Tag Archives: Investment

Thursday Trivia ~ Trust the Process

Last week, I came across a fabulous resignation letter of Sam Hinkie who served as the general manager of the National Basketball Association’s (NBA) Philadelphia 76ers from 2013 to 2016. He has also consulted for several National Football League teams. A resignation letter that I would love to re-read from time to time.

I’m sure your first thought would be that writer has gone nuts! How can a resignation letter be wonderful? The words Resignation and Wonderful simply don’t match each other. 

The reason is his cross-pollination of ideas from the world of investment. Hinkie goes on to quote Howard Marks, Seth Klarman, Charlie Munger, Warren Buffet to name a few. He has somehow taken the best out of them and applied in running a basketball team. A sports person taking ideas from investment world has been an unheard event to me. If you have come across anyone who cross pollinates ideas then please write about them in the comment section below, we would love to hear more about them.

“I believe in the discipline of mastering the best that other people have ever figured out. I don’t believe in just sitting down and trying to dream it all up yourself. Nobody’s that smart.” — Charlie Munger

A brief history of Sam Hinkie and Philadephia 76ers

hinkiesanchez.jpg

The 76ers hired Sam Hinkie in May 2013. The team’s owners, led by private equity investors, chose him for his analytics acumen. They figured Hinkie, a Stanford MBA, could Moneyball the 76ers to greatness. When Hinkie interviewed for the job, he made it clear to the owners that he thought they were “a long way away” from winning big. The cupboard was bare of talent, and if they wanted to win a championship in the long term, their best way forward would involve a lot of losing in the short term.

Here’s his thinking: Historically, in the National Basketball Association (NBA), the teams that win championships rely on star players such as Michael Jordan and Lebron James. Hinkie believed the surest way for the 76ers to get a star of that caliber was to have a high pick in the amateur draft (the annual process through which newly eligible players are selected by the NBA’s 32 teams). The highest draft picks are awarded to the worst teams, and if the 76ers were bad enough for long enough, he argued, they would eventually get a great player. It would take patience though.

Hinkie warned his bosses, the team, and its fans that the short term would be painful, and it most certainly was. Almost immediately upon Hinkie’s hiring, the team began “tanking”—the sports term for losing on purpose. Hinkie traded the team’s best players and made no attempts to acquire players that would make it better.

Over the next three years, the 76ers were horrible. They lost more games than any other team, and broke the NBA’s record for consecutive games lost. It all culminated in the third season when the team won only 10 of 82 games, making it the second worst NBA team of all time. One prominent sports writer called the team an “abomination,” and another an “atrocity“. Observers called for the NBA to intervene and have Hinkie replaced with a manager who wouldn’t tank. The team’s attendance and tv ratings were among the lowest in the league.

But even at the worst depths of history-making failure, many of the team’s hardcore fans were steadfast in their support of Hinkie. Unlike his predecessors, Hinkie offered a concrete plan based on quantitative analysis. The team was an embarrassment on the court, but they were getting talented young players with high draft picks who might some day become stars.

“[Before Hinkie, the 76ers] just had mediocre teams playing mediocre basketball, being incredible boring… and having no plan,” said Michael Levin, a lifelong 76ers fan and host of the popular 76ers podcast The Rights to Ricky Sanchez. Levin was immediately enamored of Hinkie, he told Quartz. He was happy that the team was finally ”thinking long-term at expense of any short-terms gains.”

In April 2016, Hinkie stepped down. “Given all the changes to our organization, I no longer have the confidence that I can make good decisions on behalf of investors in the Sixers….” Hinkie wrote in his 13-page resignation letter to the 76ers board. The resignation letter served as a defense of his decision-making, as well as a kind of philosophical treatise that includes references to Elon Musk, cognitive science, the physicist James Clerk Maxwell, and Jeff Bezos’s 10,000 year clock. The letter cemented Hinkie’s reputation as a mad genius or a fool—all depending on your point of view.

By January 2017, it finally became clear that Hinkie was right all along. The 76ers have won more than half of their games over the last month. The team’s talented young players are blossoming, and it is in a strong position to acquire more excellent players going forward.

