The art of giving consistent small amounts

I was accidentally involved in hearing a Ted talk by Paul Dunn on YouTube.  I heard about Paul Dunn and his ideology via the author Adam Houlahon.

I was reading Adam’s LinkedIn Playbook where he describes Paul’s work on B1G1 …. Buy One Give One.  If you would like to know more about this simple concept you can view his 4 Ted talks on YouTube. If you are not able to watch all four watch the Power of Small for sure

However this post is about one of the statistic that he showed in the Ted  talk which was titled Impact, Habit and Connection.

He showed some very glaring statistics on the need of funds to solve global problems. As per him it needs only $13 Billion to handle basic health and nutrition issues globally. This is such an amazingly small number to handle this global problem.

If we just do a small piece of maths…. if we can only give,$100 (or Rs7000/- ) and only 130 Million people (13 crore) globally do this, we would have eliminated such a major global issue will get handled.

Now a lot of us after seeing some program which shows the plight of people, feel the guilt and think we will some day help. Unfortunately the “some day”  never comes.

Which brings me back to Paul’s simple initiative of B1G1. Here he asks small and medium-sized businesses to contribute a very small amount of money each time they sell an item. Assume you sell a $3 coffee and you contribute 10 cents to one of the charity projects which are part of B1G1. If you sell 100 coffees a day, you end up contributing $10 per day or $3650/- per annum.  This seems to be a small amount in absolute terms but if you see the earlier numbers, we only needed $100/- from 130 million people to handle basic health and nutrition issues. This figure then is much larger than the $100 we were targeting.

Imagine how these kind of simple initiatives can eradicate so many issues being faced by our world today.

Obviously this may not solve the vexing problems like eradicating malaria which the Melinda and Bill Gates Foundation is trying to achieve.

However for the remaining issues this model seems to be so good.

I got so influenced by this concept that I intend to give away $1/- each time a new unique follower starts following my blog.

If you have been following my blog since the beginning I had the intention of feeding school going children in India by donating to the Akshay Patra Foundation

However I was also doing it randomly. Also I have not yet monitized my site by putting referral links or advertisements.  I do intend to do that in the in the near future so that I can achieve the same objective faster.

But before I can reach that stage, this idea from Paul has appealed to me a lot.

If each time a new person starts following my blog I will donate $1 to the Akshay Patra Foundation. By donating a hundred dollars the Akshay Patra Foundation will feed 7 kids one meal for one year.

I would recommend if each of you can also figure out a small action each time some activity takes place in your business or life, we can really make a massive difference in this world.

So what’s this got to do with achieving financial freedom.  Quite frankly I don’t know if there is any direct correlation. However there may be a Karmic relation….. like my father used to say if you give away X to someone in need, God will give you 100X.

Even if it does not give any immediate financial return, giving definately helps me feel good. And when I feel good I perform better and that may result in better financial health.

So till next time see if you can also take some small consistent steps to make g this world a better place.

And till then as the followers to my site increase I will work to donate to the Akshay Patra Foundation.

Carpe Diem!!!

 

 

Systematic Investment Plans

 

Recently I was watching a program on television channel ETNow ….it was programming related to Systematic Investment Plans. I am generally not very interested in watching content based on SIPs. It’s a well understood concept to me about how time and price averaging over long periods gives amazing results because of the discipline of continuous investing with small sums and the magic of compounding.

What however got me interested was the concept the speakers were talking about “Sahi SIP”. “Sahi” is a word in Hindi which means the right thing. So what got me interested was the idea that not all SIPs are the same. You could search for this episode on the Youtube channel of ETNow.

SIPs have to be decided based on your goals.So not every SIP can be applicable to everyone

While the basic concept of SIP is that you automate your investments and pay yourself before you pay others.

If regular investments are left to decisions of human beings then they will every month find some reason why they are not able to invest.

However with SiPs because the money goes outfrom your bank account  before you even know, you learn to adjust your expenses according to what is left. The first few months are a little tough but eventually you figure out ways to get your expenses into control. i am a ready example of that.

