Investing - My Learnings...

I had always been interested in investing in the stock market but neither had the means nor the guts to invest. Then I started working and the first thing I did after I received my first pay cheque was to open a trading/demat account. The stock markets have been kind to me and I have been able to create some wealth with higher than expected returns, especially considering the rate of return at banks. I am sure there are a lot of you like me who want to invest in the stock markets but are not sure how to keep your investment safe. I have tried to summarize my learnings from 11 years of investing. Some of this might work for you and some might not. Take what works for and leave the rest behind. Even better, share your experiences if you have been investing as well. So, let’s get started. Shall we?

My first learning was to distinguish between ‘Trading’ and ‘Investing’. Trading involves buying and selling shares frequently (holding the shares for a very few days, usually just about a week) while Investing is for long term with a time frame of at least a year. Trading involves bigger risk while investing requires a lot of hard work. I had to decide what I wanted to be - a trader or an investor? I chose the latter and focused my entire energy on investing.

Once I was clear on wanting to invest rather than trade, the next thing I decided on was the approach I was going to take. Investing in the stock markets is not a joke. So, I chose to do my research and analysis individually, before deciding on a stock to invest in. I made it very clear to myself that I was not going to ‘Follow the herd’. This was my second learning. I didn’t want to invest in a particular stock just because everybody else was investing in it. It helped me immensely as I steered clear of stocks that I was not comfortable with.

The third thing I learnt was to follow a very disciplined approach to investments. I spend hours doing research on companies that I want to invest in - looking for news, reviewing the financials of a  company and deciding on what price to buy it. Also, this taught me to be patient, especially when, at times, the stocks I had invested in weren’t doing well. I was confident of my research and bid my time before making a decision.

And this is my next learning - I never try to ‘time the market’ which in other words means that I never tried to chase the top or bottom price of a stock. I set my personal targets for returns and sell when I achieve those targets. This also helps me set the ‘right expectations’ on returns while ensuring that I don’t get greedy. The biggest challenge with this is to not feel the guilt when tock shoots through the roof after one has sold it. It has happened to me and I have (surprisingly) been quite content.

Another thing I learnt was not to put ‘all my eggs in one basket’ and hence, I diversified my portfolio. The diversification is possible only with more research but it helps me minimize my losses and risks. If one industry isn’t doing very well, it may be compensated by another that is doing extremely well. This approach also helps me invest in many stocks rather than just a few.

Probably the most important lesson is that I invest only my ‘spare or surplus’ money. My objective is wealth creation and I want to do it with the extra money I have rather than put all the money I have in the markets. I want my investment journey to be a learning one for me, but  if I invest all that I have and fail at some point,, I would be loathe to try again.

Finally, I try to monitor my portfolio regularly, at least once a day. There are definitely days when I’m unable to  lookat it but then that happens quite rarely. This keeps me on my toes and reminds me that I should keep an eye for any kind of news that might affect my portfolio.

It’s been over 11 years now since I made my first investment in 2004 and it’s been an eventful journey thus far. There have been a lot of ups and downs, trials and tribulations, wins and losses. But my zest to invest has just grown exponentially in this time. I learn every day and I hope to do so for the rest of my life. Have you invested? What have you learnt? Do leave a comment to share!

Who is the GOAT??

A friend of mine and I were having a discussion around who is the GOAT wicketkeeper-batsman in test cricket. We, however, considered only two batsmen for this. Kumara Sangakkara from Sri Lanka and Adam Gilchrist from Australia. We couldn’t agree on who was better of the two. I was leaning towards Gilly while my friend thought it was Sanga who was better of the two. I decided to take it a step forward and look at the various aspects that can determine who is better. Let us start off with their overall statistics -

Details	Mat	Inns	NO	Runs	HS	Ave	BF	SR	100	50	4s	6s	Ct	St
Gilchrist	96	137	20	5570	204*	47.60	6796	81.95	17	26	677	100	379	37
Sangakkara	132	229	17	12305	319	58.04	22695	54.21	38	52	1479	51	182	20

If one were to consider just the overall statistics, there is no question of who the superior player is. However, what also needs to be considered is that Sangakkara has played more than 60% of his matches as a specialist batsman for Sri Lanka rather than as a Wicketkeeper-batsman. Taking that into consideration, we should look at their records as specialist wicketkeepers -