Most emblematic of Hinkie’s success is the emerging stardom of the 76ers’ agile giant Joel Embiid. Hinkie drafted the 7-foot Cameroonian in 2014 even though he had a broken bone in his foot that would not allow him to play for six months. Embiid was a player of immense talent, and because the 76ers were not worried about winning in the short term, the injury did not deter Hinkie from drafting him. 

Correlation to our Investment Process

As many of our readers are aware that we follow a strict quant driven approach for our investing our client’s money in mutual funds. We call it Dynamic P/E Asset Allocation Strategy. It’s purely process oriented that takes away any emotional input for buying or selling any mutual funds.

The key objective of our strategy is to provide risk adjusted returns compared to Nifty. This attribute can be seen in the lower standard deviation and better sharpe ratio in our portfolio. Standard deviation can be construed as a measure of risk in the portfolio and sharpe ratio is return generated by per unit risk taken.

Having a standard deviation of 7.74 which is significantly lesser than Nifty’s standard deviation of 13.45 has resulted in lower volatility in the portfolio. That has created a peaceful investment journey!

20200312%20CWA%20Portfolio%20performance.jpg

Just like the process of Sam Hinkie when he intentionally tanked the team down for creating a winning team, our quant model too asks us to invest in equity when market is sliding down. We have to see red in our equity portfolio for a little while as the market bottoms out. This is the whole purpose of our quant model to take rational investment decisions by looking at numbers and not falling for emotions such as fear and greed.

We are not an expert at catching the bottom of the market. Our process is not for timing the stock market accurately either. Nobody can do that all the time. 

Even the greatest investor – Warren Buffet cannot. Even Isaac Newton once famously quoted “I can calculate the motion of heavenly bodies, but not the madness of people” while talking about his inability to time the market correctly.

There many quant models out there who successfully outperform their respective benchmarks. We are comfortable with our current quant model that has enabled us to manage risk in the portfolio as well as outperform Nifty. 

That’s why we echo the words of Sam Hinkie – Trust The Process!

– Jinay Savla

Disclaimer: The intention of this blog is not to advertise about our portfolio allocation strategy or ourselves as superior financial advisors. The intention here is to create a faith in Process or System that every Investor must follow in every market condition. Just by falling into emotions and taking wrong decisions will do more bad for an investor than good. Once again, Trust The Process!

Thursday Trivia ~ Investment Biases that blind Legitimate Business vis a vis Shell Company!

 

Apple iPhones have become a rage among youngsters. It’s not just about features anymore, it has become a status symbol. Youngsters hardly use 5% of the features available on iPhone which are more to do with camera, photo editing, social media and personal communication.

Let’s be honest – iPhones are expensive. They have far more uses than the ones listed above. Yet youngsters rush to buy it when Apple announces the launch of its new phone. Some stand for hours before the store opens to get their hands on the very first shipment of phones, trading their old iPhones for a new one by paying a few thousands extra.

But if you ask a youngster – why have you bought this iPhone X? The typical reply would be, ‘because my friend bought it too’ or ‘I want to look cool in my group and impress that particular person’ or the most typical answer will be ‘dude, it’s an iPhone!’

The funny part is that even investors go through such biases.

  1. Herd Mentality

When a lot of people in your circle buy an iPhone, it ticks of herd mentality in your brain. The reasons may never be good enough.

Same is the case with investors. Investment returns are always a projection of the future. Hence, investors are largely attracted to Entrepreneurs who in a very polished manner speak about the growth of the company. Future earnings potential of a business create a herd mentality in investors. They overlook the current scenario for a very rosy future.

Due to this bias, an investor doesn’t do his/her homework before buying a business and ends up disappointed. That’s why Stock Tips is the most dangerous addiction to have.

  1. Fear Of Missing Out (FOMO)

‘Dude, it’s an iPhone!’, is a classic case of FOMO. Youngsters feel that they will be out of trend if they don’t upgrade their phone to an iPhone. Infact, a lot of students even perform well at their exams so that their parents can gift them an iPhone. Nice incentives there!

Investors read about Entrepreneurs mostly through newspapers or magazines. Their celebrity status, large bungalows, fast cars and beautiful yachts dazzle them. The question that comes to their mind is, ‘he must have a very good business because he is living our dreams.’ Seeing this, they simply start to buy the shares such businesses without doing their initial analysis.

