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Investing

Ways of Investing

January 9, 2022 by Laxman Sonale Leave a Comment

Hello, friends in today’s article we see chapter 3 from the book, Stocks to riches. In this chapter, we learn three ways of investing. let’s see them one by one.

Previous Chapter

Three Ways of Investing:-

there are three ways by which an investor can invest to achieve superior results.

1) Intellectually Difficult

2) Physically difficult

3) Emotionally difficult

let’s see first is an Intellectually difficult path

The Intellectually Difficult Path:-

the author says, “An investor like Warren Buffett, Charlie Munger, John Templeton, and a few others have taken the intellectually difficult path of beating the markets. this path is pursued by those who have a profound understanding of investing can see future trends clearly, and can comprehend business and the environment. they know that Patience is a virtue and therefore take a long-term position.

We admire them but usually in retrospect initially, we may see them as being misguided but that is only because of our inability to grasp their point of view.”

then the author explains the method that helps this big investor to become big.

this method’s name is cashflow.

Those are big investors, they see how businesses work, their economic policies and market forces that affect the business environment, and how businesses show the cash flow. So this is the most difficult path, and it required a keen mind to study the different concepts of investing.

the author says, ” A good grasp of the various fields of management is required to understand the organizations and their ability to capitalize on various business opportunities. Good knowledge of the field of liberal analysis is basic to the development of various investment concepts.” (Ways of Investing)

then the author explains the name of the game in investing to get a superior return.

the author says, ” Here the name of the game is Patience. Such investors are always on the lookout for good opportunities and bargain prices. As long-term investors, they are willing to wait for them. they are not perturbed by events news rumors and gossip that create short-term volatilities.

They have a strong belief in their abilities since their goal is investing long-term for cashflows. As against capital gains, they are in no hurry to invest. They strongly believe that opportunities are always there but that when the biggest of them come, one must have the money to invest.

They are therefore very careful about allocating resources. They never buy on impulse. They can be out of the market for months, even years. they have the patience to wait till the right moment. Brokers usually do not like such investors as they do not churn their portfolios regularly.”

Then the author explains Intellectually investor qualities.

the author says,” Intellectually investors are also emotionally strong. that is the reason they are able to exercise such restraint.

we all want to be such investors but we cannot as we believe that we are not allowed intellectually blessed as they are. This is a wrong notion. the reason they are intellectually capable is that they work hard and make effort to reach that stage.

They constantly explore opportunities by talking with management, examining different viewpoints on business, trying to understand economic policies and their effect on business environments, etc.

their intellectual capability is derived from their hard work and their strong belief in the long-term approach to investments. Moreover, they use common sense in their judgments and are not swayed by rumors.” (Ways of Investing)

so these types of intellectual qualities you should practice to get a superior return.

then author talk about the second difficult  path is The physically difficult path,

The Physically Difficult Path:-

then the author explains, how we have to do work physically to get the proper investment opportunities, for that author gives the following explanation.

the author says, ” Most people are deeply involved in the physically difficult way of beating the market. they come early to the office and stay late. they do not know what their children are doing as they don’t have time for them.”

the author explains the whole things that regularly fund manager does each and every day of life. And this type of doing is the same as the other fund manager is doing.

then the author explains, why these people do this, and also gives their own experience on the physically difficult path.

the author says, ” In my experience, in the stock market dealing with fund managers has been really amusing. they sincerely believe that keeping themselves busy this way makes them look important and increases their ability to pick up the winners. Once I was at the office of a fund manager and we were chatting informally The telephone rang but he did not answer it. after a couple of rings, the call went to the answering machine. This is how most of them behave. show the world they are busy.”

then author explains how the day trader has also a physically difficult pathway.

the author says, ” the day traders also take the physically difficult path of investing. they spend the entire day collecting information and making decisions based on that information. (Ways of Investing)

so, with all the fund managers and the day trader trading the same path, how can any one of them achieve better results.?”

then author explains how good opportunities come, and what we have to do physically difficult path.

the author says, ” Good opportunities come once in a while and you spot them only when you are cool and have the time to think. The physically difficult path is based on the assumption that there are a lot of opportunities out there and you have to keep digging hard to be successful at investing. the current volatility in the market is the result of too many people trying to invest by this method.”