Now coming to the”sahi or right” SIP….. what the speaker mentioned was that based on your goals you need to decide on the investment vehicle or mutual fund scheme and the amount that you will be willing to invest.

One other aspect was how inflation eats into your goals. However because of inflation you also get salary increases. If you can increase the amount of SIPs based on a certain percentage of increase in your salary, then you can control the inflation monster from hurting your goals.

So there is no one size fits all. You need to identify the goals at different stages of your life and accordingly decide on the type of schemes you want to invest.

However the one thing which I have been mentioning for a long time in all my posts still stands….. you need to start early in life. The longer your runway the bigger is the magic of compounding.

Till next time….

Other articles, reports and videos that helped me

 

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If you have been reading my blog posts regularly, will remember that I saw one of my mutual fund investments suddenly after 15-16 years and the Rs2000/- I had invested had over the years become close to Rs90000/-.

After this I became a regular at trying to identify various mutual fund schemes and slowly building SIPs (Systematic Investment Plans – where monthly a small amount of money directly gets withdrawn from the bank and invested in the respective schemes). Even today this is an important piece of education for me.

This was a very good mechanism because it brought about a lot of financial discipline into my life and I slowly started accumulating wealth.  The good thing was that in 2013 when this dawned on me, the Indian equity markets were at a very low level and subsequent to that there was a rally over the next 5 years which helped me gain a lot in terms of reaching my goals.

Around 2014-15 I read the Tony Robbins book Money Master the Game. While this book is focused towards the US economy and the shares and financial markets in the US, there were some nuggets of wisdom in a few areas which stuck with me.  One of the items was how even a 1-1.5% reduction in interest over a long period of time can make a very large difference in the compounding machine.

In India the mutual fund industry is quite regulated by SEBI and the total expense ratios of schemes are quite well controlled.  Inspite of that the MF schemes can be charging upto 3 odd percent as their fees.  This got me thinking how far I can be from my goals because my compounding machine has this leakage of about 3%. ( I even had a whole blog post related to how small differences in interest rates over long time periods can have massive impact on your wealth)

But I did not know, how to pick stocks myself.  So how could I invest in equity.  That’s when I started scouting for books on investing.  These were the books I wrote about over the last few posts.  However most books were US based stock market related and I could not relate to the Indian markets.

While searching for some simple inputs I came across people talking about the letters written to the shareholders of Berkshire Hathway by Warren Buffet.  I would recommend anyone anywhere, if they want to learn about basics of investing in simple terms then this is one of the best sources and is free of cost.  These letters are available on the Berskshire website and tabulated so you can search for them by the year they were published.

Inspite of these letters being written so well, I was a novice and was not able to relate to a lot of concepts with respect to the Indian companies, because American companies have different kinds of share holding patterns.

Accidentally I happened to chance upon the Wealth Creation studies created by Raamdeo Aggarwal Jt. Managing Director of Motilal Oswal.  These were similar to the Berkshire Hathway reports in that they came out each year but were better because they were talking about Indian companies and the Indian stock markets.  And to top it, they were also free.

I devoured on these reports and now am a big fan of Mr. Raamdeo Aggarwal who authors these reports.  Recently they have released the 23rd wealth creation study.

Most channels also get Mr. Aggarwal to discuss on the stock markets on a regular basis.  On YouTube you will see episodes of ETNow or CNBC TV18 where he is featured on a regular basis.  However last year the channel Bloomberg Quint ran a 4 part series with him on investing.  This is the best 4 hours you can spend on learning investing from one of the stalwarts of investing.

There is another person whom I admire from seeing his interviews on television.  he is Riddham Desai of Morgan Stanley India.  You can also see his interviews on either ETNow and CNBC TV18 or on Bloomberg Quint.

Between Riddham and Raamdeo the difference is the fact that one can distill the macro perspectives of the Indian economy so simply and present while the other can focus so well on the micros amazingly.

Have a look at these reports and videos and you will get a great input on how to evaluate stocks.