Such fairy tales never have a good ending. Investors often lose money in such scenarios without knowing what really happened.

The question now is – how should an investor can avoid such biases in future?

To be very honest, it’s extremely difficult.

  • Investors are often subject to various behavioural biases that come in the way of making a decision.
  • Not just biases, but sometimes a few overnight regulatory changes also make an ongoing business to shut down.
  • Or sometimes the rules of the game is disrupted by a new-comer.

Although what an investor can control is the way he/she perceives an entrepreneur and his business. But there is a very thin line between a fraudster and a legitimate businessperson. In this article, we will look at two billionaires – One is the well-known Elon Musk and second is lesser known Jho Low.

Background

Elon Musk – Legitimate Business

Known for his stylish electric cars and Mars inhabitation plans, he is admired all over the world. He is the perfect rags to riches story of an American dream. Tesla is a name to reckon with in the world of automotive industry. If it’s electric, it has to be Tesla. In a few years, he has disrupted payments industry through PayPal, Auto industry through Tesla and Space industry through SpaceX.

Jho Low – Shell Company

A Chinese-Malaysian financier from the bustling island of Penang, Low Taek Jho – more famously known as Jho Low – is portrayed by Malaysian and US investigators as one of the masterminds of the 1MDB scam. Despite never holding a formal position with the fund, he is alleged to have played a crucial role in its activities. And it was his savvy networking and shrewd business sense that allowed him to thrive.

Similarities

  1. Extremely larger than life business plans

‘Everything that glitters is not Gold’ – we have been listening to this pearl of wisdom right from the time we started understanding the World. Yet often, we are dazzled by that glitter. We love plans that are larger than life, may it be business or personal life.

Elon Musk talking about going to Mars in a few years dazzles us. We worship him for dreaming the impossible. In a similar fashion, Jho Low talked about transforming Malasiya, he attracted offshore investments to develop Iskander to the tune of $ 1 billion from Saudi Arabia. At a time Malasiya was not considered an attractive investment destination, it’s the larger than life business plans of Mr. Low made him a force to reckon with.

  1. Self-Promotion

Today’s start-up business culture demands Rockstar CEOs. They need to look smart, be outspoken and dress perfectly well.

If one carefully assesses the lifestyles of Mr. Musk and Mr. Low, they are closely connected to Hollywood. Infact they date actresses and marry them too. This gives them a celebrity status in public life. They enjoy it.

  1. Doesn’t play by the rule book

Right from our childhood, we are taught to obey the rules. For example, we are taught to stop at the red light on the road. But when a Ferrari or Lamborghini breaks the red light and zooms past us, we are dazzled. We talk about it for months recounting that episode every single day.

After disrupting the payments industry, Elon Musk set his sights on rockets and electric vehicles with no prior experience of the industry. As a result, he skipped many rules, made a lot of mistakes, apologised publicly and yet in the end when he won – he is worshipped by millions.

Jho Low never had a real experience of running an off shore investment fund. In classic financial term it’s ‘Sovereign Wealth Fund’, something every investment manager aspires to when they have experience. At 27, he saw $ 1 billion entering his 1MDB fund for development of Malasiya which never quite happened. $ 700 million was transferred to an offshore Swis account which he spent lavishly attracting Hollywood celebrities and even backed ‘The Wolf of Wall Street’, an iconic movie played by Leonardo DiCaprio.

  1. Loved / Hated by Media

‘Any publicity is good publicity’, a term we get used to while we are reaching in the middle stages of our career. If it’s good publicity then we get the limelight and if its bad we still get the limelight and a chance to explain.

Mr. Musk and Mr. Low are continuously loved and hated by the media. Mr. Low who is absconding from Malasiya will see a lion’s share of hatred by the media. For Mr. Musk, there are two parties and both are fighting each other as to he is a good/bad businessman.

Absolute Difference

Actual Business with Cash Flows

Tesla cars are being used around the world. Rocket of SpaceX carry satellites or payloads for International Space Station. The companies are genuinely earning money. Infact Mr. Musk is known for his 80-100 hour work weeks due to which these businesses have gained immense success in a short time.