Life is simple. we make it complicated.

then the author explains the third difficult path and its most important and difficult path, if you master this way of investing then you are 90 percent ready to get a superior return.

The emotionally difficult Path:-

the author says, ” Most of us may find the intellectually and the physically difficult paths too daunting. In that case, we could opt for what is called the emotionally difficult path. Actually, this path is very straightforward. Simply work out, a long-term investment policy that is right for you and be committed to it.”

then the author explains how people think and act on the television news and rumors happening in newspapers, you can read, by ordering this book, link in below image.

after this author gives one example

the author says, ” If one were to compound money at a modest rate of seven percent the money would double at the end of 10 years and it would be 16 times at the end of 40 years.

Patience also helps you to control transaction costs. the more you churn your portfolio the more you pay the broker in terms of brokerage and of course the government in terms of taxes on your capital gains.

then you also have costs like depository charges, transactions tax, and service tax. all these costs would be avoided if one has Patience.

The emotionally difficult path requires an understanding of how our emotions guide our decision making especially when we deal with money. Our emotions directly affect our decisions on investments and expenditures.

We have to learn to think with our emotions rather than have our emotions do the thinking. understanding our own anomalies as also that of others will help us become better investors.” (Ways of Investing)

In the next fourth chapter, we will learn how to use our emotions to our benefit.

lastly, the author explains why is investing so difficult.

Why is investing so difficult:-

the author says, ” the most difficult part of investing is understanding the behavior of the stock markets. Market fluctuations are based on the varied opinions expressed by its participants, which in turn are subject to change commensurate with the changing sentiments of people.

it’s the crowd behavior that dominates the decision making and it is responsible for the sudden changes in the sentiments. take for instance.

The black Monday in May 2004. the markets lost around 700 points when the elections brought Congress to power.

What precipitated this huge fall? had anything gone drastically wrong with the performance of the companies whose stock prices crashed?

Definitely not. but the sentiments changed the BJP being voted out of power was a big change and normally we do not like changes.

Hence there was gloom all around and people dumped stocks as though there was no future. The herd mentality was at work and the markets crashed as each one wanted to get out faster than his neighbor.

If you were emotionally strong and you had bought when the others were panicking, you would have ended up making a huge fortune. (Ways of Investing)

But this seems easy only in hindsight. At that point in time going against the crowd is the most difficult but the most sensible thing to do. Understanding behavioral science is the key to success in this financial market. Its application not only helps you control your emotions but also helps you to understand others’ emotions and benefits from their mistakes.”

On emotion, Warren Buffett has a quote

“ If you can’t control your emotion, then you can’t control your Money”

so emotion is the main part of investing.

so this is all about the ways of investing from the book, ” Stocks to riches ” by Parag Parikh

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Filed Under: Stocks to Riches Book Summary Tagged With: best investment plan for 3 years, best investment plan for monthly income, how to invest money, invest money online, Investing, safe investments with high returns in india 2021, ways of investing, ways to invest money in india, which is the best investment plan in india for middle class, why is investing difficult

Intelligent Investor: Chapter 9

November 11, 2020 by Laxman Sonale 1 Comment

Hello friends, I am Laxman, Today article we see chapter 9 of an intelligent investor book name Investing in Investment funds. In this chapter 9 of the intelligent investor book, the author advises the average investor they don’t understand the financial concepts and the balance sheet. this type of person can be invested by hiring a well-knowledgeable person in these fields i.e. investment fund management.

Previous Chapter 8: Click here

intelligent investor: chapter 9

Investing in Investment funds:-Intelligent Investor: Chapter 9

When investing in an investment fund, you have to set your mind if not the investment broker leads your money with his style and gives you different ideas of stocks to buy, and increases his commission so this type of time you can also get the headache of tax.

and also the author says they are good at analysis but they are not good to know about the future.