Details	Mat	Inns	NO	Runs	HS	Ave	BF	SR	100	50	4s	6s	Ct	St
Gilchrist	96	137	20	5570	204*	47.60	6796	81.95	17	26	677	100	379	37
Sangakkara	48	81	4	3117	230	40.48	5988	52.05	7	11	419	9	124	20

Now, this tells us a completely different tale, doesn’t it? Gilly has played all his matches as a wicketkeeper while Sanga has played only 1/3^rd of his matches as a wicket-keeper. Gilchrist has a better average (7 runs per innings) and far better strike rate (82 vs 52). Even as a wicketkeeper, Gilchrist has more dismissals per match (4.33 per match) over Sangakkara (3 per match). Even if you look at the absolute number of runs scored by each, and extrapolate Sanga’s to match the number of matches played by Gilli, Sanga would probably have scored more than what Gilli has. But that can be drilled down to the position in which they play. Sanga has primarily batted at number 3 while Gilli at number 7 and this has ensured that Sanga has batted in almost both innings of a test match while Gilli has managed only 1.4 innings per match.

Another aspect that Gilchrist was outstanding at was his ability to build his innings around the tail-enders. 73% of Gilchrist’s innings (100/137) has been at the number 7 position which meant he had to play a lot more with the tail-enders while Sanga played 90% of his innings at number 3 with the top or middle order.

Another disadvantage that Gilli had against Sanga was that he made a late debut (at the age of 28 against 23 for Sanga) and that took off a few good years from his career. Who knows how much better his stats would have looked had he made an early debut! Sanga, without doubt, is a far better batsman, but, if I were a selector of a World XI and wanted a wicket-keeper batsman, I would go with Adam Gilchrist. For me, he is definitely a far better wicketkeeper-batsman! What do you think?

Results Till Now: Nifty Companies See 6% Drop In Revenues as Cement & Oil Players Falter

A little more than 50% of the constituents of Nifty have reported their March quarter results till date, and it isn’t looking good. Revenues are down 6% while profits are down 5% compared to same time last year. Operating profit, which indicates the operational efficiency of the company, was also flat compared to last year. If you think markets are down and are looking for a reason for them to go even further down, you have a good reason now. The fact is, the results of our top companies, the companies that form part of our benchmark index are nothing short of a disaster.

The worst performer has been Vedanta, reporting a 1268% decline in profits compared to last year on the back of a one-off non cash impairment charges.

The Cement sector saw 31% reduction in profits though the revenues did increase marginally by 3%. The operating profits fell by nearly 2% and all cement companies lost over 25% of profits when compared to the previous quarter, ACC lost the most with 41% reduction in profits.

The IT sector saw TCS lose 30% on that big fat bonus payment, but HCL, Wipro and Infosys also barely managed to show some growth in low single digits, even though the sector saw a 9% growth in revenues.

The Financial Services industry saw their profits grow by a paltry 7% primarily on account of the 2 PSBs showing nearly 55% dip in their profits even though the operating profits rise by 20%. Of the companies, IDFC, IndusInd Bank, Kotak Mahindra Bank and Yes Bank grew at over 25% in the same period, but ICICI Bank & HDFC disappointed with a mere 13% & 10% growth in net profit respectively. 

Cairn slipped from a 3,000 cr. profit to a loss in the quarter. The other big oil and gas player, Reliance Industries, saw profits up 8.5% even as revenues declined by a third.

Maruti had impressive results, with a 60% growth in profits while Hero Honda produced an average level of growth at 14%. This ensured that the Automobile sector 45% increase in their operating profits even though their revenues increased only 10%.

Telecom sector had an impressive quarter clocking a growth of 80% in their earnings while revenues increased 14%. Their operational efficiencies increased by a whopping 65%. Bharti Airtel had an unbelievable growth in profits with 86% while Idea Cellular didn’t lag far behind with a growth rate of 60%.

If you add all the profits and revenues of the companies that have announced results so far, we are seeing a 6% and 5% drop in both revenues and profits respectively.

Cairn is the biggest culprit on the profit front, having reversed from profits to losses on oil and the PSBs also contributed to the negative profit growth. Reliance too saw a revenue drop of over 40% for the quarter, contributing primarily to the negative revenue growth. Even if you removed these from the results of the others, revenue increases were only 8% over the previous year, and profits of the rest went up by a meager 6%.