On the contrary, 1MDB of Mr. Low never had any real business. Iskander project never really got off and later on the entity was used for mobilising funds for then Malasiayn Prime Minister Najib Razak. It was a shell company. Funds raised by 1 MDB were transferred to various off-shore accounts and the money was used for various purposes which were never listed in the Profit & Loss statement or Balance Sheet of the company.

Conclusion

Now let’s look at some domestic scams that happened right under our noses. Yet it was difficult to detect them.

Curious Case of GainBitcoin and HomeTrade

In 2016-2017, Bitcoins gained significant attention as its value rose several times. Almost everyone was talking about it. If money was to be invested somewhere then crypto-currency was the place and Bitcoin topped it. Even dinner conversations at restaurants were around its superior returns. Classic FOMO one can say!

To take advantage of this behaviour, GainBitcoin offered to pay 10% monthly returns through a scheme of GB21. And guess what, around 8,000 people fell into this trap. Well the losses are in few hundred crores but it was FOMO working. No investor ever asked, 10% a month – how can any business achieve that?

Home Trade gave life a new definition with its slogan – life means more. A star studded advertising campaign with Hritik Roshan, Sachin Tendulkar and Shah Rukh Khan without any product to sell. Duping even banks with Rs. 400 crores and absconding from India, the CEO Sanjay Agarwal spent close to Rs. 20 crores on the launch of the company. Such a larger than life showbiz created a herd mentality amongst its stakeholders. Only leading to a start of an eventual downfall.

Investors are often dazzled by quick returns on their portfolio. Entrepreneurs often feed stories to media about their businesses which are doing well in domestic as well as international circuit. Most investors that don’t know how to read Annual Reports of the companies fall into the trap of news from various media houses. They fail to recognise a legitimate business or a shell company.

It’s also equally important to acknowledge that markets eventually handsomely reward investors of genuine businesses. And if you are an investor that is unable to differentiate between a legitimate business and a shell company, then it’s always safe to invest with a capable fund manager who is an expert at it.

– Jinay Savla

Thursday Trivia ~ Are you Financially Free?

 

Rahul, Divya and Mahesh are childhood friends. Everyone likes to call them  – 3 Musketeers! Right from staying in Mumbai’s suburbs during their school and colleges days to now living in posh locality of South Mumbai, their journey is not less than anything inspirational. Those sleepless nights before exams, traveling in local trains, chai-samosa parties, etc. are some of the unforgettable memories that they relive whenever they meet.

Rahul rose through the ranks of corporate ladder after completing his professional education. Divya became a doctor, she is a visiting doctor to many hospitals in Mumbai. Mahesh established a business while he was in college and has now established into a global company.

As Rahul turns 40 today, he stands on the balcony of his penthouse with Divya and Mahesh next to him reliving those days when they were hustling through life.

‘Life has blessed us with so many fond memories. We used to study till 4 am and write exams the very next day. Not to forget the chaiwalah who used to come at 1 am in the morning and ask us about our preparations for tomorrow. Remember how Mahesh used to confidently say, that we will crack the papers wide open!’ remarked Rahul.

‘Oh yes and we would be worried about whether we will be able to write the paper tomorrow or not,’ laughed Divya.

‘And we did crack the papers every single time. Didn’t we?’ smiled Mahesh.

‘Most definitely we did.’ Divya winked.

‘Seriously, I had to climb the hard corporate ladder and work around my loans for my house and Mercedes while Mahesh has been able to buy three houses and 2 BMWs by now. He seems to have some magic wand.’ Rahul said.

‘I never buy anything on loan. We have a saying in our family, a person works for 12 hours while his interest on loan works for 24 hours. The only loan we take is for business expansion and new product offerings.’ Mahesh replied with ease.

‘WHAT!! You have never taken a personal loan. Then you’re surely missing out on great things of life buddy. See this phone of mine, it’s worth Rs. 1.25 lakhs. I couldn’t afford paying straight away so I got an easy EMI option on it. I just bought my first Audi too and have my bank’s relationship manager working on a house that we are planning to buy in next 6 months. It really improves my image as a doctor, you see.’ Divya anxiously replied as she couldn’t believe Mahesh never ever took a loan.