So so many people are expecting a bigger return from the stock by hiring these guys. so the broker uses these expectations from him they charge you a higher rate for his work.

In my opinion, the author is saying is good and we have to put money in an investment fund for the five or more of you.

so this type of situation happens for this purpose, we have to follow the following obstacles faced by investors.

Obstacles faced by Intelligent investors: Chapter 9

  1. Migrating managers: When you choose some investment fund and doing an investment in the fund. In form of SIP. After one year you get a good return. The manager lives their job. This happens commonly and we have to face it. In this situation, you can ask the question to the fund manager or your broker about his contract with the investment funds.
  2. Asset elephantiasis: There is common human behavior that if some broker does a good result in one year with his limited money, then lots of other people also do the investment in these funds so the broker has the maximum money and they don’t have the opportunities to invest so they buy the great company with average return company stocks. Then return falls for that broker because of Asset elephantiasis.
  3. Increase in expense: When some investment funds give a good return but actually they also take higher charges from the investor. (Intelligent Investor: Chapter 9)
  4. Sheepish behavior of funds: This type of behavior happens from the investor because when two investors meet each other and discuss their investment return from the funds, if one of those has a higher return then the other investor called the broker and asks him about the return and they say if you can’t get the result of another fund then I will take me all money. So this behavior very well knows the fund’s manager so they do the proportion invested in the popular company and get the all are the average return. (Intelligent Investor: Chapter 9)

So This obstacle is what should the intelligent investor do? for this question author gives one piece of advice i.e. Buy broad market index funds.

So if you can do investment in index funds, then you have to check the quality of the broker which is as follows.

Qualification for funds that beat the market:

  1. Managers are the biggest shareholder: Simple philosophy is that if someone’s money is in his funds they try to get the maximum return from his investment. so check for the managers as are the biggest shareholder.
  2. Charges low fees: Also check his fund’s charges and other hidden charges, and get the low-charge investment fund with the first qualification. (Intelligent Investor: Chapter 9)
  3. Dare to be different: If the manager has the power to handle funds with his technique and tries to be for the maximum return.
  4. Prevent asset elephantiasis: to prevent asset elephantiasis you have to check the fund’s performance and its asset for this purpose, by asking simple questions.
  5. They don’t advertise: If someone is good at his work, and also see they try to advertise the funds with a big return.

After this qualification, you have to select the funds by watching the following point.

Selecting Funds;

  1. Past performance: Check the five years of the past performance of returns and also the charge returns.
  2. Manager reputation: Check the manager’s reputation and how he stays with his reputation and how much they go in deep for the reputation. (Intelligent Investor: Chapter 9)
  3. The riskiness of funds: this check by asking the question to the broker and manager about his financial fear, and risk.
  4. Operating Expenses: Check on the contract of investment or you can check to buy by asking them.

If you can watch this thing, But in reverse order click the logic of funds. (Intelligent Investor: Chapter 9)

After this author gives some advice on when to sell.

When to sell:

  • Unexpected changes in strategy.
  • increase in expenses
  • Increase in tax bills
  • Suddenly erratic return

if this type of happening in the funds then, you can sell your investment. but you have to check the real problem.

After this you can invest in Investment funds, So this is about chapter 9 of the intelligent investor book name investing in investment funds.

Elementary worldly wisdom from Charlie Munger

read more One Up On Wall Street book summary series

Read more Common stocks and Uncommon Profits book summary series

Next Chapter 10

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How to get rich from nothing in the Stock Market

October 29, 2020 by Laxman Sonale 1 Comment

Hello friends, myself Laxman, to we see How to become rich and wealthy in Stock Market.

In Stock Market, there is only one simple way that makes you rich i.e.Compounding effect.  Over the long term, you can become rich and wealthy.

What is the Stock market?

How to Get Rich from nothing in Stock Market:-

How to become rich and wealthy?