However stock picking is a tough call and if you don’t want to put in the hard work, then Mutual Funds and ETFs are the best route for you to take.

Till next time….

 

Books that have helped me with my financial education- Part 3

Its been almost 2 months since my last post.  During this time I went on vacation with my family.  I will list those exploits in a separate post.

Before I left for my vacation, I was writing a series of posts on the books that have influenced me.  Hope after reading the blog posts you got a chance to read those books.  I would love to hear your comments on how you found the books.

For the moment this will be my last post on the books I have read till I get to my next lot.

The first book this time is the STAR Principle by Richard Koch.  I have been a fan of Richard Koch for a long time and try to read through all his books. In the STAR principle Richard talks about identifying companies which have higher than 10% growth rates and how they can end up creating almost monopolistic situations.  For developed economies like the US and UK I think this logic of identifying at 10% growth rates is a good number because the overall economy is growing at just about 2% average.

However if we were to look at it from the Indian context where India is growing at about 13-14% (6-7% growth + 7% inflation) then the number in his logic dosen’t hold.  However rest of the logic that he espouses in the book should hold.  I have myself not been able to identify an Indian company which is growing at 5 times the overall economy( 10% when economy is growing at 2%) on a consistent basis in the public domain.

The next book I read and would recommend Finding the Next Starbucks by Michael Moe.  Like the above book by Richard Koch, this one is also more focused on identifying high growth companies before the world comes to know about them.  Again since I don’t have knowledge of the private investment space in India, I have not been able to verify the logic and rules that the author gives.  However its a good read and a different way of identifying high growth companies.

I have been a big fan of the Little Book series.  In one of my earlier posts I wrote about the The Little Book That Beats the market by Joel Greenblatt.  There are a whole lot of other Little Books by different authors which explain difficult concepts of the financial markets in easy to read language.

One book which is worth a mention once again is Common Stocks Uncommon Profits by Phil Fisher.  This is a little serious read but is a timeless classic on equity investing.  Even Warren Buffet recommends Phil Fisher.

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While exploring investing, I did a lot of research on people who do trading – stocks, commodities etc. One author who I found has done a lot of work on understanding traders and writing about them is Micheal Covel.  I was introduced to him via the Little Book on Trading.  I then went on to read a couple of other books Trend Following and Turtle Traders.

If you have seen the movie Trading Places then you will find the Turtle Trader especially fascinating.  I did use the rules of the turtle traders for a short while and found them very valid for the Indian market as well.

However I left the trading space because I realised I did not have the speed with which to give directions to my broker to release positions when the trend reverses.  There are a lot of platforms available which allow you to set the rules for trading where based on your rules the platform can sell your holding.  Since I was only experimenting, I did not subscribe to any of these platforms.

In my next post I will share with you some other classic interviews and reports which explain the concepts of investing and financial planning.

Till then ….let me know your comments

Carpe Diem!!!

Books that have influenced my financial education – part 2

After the first 4 books that I listed in my last post which had predominantly US based authors, the first book this time is written by an Indian author.

Saurabh Mukherjea’s – Coffee Can Investing – Saurabh had written 2 books before this book.  Both the books were very focussed on the Indian equity market.  This book however provides a very simple framework of identifying stocks in the Indian context and also builds a case for how asset allocation has to be done with the Indian context.  If you are an Indian investor wanting to get into equity markets then this book is a must read.  I have given copies of this book also to young men who are getting into college or coming out of college.  The other thing about this book that I liked is the typical Indian examples. In India food inflation, medical inflation and inflation related to commodities like petrol can play havoc with your savings. By taking specific examples of Indian people and their saving patterns he goes about constructing portfolios.  Therefore I would reiterate, if you are an Indian investor then, this book is a must read.