Mahesh sensed Divya’s anxiousness. He replied, ‘That’s wonderful Divya. I am glad to see you so happy. You are a wonderful doctor but very bad at managing your money.Since you were so busy studying those big books, you never got the time to understand the power of compounding.’

‘I agree with Mahesh. Understanding money and power of compounding is a must, Divya. It’s the 8th  wonder of the World.’ Rahul interrupted.

‘I don’t believe Mahesh at all. Even Rahul took a loan for your house and Mercedes. So what’s wrong with me taking one?’ Divya was getting a little irritated now while Mahesh maintained his composure.

‘Yes, Divya. But then look at what I had to go through. Most of my money was being spent on servicing the EMIs on loans. Though I don’t have any loan on my head right now, I also don’t have any money sitting in my bank right now that will help me retire. If my daughter gets hospitalized tomorrow, I will have to take loan from you and Mahesh to help me out. Next option is credit card.

Technically, I am still a slave to the system. I can’t escape my job. I am still working for money, I just disguise it saying that it’s my passion. But it’s far from truth and you know that.’ Rahul choked while speaking.

‘Divya, don’t get me wrong. But the loans that you are enjoying today are just financial burdens of tomorrow. You still aren’t able to take your personal time off from work. It’s creating a pressure for you when in reality. You want to start a charity for underprivileged since a long time but you aren’t able to because you don’t have time. You are chasing money while dreams are slipping away.’ Mahesh chose his words carefully this time as Divya went into deep personal enquiry.

Silence for 5 mins.

Finally Divya started talking. ‘You guys are right. I have achieved so much as a doctor but there is no freedom in my personal life. I still cannot take 1 week off from work and spend time with my children. Home loans, car loans and now a loan for phone too. There is no money sitting in bank account that can be used if some emergency in family comes up. Retirement is completely out of picture, at least you have even thought about it Rahul, for me it’s a distant reality.’

Rahul got up to get a juice for Divya. On coming back he asked, ‘Mahesh how the hell did you do it? I mean, how did you become financial independent with so much stress from business every single day?’

To which Mahesh replied, ‘I never really took a loan to fulfil any of my desires. Whatever money we made, we continuously invested back in our business all the time. Plus since last 10 years, we have been investing mutual funds as well.

When you own a business, you own a piece of growth. It starts small and slowly compounds over time. Remember the days when you bought your first car and I was still traveling by public transport. I had the option of taking a loan but didn’t want to burden myself. While Divya was enjoying Europe, I was enjoying Kerala. The idea was to let money work for me.

And it took off. In last 12 years, we saw immense growth in our business. Then even our holdings in mutual funds grew and suddenly we were having more money than we had ever imagined. My business makes enough money for me to not work for a few years. My investments have earned me financial retirement. I am happy with my phone which serves the purpose of emails, chats and calls. There is no financial pressure, what more could I have asked for in life?’

Divya was listening with great interest when Rahul interrupted.

Owning a piece of business is so important. I had ESOPs of my company but I sold it off for down payment of my home. Those shares are worth 5x more today. I realize now that I made such a big blunder.’ Rahul almost stopped drinking his juice.

‘That’s in past Mahesh. Now what shall we do?’ Divya looked highly concerned now.

‘Don’t worry. We will crack this paper of your financial life wide open too, just how we did during exams’ winked Mahesh.

‘That’s the spirit boys!’ yelled Rahul with excitement.

Mahesh said, ‘listen to me very carefully now, just don’t interrupt. First and foremost, repay every loan you have. Especially your loan for Audi, Divya. If you don’t need that car then don’t buy. You are not impressing anyone. Just putting too much financial stress on yourself. And for that second home you are buying with loan, cancel that too. Find a nice broker and sell that house. You don’t need an extra house right now too.’

Divya politiely asked, ‘My dearest Mahesh, how do I repay my loans and start investing? I will need someone to guide me through the process. I am not born with mastery in numbers, like you!’

Rahul laughed while Mahesh was gathering his voice.

