand business)
• OUT (Difficult to understand business)
• TOO HARD (So complex and not worth spending any time)

Buffet also mentioned, 99% of stock ideas that came to him fall under Too Hard category. Then where are we ? Can we understand any business that easily. If so, that's our circle of competence and that is the company to invest

It is always important to understand what we don't know rather than understanding what we know. If we got this point right, that's when we are ready to enter the stock markets

Financial Advice from Socrates, Einstein & Frank Wells

"The only true wisdom is in knowing you know nothing" - Socrates

These words by Socrates fits very well even now in the financial markets, we never should sit in front of the stock market thinking that we know everything, Stock Market has the great capacity to prove us that we are wrong in many situations

At the same time, we should not hesitate to take the calculated risk. Before taking a position, it is better to be prepared for any negative turn of the market and we have the capability to hold that position

We all know more about Albert Einstein. yes, he developed the Theory of Relativity (E=mc2), he also co-invented the refrigerator which operated on compressed gas, he also co-invented Light intensity self-adjusting camera and so on. we know the list keeps on extending

He also told "Ego = 1 / Knowledge", which means Ego and Knowledge can never be at the same place and can never be equal. More the Knowledge lesser the ego, lesser the knowledge more the ego

To know more about investing and trading, one should understand this and gather and collect information from all possible source without this Ego. No matter the age of a person, who has knowledge. These days more information are available on Internet and anyone can be more knowledgeable than us

We would have heard about Frank Wells, he was the president of Walt Disney company from 1984 to 1994 (till his death), after his death, his son found a little piece of paper from his wallet. Can you imagine what was written in that paper ? "Humility is the essence of Life". He carried that note with him for 30 years. Now you decide how this can be related to stock market

Hope this blog adds value to your ideas.

Have a Great Day

B G Nareshkumar

Good Friends of all time - Sensible Optimism & Finance

Let's take an example, if a person 'X' get surrounded by people, who always have an idea of pessimism about the financial markets. what will be his conversation most of the time. "Nifty & Sensex will fall drastically tomorrow" , "This stock will lose 5% in a week" and so on. If this was the conversation going around 'X" all the day, then obviously his mind will ask him to short the market. We know Shorting the market is highly dangerous

Instead if we have an optimistic idea of an company in long term or concentrate only on the company which has good financial books, then will definitely go long in the market and chances of making money is much higher

Being optimistic about all the companies is not advisable and practically not possible, we need to do our analysis strongly and should be very comfortable with the numbers and also should have thought of the possible risk on the downside before being optimistic. This is the true approach for optimism

So it is very important to be surrounded with people who has an optimistic approach toward the financial markets. In most of the Rakesh Jhunjhunwala interviews, he is always optimistic towards the stock market, even if that day, nifty has fallen 2%. That might be one of the reason he is addressed as Big Bull of Dalal Street

A survey also says, people always like to hear the news on negative side rather than positive side and people get attracted to those news. Imagine if a person have shorted the market, the whole night he will look for the bad news about that company and companies don't post bad news that easily, which will keep him tensed all the time and make him to book loses soon after the market opens

Stay away from pessimism (best thing is if we feel anything negative about a company - just ignore that company entirely), it is the toughest job but still try to be optimistic and the feel you can attract is a big smile on your face. Always one should remember, we don't need to be invested in 100 companies to be financially wealthy or we don't need to be expertise in 25 different things to be successful

"Optimism is the faith that leads to achievement. Nothing can be done without Hope and Confidence" - Helen Keller (American Author)

"I try to think about Optimism. I try to look at the beautiful things in life" - Dolores O'Riordan (Irish Musician)

"Optimism is the Happiness Magnet. If you stay positive, good things and good people will be drawn to you" - Mary Lou Retton (American Gymnast)

"Optimism is Superpower" - Bill Gates (Do we need any intro for this person)

Have a Great Day

B G Nareshkumar

Framework & Priorities

Let's assume, Naresh is great Statistician 😎. If you ask him to give the best statistics on a specific thing, he will ask you for the large possible and relevant sample to give his best results

Now if we need to get the successful statistics of this universe, we need the largely available framework on this universe. The 3 largely available / most relevant frameworks for identifying the universal principles are 

• Inorganic systems - which are 13.7 billion years in size (Law of Math & Physics, the entire physical universe)

• Organic systems - which are 3.5 billion years in size (Biology of Earth)

• Human History - let's say around 20,000 years in size (Human Behavior)

If we see in all the above 3 frameworks, the foundation principle is nothing but our 8th Wonder "Compounding"

Either it be Inorganic System or Organic Systems or Human History, they all became big and in existence now is just by compounding itself over time. In other words, it all started small and over time it has grown this big by multiplying

when the whole universe believes in compounding, why not we ? Think about compounding today