The next book which is written extremely well is by Joel Greenblatt – The Little Book of Investing – which still beats the market.  This book explains the concepts of Return on Equity / Return of Capital Employed along with the value of a stock so simply that once you read this book you can read through most financial ratios and easily get an understanding of the relative value of the companies. The tables and the resources however are not of value to an Indian investor.  But if you understand the concepts then you can individually build the relative tables on your own.  One of the challenges which I faced when employing his simple technique was that he suggests selling off the complete portfolio every year.  Since I was buying shares over a period of time, putting this into action became difficult.  However inspite of this, I would strongly recommend, this book to everyone who is getting in new to investing.  Like Dhando Investing by Mohnish Pabrai, which I had mentioned last time, this book explains concepts with simple examples, so a must read.

The third book this time is by Tony Robbins again – Unshakable.  Another of Tony’s masterpieces, simply written, explaining the working of the markets.  Key thing especially if you are in the US market is that every 3 years markets will tend to fall.  Psychologically if you understand this concept then you can drive big returns in the long run.

The fourth book – it is supposed to be the guiding book for Warren Buffet and a lot of other famous investors – is the Intelligent Investor by Benjamin Graham.  Quite frankly when I read this book for the first time, I was new to investing in equities myself.  A lot of the concepts that he brings out were totally new to me and the book didn’t appeal to me much.  One of the reasons for that was also the fact that this book also had the US context in mind where the markets are more mature and hence not growing so rapidly.  The Indian markets on the other hand are still nascent and reporting is not transparent. Another fact is that the Indian markets are now in a growth phase. It was only after I had spent a couple of years trying to see how things work that I reread the book and understood it. There a lot of practitioners in India also who would like to buy a company at 5 cents to a dollar as suggested by the author.  However I have personally preferred to look for growth stocks, even if they are expensive but they should have ethical management teams.  In India I think that is the bigger challenge.

I will continue with some more books in my next post.

Meanwhile if you can recommend some books to me on investing, please out it in the comment box.

Till next time then.

Carpe Diem!!!

 

Books that have influenced me in my financial education

In our education system unfortunately even now we are not taught life skills.  Whether it is on building interpersonal relationships or financial literacy the education system even after 16 years of highly competitive education does not prepare us for living a life.  I know this about India.  You could tell me your experience with other countries.

During one of a recent gathering at home we gave some books to some of the kids on investing. The idea was that if the kids can learn this at a young age then they will be better off.  One of the kids asked on what other books had helped me during my journey.

While there have been a lot of books and company annual reports and videos, I will give you some names of books and what I learned from each book in this and the next few posts.  Maybe we will even go further for the annual reports and videos in later posts.  The books listed here are by no means in any order of ranking.

