good

I was recently listening to the Berkshire Hathaway annual conference addressed by Warren Buffet and Charlie Munger. This was being beamed live via Yahoo.

In this Yahoo presentation before the conference began they had some of their correspondents check out the people who had cone and then one of the correspondents also did a small interview with Warren Buffet. One of the questions he asked was – what Warren thought about Bitcoins and cryptocurrencies. This question kind of has stayed with me because this was something which I myself was not clear for a long time and then a lot of people have asked me.

As is usual of Warren Buffet he gave a very simple explanation for what is an investment and what is trading. This is something which I found very useful and I thought of sharing.

For him cryptocurrency is not a investment because the cryptocurrency has value only in the eyes of the next person who wants to buy it so it’s a commodity for trading and if someone is willing to pay higher price you gamble on that.

Unlike trading an investment is an instrument of some kind which earns on its own even if there is no one to come and buy it from you… so if you buy farmland in your village and even if the next person is not willing to buy it from you at a higher price, at the farm you can still grow crops and have cattle etc. …. Same would be the case in terms of investment in equity…or for that matter even buying a cow can be an investment and the milk can be sold

So if you are wanting to do an investment keep this fundamental concept in mind …..will this item earn for you irrespective of somebody wanting that item or not.….if you buy foodgrains with the thought that somebody will buy it from you at a higher price then that is trading. On its own foodgrains will not grow more foodgrains for you

So your house for your own living is not an investment – which is something I had written earlier also is a bad idea, but a house which you buy to rent out to generate passive income is an investment and therefore a good investment

Equity purchase of a company which manufacturers or makes something is an investment because the company will continue to produce its goods irrespective of whether someone else comes and buys that equity from us or not

People become financially free when they make investments. These investments earn for them and compounding grows the earnings multiple times over. The longer the runway – as Mohnish Pabrai puts it – for compounding to play its part the more wealth you create.

Till next time….when you are in a dilema…think very simply ….will it earn for me irrespective whether the other person wants it or not.

Carpe Diem!!!

Today’s blog post has nothing to do with finance directly.

In 2013 there was a massive cloud burst and floods in the Uttarkashi area in India. Thousands of pilgrims going to the Kedarnath temple and people living in the adjoining areas got drowned because of the flash floods.

Today I came to know about a boy whose parents and sister had gone for the pilgrimage. Since 2013 there was no news whether they were alive or not. Since their bodies were not found they were not declared dead either. This boy was a student at that time.

Due to the sudden disappearance of his parents and no financial support from relatives, who actually disowned him, he worked at a petrol pump to somehow earn enough money to survive and complete his education.

On 12th April this year, almost 5 years later he got news from a rescue team that his parents were in coma in a villagers home. When he reached there he found that the villager herself was pretty poor, but had taken care of his parents and sister while they were in coma. I am told that his mother and sister are now out of coma and father is still badly unwell.

But when this story was told to me by my friend, both she and I came to this discussion that the miracle was not that in the flash floods the parents and sister of the boy survived but the fact that the villager who herself was not very rich took care of 3 unknown people in coma for almost 5 years. After that when they come back to consciousness, this lady worked with the government authorities to trace this boy who stays in Noida – about 500-600kms away.

There was no money that she got during those years for taking care of the unknown people. During that time this boy, inspite of all the hardships, through his perseverance studied and got himself a decent job and kept his hopes alive of meeting his parents and sister again.

Its the human spirit and the fact that inherently human beings are good that miracles happen. The news channels and papers make out that the world is coming to an end but its people like the villager and the boy who show that the world is still a pretty decent place and all over the world there are human beings who are doing positive things that make this world a much better place to live.

Lets spread the positives to make our world a better place….

Till next time

ANIMESHJMATHUR

Investments and Bitcoins

Miracles happen ….because human beings are good