There are many compounders in this world, who took control over their time. Everyone have the same amount of time, but these people took control over their time effectively. How they achieved this? It's also about their priorities. If we really need to know what are their priorities, don't go and meet them in office on Monday morning

We need to watch them closely or try to be with them (if possible) on weekends from Friday Evening till Monday Morning. This is when they plan to set their value system. Compounding doesn't stop working since it is a weekend, the system works very effectively on every tick of a clock

Don't think, it is a weekend and stock market doesn't work. Most important news about a company (Good or Bad) will be released after market hours (most of the time). One reason is just to avoid panic among investors

The actual market hours (Equity & Derivative market) is from 9.15 am to 3.30 pm, which is 6 hours and 15 minutes, in addition to that 8 minutes of pre-market from 9.00 am to 9.08 am. Let's calculate, we have 24 hours a day and do you think only trading on this 6 hours make profit for us or the remaining 18 hours will bring profit ?

If we believe in compounding, we should know that market hours are only to execute the orders which we planned about and the rest will be taken care by time to compound itself. Hope this blog gave you some additional information.

Have a Great Day

B G Nareshkumar

Solitude, Think, Develop Idea & Focus

"Take up one idea. Make that one idea your life - Think of it, dream of it, live on that idea. Let the brain, muscle, nerves, every part of your body, be full of that idea, and just leave every other idea alone. This is the way to success" -  Swami Vivekananda

I was just thinking, did i hear this dialogue somewhere else ? Yes, in the Tamil movie released in 2015 - "Thani Oruvan", one of my favorite & charming actor Aravind Swamy tells this. What a classic dialogue. Isn't it ? 

We all know Warren Buffet and Bill Gates are good friends and they are like-minded. When Bill gates met Warren Buffet for the first time during the dinner. Gates's mother asked everyone in the dinner room, what they believed was the single most important factor in their success in life ?

These two like minded people gave the same answer, which was none other than "Focus". As Buffet says - Intensity is the price of excellence

The another common thing attached to this Idea and Focus is Thinking. Let's say I get chance to read more articles and novels in different topics and if  I don't think of it deeply through my mind, I won't get an idea and if I won't try to focus on that idea, then success will remain just a dream

Solitude is a great friend, when we are alone, our mind tend to think which we ignored earlier, this will help us to build our idea better and that will help us to focus on our activities. This is a road to success.

Ok, now let's see how this worked with investing, Say some 10 years back, if I would have spoken about stock market & investing, people would tell me, they are not interested in gambling (In India atleast), now a survey says more people specially during the corona time, when they had their solitude, they thought over stock market and had some idea about the financial markets and few already started focusing on making money in stock market

Thing to remember, when we start thinking, the first thought which strike our mind about a topic would definitely not be ours, that would be someone else's opinion which will strike us. when we keep thinking on the same topic with collection of different information, at last we will have our own thought, that is when we should start building our idea & focus to it

So, the cycle works this way, have solitude (Not always), start to think, have an idea and focus on it. Then success will approach us. Hope this blog give some information on developing an idea and focusing towards it to achieve success.

B G Nareshkumar

Matthew Effect & Michelangelo's David

I believe everyone would have heard the name Warren Buffet. Let's assume a person 'X' and Warren Buffet reads the latest release of The Economic Magazine, who would end up with greater insight after reading the magazine ? Undoubtfully its Warren Buffet. Isn't it ?

This is just because buffet keeps reading atleast 6 hours / 1000 pages a day  for about 75 years and thinks over what he read and do things what he believes as right with all the collection of information. Matthew Effect is, if a person continue to do something over longer period of time repeatedly with quality, he gets greater insight on the topic compared to others who does less frequently

Imagine a person who keeps reading, thinking and investing consistently over years, what would be the benefit he receive ? That's the benefit of compounding (the 8th wonder)

Michelangelo, an Italian sculpture, painter and architect was known for his greatest work in the 15th century. He was well known for sculpting the 'Statue of David'

Pope once asked him what was his secret on creating this masterpiece? Michelangelo replied, David was always there in the Marble, i just took away what was not David

My suggestion to the reader of this blog is to try the below:

• Use the Matthew effect - consistently read / analyze and invest slowly, which on time will make you the master of investing as warren buffet and would help in gaining abundance

• As Michelangelo said, there is already a great investor / financial planner inside everyone and what we need to do is sculpt ourself  by gaining more knowledge

"I constantly see people rise in life who are not the smartest, sometimes not even the most diligent, but they are learning machines" - Charlie Munger. I believe this blog gave you information on benefits of consistently gaining knowledge and helped you to learn some additional information today.

Have a Great Day

B G Nareshkumar