There are also different ways but it’s become very risky like Trading( intraday trading) speculating in the Stock market. But we have to make it without taking risks in the money management game. For that process we have to follow simple four steps :

  1. Income
  2. Save money
  3. Investment
  4. Simple living

let’s see in detail

Income: 

We have to become rich and wealthy in the Stock market. first, we want is the income source. That income source can be Passive Income or Active Income. In Active Income, we can do the jobs, self-employed work, etc. In Passive Income, we can make a website or youtube channel or any other things you do not work for that work.

Read more about the stock market: Click here

Save Money:

Money is earned by income or any jobs that money we have to save for our Investment purpose. I am personally Save money by avoiding spending money, I am Focused on the Need, not on the want. you can also save money by focusing on the need and cutting down the wants for your life. You can save tonnes of money by simply doing these tips.

Investment:

We have both Income and Saved money. so we have to start making money from money by simple investing. I am personally investing money in the stock market. those who have knowledge of the stock market can invest in that. Those who don’t know about the Stock market they can invest in Good Mutual Funds or the best strategy for the average investor is INDEX FUND these tips are also what Warren Buffett told.

To visit the book summary website: Click here

Simple Living:

We can be rich or poor only depending on the living of our life. We have to become rich and wealthy, we have to remember that when our money makes continuous money. we can be rich in a few

years. For this purpose we have to avoid the Ego boosting stuff, don’t compare it with others. This may be helpful to save money more and more and also help to invest more. These are four simple ways you can become rich and wealthy in a few years.

 

hey buy the following book to learn about money, to become rich

So this is about how to get rich from nothing in the stock market. hey guys, this looks simple, but actually, very few let’s say only 1% of people do this thing. so don’t take these steps easily, follow these steps seriously.

Charlie Munger Says in his quote, ” Take a simple idea, take it Seriously.”

[Read more…] about How to get rich from nothing in the Stock Market

Filed Under: Investing Tagged With: benjamin graham school of value investing, how to get rich from nothing, Investing, investment, money, rich, share market in india, simple, stock market, wealthy

Warren Buffett rules of Investing?

October 19, 2020 by Laxman Sonale 2 Comments

Hello friends, In today’s article we see warren Buffett’s rules of investing. Everyone knows this rule but no one follows the warren Buffett rule, because they don’t understand the logic of Warren Buffett’s rules of investing. So friends let’s understand the inner meaning of these rules.

Warren Buffett rules of investing

What are Warren Buffett’s rules of Investing?

Investing is the art and we have to learn that art by practicing. For learning this art we have to follow the investing rules, let’s see what is the rules of investing? in one by one format.

Investing Rules:

Rule no. 1: Never lose money :

let’s understand this rule, losing money is like lose of money during an investment or business. This is the simple one meaning, but we also lose money by Investing properly with good company but our money does not grow i.e. also called as the losing money. (Warren Buffett rules of Investing?)

 

 

To visit the value investing website: Click here

let’s understand an example: one women’s name is Geeta.

she makes an investment in a Bank, business, and the Stock market. she gets the return after the 10 years of investment from the bank is about 7%, in business 10% and in Stock market 15% percentage from investment.

All of us see that there is a good return from the investment. But there She is the lost money in the bank because the Inflation rate in that 10 years is all about the average is 10%. (Warren Buffett rules of Investing?)


So They lose money in the Bank and the same value of money remains in the business investment. so That concept is called the MONEY ILLUSION. There are lots of people experts know about this stuff. But they don’t tell you about this stuff.

[Read more…] about Warren Buffett rules of Investing?

Filed Under: Investing Tagged With: benjamin graham checklist, benjamin graham investment strategy, benjamin graham net worth, benjamin graham portfolio, benjamin graham quotes, benjamin graham school of value investing pdf, benjamin graham value investing pdf, how to never lose money in the stock market, Investing, money illusion examples, money illusion in hindi, money illusion occurs when, money illusion pdf, money illusion phillips curve, money illusion quizlet, never lose money chart, never lose money meaning in hindi, never lose money quotes, never lose money table, warren buffett 70/30 rule, warren buffett children, warren buffett company, warren buffett house, warren buffett investment strategy, warren buffett never lose money chart, warren buffett never lose money table, warren buffett portfolio, warren buffett stock, What is rules of Investing

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