  1. Tony Robbins – Money Master the Game  – I have given this book as a gift to others and highly recommend especially if you stay in North America because some of the concepts are truly North America focussed.  This book has interviews and experiences of some of the best money minds other than Warren Buffet.  The book is written in a very simple language and has inputs on creating the edge in your investments.  This is a very big book to read. A few key things that stood out for me-
    • Tony was giving away all the earnings from this book to a charity foundation and also adding an equivalent amount from his own.  Most of the rich people I have read believe in giving back to society and magically their investments only keep growing
    • Saving versus investment – if you have to create wealth you cannot create it by saving.  you have to invest.
    • Sir John Templeton – even though he was just earning 50 pounds a month, he created such a big financial empire by saving more than 50% of his income every month.
    • Asset allocation – all investments will have cycles. Equities will rise and fall dramatically.  The fall can destroy your earnings if you entered the equity at a high price.  By having debt and some commodities in your portfolio you can ensure that the rise and fall you have in all types of investments is buffered.  Depending on your risk profile ensure that you have some kind of allocation.
    • Automating and paying yourself first- always automate your investments so that there is no emotion involved because otherwise you will always have expenses which will eat up your money and you will never invest.
    • A third very important concept was fees paid to fund managers and how the small percentages of fees taken by the fund managers can impact your long term growth.  In India SEBI is doing a decent job of controlling the expenses charged by mutual funds.  Especially if you don’t have the bandwidth of researching multiple companies, going with a mutual fund in India makes sense.  Another place where mutual funds in India are better bet is the small and mid size companies.  As an individual investor you will not have the information on these companies which these institutional investors can get.  In India for the large companies like in the US investing with index funds/ETFs where the fund charges are extremely low makes more sense
    • The last key perspective from my point of view was the distributor’s role.  If the distributor is biased by the commission she gets, she will never give you proper advice.  So you should choose your financial advisor different from your distributor to get proper advice on investments.
  2. Mohnish Pabrai – The Dhando Investor. A very simply written book about how the Gujarati community has created riches in America by buying when the markets were low and then capitalising when the markets went up.  Markets follow cycles, they will go up at some time.  Mohnish uses this to showcase how buying quality stocks at low cost can help make huge money.  Mohnish is big follower of Warren Buffet and has his own investment firm Pabrai investments. Like Warren he also does a lot of giving away of his wealth .  His foundation Dakshana is involved in training a lot of financially weaker students to train for IIT and AIIMS.
  3. Alice Schroder – The Snowball – A biography of Warren Buffet.  There are a whole lot of books on Warren.  Even I will list some more which have helped me understand investing.  This one however takes you up and close to the real Warren Buffet from his childhood and how his decisions have helped him today become the richest man in the world even after giving away so much of his wealth.  The biggest takeaway out of reading this huge book for me was the concept of deferring your urge to spend.  There are various examples in the book where Warren thinks if he should be spending a few dollars now or investing such that he could have a multiple of the amount to spend.  Now some people could call him stingy,  Some people whom I have given this advice have also told me then why earn and live if we can’t spend.  You need to be a judge of this for yourself and decide your priorities.  Warren had a goal to be a multimillionaire by his mid thirties and he achieved it well in advance of his target.  One other aspect is his commitment to give away a certain portion of his wealth every year till the time he dies.
  4. Peter Lynch – One up onWall Street – this book gives such a simple advice on how to invest.  His logic is simple.  The numbers and frameworks and everything else is for the big investors.  For the small investor like you and me he gives a very simple idea.  Invest in companies which you use everyday and your investment will be successful.  Out of the mutual fund universe, the shares I invest in are the ones which I use.  Whether it is my bank or my housing loan or the shampoo we use, I have looked at investing in only those companies.  I also get the pleasure of knowing that what I am buying, some portion of the profit would come back to me in the form of either dividends or by the capital appreciation of the stock

This post has kind of become big already.  I still have a lot of books to talk about.  Each of these books gave me a few ideas to form my investing philosophy.  So I will cover these in the next few posts.

Till then

Carpe Diem!!!

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Soorma and life’s lessons

Today I saw this movie Soorma which is based on the real life story of the Indian hockey player Sandeep Singh.

I had not known the actual story of what had happened with Sandeep Singh in real life and the the life threatening situation he went through.

What this film also brought out was the fact that if you have a skill which determines your income, your possibilities in life & your status in life and if something hurts that skill your whole life can get shattered

Life comes with its own ups and downs and everyone has to go through them…. What matters is the people who come out of these ups and downs with grace and dignity.

I was telling my son the same thing today after watching the film.  I have also had a situation where I was clinically dead and no one in my family knew about it because I was in Bangalore at that time.

It was the people around me & the crew in the aircraft of Indian Airlines (now Air India) who showed the presence of mind and immediately took me out of the aircraft in Bangalore and took me to the Columbia Asia hospital where I was revived.

It was the colleagues in my office in Gurgaon who sprang into action on that 18th July 2008 evening and organised everything once they came to know about my situation

At the end of the day when there is no family or friend around and still the world helps you, without any compensation, it just shows that you have been blessed with so much.

So it is imperative that we ensure we do our good deeds at all times without bothering about the return because at the end of the day the universe pays you back multiple times with all the goodness

This blog post has nothing to do with finance but it’s an even bigger thing about earning blessings through whatever good we can do, because irrespective of how much money you have , it’s the blessings that you have earned on your way that help when no one knows you and the amount of money you have, but still help you.

Do good &  May the force be with you!!