Mahesh replied, ‘Yes Divya, as always you are right. You need a Financial Advisor to help you through this. Just the way you take care of your patient’s health, your advisor will take care of your financial health. An advisor will see to it that you don’t overspend your income, invest the balance and see to it that you don’t take up unnecessary loans. This will secure your retirement and you will be able to work without having to worry about money any single day.’

‘Wow Mahesh. Do you have anyone in mind?’ enquired Divya with great excitement.

‘We have a financial advisor who will help you out with the process.’ Rahul intervened.

‘What!! Both of you already have one and never told me about it!’ yelled Divya.

‘That’s because you never want to discuss about investments ever with us.’ Mahesh replied.

Rahul replied, ‘Yes. I invest some portion of my salary every month into mutual funds. Also have an emergency fund set up, if I am unable to work for 3-6 months. Since I paid my complete home loan last year, I will be able to gain complete financial independence in the next 5 years. My advisor keeps a very good track of it.’

Mahesh looked at Divya and said, ‘Sit with the financial advisor for a few hours and plan a life of complete financial freedom. Just don’t let your fear or greed get in the way. It’s okay to get rich slowly because ultimately you will get rich. Getting rich fast, never really happens!’

‘Wow. What a speech, can’t get enough of it!. But for now, we are hungry and need food. Right now, we wish to focus on independence from hunger!’ Rahul smiled and thanked Mahesh.

 

Today’s Thursday Trivia has taken its inspiration from the tweet of Mr. Steve Burns. 

The most satisfying personal finance achievements:

  • No credit card debt
  • No car payments
  • Home can be paid off
  • No debt
  • Emergency fund
  • Big retirement account
  • Big trading account
  • Cash flowing assets
  • No financial pressure
  • Financial independence from a job

 

– Jinay Savla

 

Thursday Trivia ~ Commandments of Super Investor Mohnish Pabrai

Last week we had the pleasure of listening to Mohnish Pabrai, the shameless cloner of Warren Buffet at the Morningstar Conference. He started his investment journey after 30 years of age with a little over $ 1 million in early 2000s and now is worth above $ 100 million.

Reading this, many investors would feel that he atleast had a $ 1 million to start with. However, this can also be viewed as he made an investment return of 100 times through his focus and dedication. Another view can be that since he was an active investor, he could make such a return. Agreed. However, being a passive investor – if we can grow our money better than a fixed deposit or a LIC, it would be a good proposition. I suppose.

Mohnish shared his 10 commandments which were more directed towards fund / asset managers, not all of them would be useful to our readers who are passive investors. Hence, we have identified 4 commandments which would be useful to our readers.

 

Commandment #1: Thou shall be singularly focused like Arjuna.

As investors, we control our process of investing. Returns generated by stock market is not in our hands. Yet, most of our focus is to time the market and see if get that 1% extra than our colleagues at work have generated. It feels nice to take a little risk sometimes.

But is it really worth it? Does it always play like that?

Losing out on our investment discipline and timing the market has often generated loss than profit. Nobody can predict the market; they simply have their own theories. Some work, most don’t. Therefore, while opting for a goal based investments, an investor should focus on his process of systematic investment plans (SIP) rather than acting on an immediate tip provided by someone just to make that extra buck.

 

Commandment #2: Though shall never short.

Mohnish made a very interesting point here. He said, the upside or maximum returns to be generated while shorting a stock (selling first, buying later – when it’s felt that price of the company will fall) is merely 100% or double. However, the downside or maximum loss is unlimited.

What? Why? How?

Suppose there is a Company A which has delivered poor results. Hence, the primary feeling in the stock market is that the price will fall. Company A has a price of Rs. 10 at the moment. Now if a trader decides to short this Company by putting Rs. 1,000. He simply sells the stock of Company A at Rs. 10. Now, when the price goes to Rs. 5, he would have made 50% returns and if the price touches 0, the trader would have made 100%. Logic of stock market states that price cannot go below 0. So the maximum returns generated by the trader would be Rs. 1,000 on his previous investment of Rs. 1,000. That’s 100% returns.

Now the TWIST!!!

Now if by any chance Mr. Market feels that Company A, may have delivered poor results right now but it will deliver superior results henceforth and decides to raise the price of its stock. Our trader friend here would be for a shock. At Rs. 15, trader would have made a loss of 50% and at Rs. 20, he would lose his entire capital. Now here comes the scary part. Logic says, price cannot go below 0 but it can go up above 20 right?