Are these numbers impressive? Hardly! What can be expected of the rest? I would expect more of the same. These numbers are very disappointing and unless the environment changes soon, achche din would be some time away.

Mentoring - What should one look for in it??

I am sure all of us see successful people around us. Have you ever stopped by to ask them how they got to where they are? The chances that they will mention about a mentor helping them are very high. What makes mentoring so important? Receiving that investment of time, energy and advice makes mentoring almost priceless. This also means that one should be very careful in choosing a mentor. So, are there any attributes that one should look for in a mentoring program? Here are my thoughts. Do you agree?

Looking for praise alone won’t suffice.

A lot of people are looking for some attention and appreciation when they claim that they want a mentor. They aren’t really looking for constructive feedback which is what would help them work towards growth both personally as well as professionally. To make the most of a mentor, people should look for things that would help build their curiosity and self awareness. This would definitely drive them to perform better.

The more silent, bigger the failure.

If people are to grow, their mentors should be ready to have frank conversations with them. Conversations that are difficult to have and most people would avoid having. A manager can be a mentor too by providing constructive feedback at all times, this would also ensure there are no surprises for the employee during appraisal.

Readiness to accept candid feedback.

A lot of times people don’t like to hear bad things and would love to hear only good things about themselves. But if one wants to make the most of a mentoring relationship, they should be ready to accept candid feedback and understand that it is in their best interests  and therefore be ready to take/accept it.

Building Relationship.

Unless the mentor-mentee build their relationship over a period of time, this wouldn’t work. It can easily get either of them to be disinterested sooner and the meetings would become obligatory. And once it does, there are no benefits to derive for either party. Hence, active listening and empathizing becomes extremely important for the relationship to succeed.

Admiration and Emulation.

While one chooses a mentor, they should never try to align one’s self with someone because of their title. That would be the worst thing to do. Rather, they should look out for someone whom they look up to. That would help them stay focused and make the most of the relationship.

Motivation - Just how important is that?

Motivating a person is not easy but is very critical if one wants the person to stay satisfied in their job. Motivation is what leads people to work harder, be more productive and helps in arresting attrition. So, can one think of a single strategy that can magically motivate people and more importantly, keep them motivated throughout? I don’t think there is anything available. Every single person is unique and if one wants to motivate multiple persons, one has to apply multiple strategies.

However, I think there are some themes that can be used and will work with a variety of people. Do let me know what you think

1. The focus is always on teamwork and it’s benefits nothing ever beats the attention provided to people individually. Taking a moment to speak to an individual alone and personally can make him or her feel truly appreciated. Publicly appreciating their good work and praising them while at the same time spending time with individuals and talking to them about things that matter to them makes them feel very valued. This also ensures that the other people also feel positive about the environment provided to them. More importantly, if someone is under performing, or is overwhelmed by a specific duty, taking them aside and working with them to make the situation better for them is equally appreciated as the person knows that you are behind him/her not only to praise them but also during their tougher times. Individual attention also demonstrates that one cares about the individual behind the work as much as the work itself, and that you're willing to take extra steps to make the individual feel comfortable.
2. People tend to feel bored when their job becomes repetitive over a period of time. Staying for long in the same position will eventually demotivate everyone. That said, if one is offered opportunities for advancement and improvement, they will lap it up immediately and that will also motivate them to work harder. This doesn’t mean that it should always involve an increment and a new job title, it could also mean offering new training opportunities or offering new responsibilities, especially when one is willing to take them on. Helping people grow and change, one can expect people to remain excited about their job and be highly productive.
3. People are going to look to their leaders to set an example for the rest of them all. Leaders are required to be setting a tone, a work ethic, and a set of values. Setting the right example can have a meaningful effect on the mentality of your group. For example, if one works hard and stays optimistic about everything, even in the face of enormous challenges, the chances of the employees to do the same are rather high.

People are unique and unpredictable, with individual desires. No matter how much ever one has thought through the plan, it may not please all of them at all times. So it is required to that one be flexible and make changes to the plan along the way to ensure that the team stays motivated. This will ensure that the team is efficient and happy, all the same.