So right from Rs. 20, when the price increases – our trader friend would have to arrange money from some other source of income as his initial capital of Rs. 1,000 would have been wiped out anyways.

This is one of the reasons we always hear in our social conversations – do you know Mr. X played in the stock market and has now sold his 5 BHK and shifted to 1 BHK? Now is this the fault of stock market or trader?

 

Commandment #3: Though shall always have a rope to climb out of the deepest well.

This commandment may have a different meaning for different people. For us, it simply means – Asset Allocation. Never invest your entire corpus into high risk equity funds in lieu of future high returns. Diversifying our investments into different asset classes such as equity, debt, real estate and gold results into sound sleep even during stock market corrections. However, an investor tends to unfollow his / her discipline when markets have shown a stellar past performance.

Let’s take an example of recent run up in the market and resulting in a fall. Throughout 2016 and 2017, Sensex and Nifty only inched higher. Because of the recent returns, many investors took their money out of fixed deposits / debt mutual funds to invest into risky mutual funds. Some investors started buying shares of companies based on very little information couples with extremely high conviction – obviously because it was a tip.

Nifty after touching a high of 11,700 has now come down to 10,000 levels. A fall of 17% in a matter of days leaving many investors wondering for the next 2008 crisis. Rather than boasting about their investment returns, they are now asking – what do you think is the bottom? Let some time go, this bottom phishing will also not work. Why? Because they are not disciplined, they are in a state of panic and trying to time the market. And that never works!

 

Commandment #4: Thou shall never be Leveraged. Neither a lender a borrower be.

Many investors tend to take a loan against their own shares / mutual funds to invest more in the stock market. This behaviour is often triggered by high returns generated and overconfidence of the investor to make quick money in no time.

Or when an investor watches their neighbor doing very well and decides to offer him some money to be invested in the stock market at unreasonably high monthly returns. This often happens in the real estate business. Many real estate players promise a 40% yearly interest and after a year are nowhere to be found.

Both of these habits of leverage result in bad outcomes. It poses unnecessary risk to be undertaken to achieve those investment returns. In short, it’s just impossible.

Hence, at Cirlce Wealth Advisors we don’t encourage trading the stock market. Investments with long term horizon, average returns and low risk can make an investor super rich. Compound interest works wonders for those who believe in it and run the course.

– Jinay Savla

Thursday Trivia ~ Easy Steps To Get Your Lost Aadhar Card Online

‘What a pain is this? Everyday someone is shouting over an SMS – Please link Aadhar. It’s frustrating’ Manish said while checking his messages.

‘It’s frustrating only because you have misplaced your Aadhar card. Don’t spill your laziness on everyone.’ Neha said in a mocking tone.

‘Alright. Let me speak to our financial advisor, I am sure he will help me out rather than passing comments’ Manish said while placing a call to his financial advisor.

‘That’s easy Manish. Don’t worry, just a few simple steps and it will be done. I will email you in five minutes’ financial advisor said.

‘That’s great. Email me.’ Manish looked excited.

Manish’s phone popped up with an email notification. A few steps were mentioned, ‘government work usually takes a long time, but thankfully this is not so!’ he thought to himself.

Instructions were as follows :

Go to website – www.resident.uidai.gov.in and select ‘Retrieve Lost EID / UID’

Upon selection, fill in your personal details and request for One Time Password ‘OTP’

Enter that OTP received on your phone. Your Aadhar number will be sent on your mobile.

Upon entering OTP, a new window will open up where you will be able to ‘Download Aadhar’

The link will take you to a new page – https://eaadhaar.uidai.gov.in where you can select ‘Aadhar’ and put in the number received on your phone. 

A couple more details need to be mentioned. Request for one more OTP for the last time.

After you put in your OTP. Your Aadhar Card will be automatically downloaded. Password to open is first four alphabets of your name in upper case and year of birth.

‘That just worked perfect. Thanks buddy.’ Manish excitedly called up his financial advisor. Neha was pleased to see this and both sat for lunch together.

– Jinay Savla