Be your own guest

India is a country with several thousands of communities based on language, religion and native region. In the modern Indian workplace, it is difficult to tell one community from another. However, pick a few sample individuals and visit their homes. The lifestyle they live at home says a lot about the community they hail from. Given the same level of household income, some communities treat themselves like royalty, while others intentionally deprive themselves, calling it frugality. They only loosen up when guests visit them. Continue reading Be your own guest

Book Summary: Intelligent Investor – Benjamin Graham

Buy here in Amazon.com or Amazon.in

  • ISBN-10: 9780062312686
  • ISBN-13: 978-0062312686

Warning: This book is an advanced read even for finance professionals. You must have basic knowledge on capital markets to be able to understand and appreciate the book. Like high echelons of Carnatic music, this book is a God send for those obsessed with return on and of their investment, but most others may be unable to appreciate the finesse of the mentioned points.

Graham on Risk Management
Graham on Risk Management

This book is one of Investment Classics vouched by none other than the most well-known investor of our times Mr. Warren Buffett. Most revelations in the field of investment lose relevance overtime and even prove dismal in succeeding cycles, as can be seen in some of the commentary by the supplementary author Jason Zweig (more on that later) but Graham’s principles have themselves have survived several market cycles. Infact these principles thrive on the market cyclicality. So let’s go about to explore the voluminous book.

Speculation Vs. Investment

A shareholder is a part owner of the company and has to study the business fundamentals thoroughly before deciding to put his money into it. The investor must be convinced that he is receiving more value of the company for the price he is paying. Purchasing shares with the hope that it would increase in price is speculation. A non-professional who is speculating on share prices is purely gambling.  It is an exciting past time worth being pursued with only a small portion considered as fun money which you are okay to loose.

Investor’s Biggest Enemy- Inflation

A good investment must deliver an inflation beating return with an acceptable level of risk. Graham considers bonds (debt securities) as one of the most important vehicle to achieve the same. Since secure return of principal is of prime importance, Graham prefers Govt.bonds over corporate bonds as there is nil risk of default by the Government and a few additional points from corporate bonds do not justify the additional risk. However, Graham recommends buying bonds of corporates when available at a steep discount in the secondary market due to temporary adverse conditions faced by the company or market.

Two Types of Investor – Defensive and Enterprising

Myth in investing world is that you have to take higher risks to obtain higher returns. According to Graham higher returns go to the investor who actively pursues it, i.e an enterprising investor while the passive or defensive investors get average returns.

Portfolio Allocation

Between stocks and bonds, Graham recommends a minimum of 25% and a maximum of 75% allocation on each of them. Only investors who are prepared for a huge draw down(notional loss on quoted price) should allocate 75% on stocks at any point in time. Conservative investors may be better off with maximum allocation on bonds.

Rules for Common stock Component

  1. There should be adequate but not excessive diversification. i.e a minimum of 10 and a maximum of 30 stocks.
  2. Each of the selected company should be large, prominent and conservatively financed.
  3. Each company should have a long record of continuous dividend payments of atleast 10 years.
  4. Set a limit to max price one would pay for the stock. Suggested: Trailing 12 months PE of 20 or average of 25.

Graham in general advices against picking stocks individually as he considers an individual cannot do a better job at stock picking than the professionals who seem to do a pretty average job themselves. His preferred way of investment in equity is through index funds.

For an enterprising investor who is willing to put in more efforts into stock picking he advises following guidelines:

  1. Financial Condition: (a) Current assets at least 1.5 times current liabilities and (b) debt not more than 110% of net current assets (for industrial companies)
  2. Earnings Stability: No deficit in the last five years.
  3. Dividend Record: some current dividend
  4. Earnings growth: Last year’s earnings more than of prev years
  5. Price: Less than 120% of net tangible assets.

Dollar(Rupee) Cost Averaging:

Such carefully selected stocks must be purchased through a monthly purchase plan of a fixed amount every month as long as the basis premise of selection holds good.

Graham on Dollar Cost Averaging
Graham on Dollar Cost Averaging

Portfolio Tracking and Updation:

The portfolio must be reviewed atleast once a year. But frequent urge to check the stock prices must be avoided.

Dividend Policy:

Graham is extremely critical of companies that retain more earnings than required for growth. For the company managers to believe that they are more qualified in growing the retained earnings than the shareholders is incorrect, unproven and misaligned incentives.

My Critic on the book: The commentary of the book by Jason Zweig adds number of recent examples. However, the commentary is dated only till 2003. So the book completely skips the 2008 crash and the lessons from it. Jason Zweig has also recommends investing in junk funds as he says risk has been significantly reduced due to diversification. Diversification does not do away with systemic risks which while adequately addressed by Graham need to continue to be adhered too.

This book is a great read if you want to understand more on Asset Allocation in capital markets.  For more in depth knowledge on picking stocks please read ‘Security Analysis‘ by Graham and Dodd.


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Book summary: Miracle Morning

The Miracle Morning by Hal ElrodBook title: Miracle Morning
Author: Hal Elrod
Publisher: Self
ISBN-10: 0979019710
ISBN-13: 978-0979019715
Buy on: Amazon.in | Amazon.com

 

 

 

 

Introduction

In this book, the author Hal Elrod talks about how waking up early in the morning and then following 6 simple practices transformed his life. The author abbreviates the 6 things in his morning routine as SAVERS. In his 1-hour routine, he goes through 6 activities that give him the perspective he needs for the day. Continue reading Book summary: Miracle Morning

How to Learn just about Anything? – Part II – Acquiring Skills

We have all wanted to learn new skills like painting, singing, playing an instrument as an adult when we do not have the luxury of attending series of classes or the 10,000 hours as claimed by several. It is not so hard and even some life skills like swimming, driving can be learnt in as low as 20 hours. In this post we discuss the method for acquiring a skill at an amateur level at the shortest possible time.

Planning Stage:

Step 1: Define Success

A clearly defined goal is the starting point of the journey. Don’t start with more than one skill or goal.

Eg: 1) To be able to type 60 wpm using a qwerty keyboard with not more than 3 mistakes.
2) To be able to do a portrait sketch in pencil with reasonable semblance.
3) To be able to play ‘chinna chinna asai‘ song in my keyboard with correct tempo and tune.
4) To be able to swim across the 50m pool in freestyle without stopping
5) To be able to park the car in any parking lot properly

Defining Success
Defining Success

You can always build upon your knowledge sequentially, but it is important to do it only one at a time. Once you have reached your goal, you can give yourself a tougher goal in the same skill, or move on to a different one, as you choose.

Let us also address, motivation issues here. Learning a skill is hard, a goal with a purpose often works better than learning for leaning sake. For Eg: I want to learn conversational Gujarati so that I can talk to my fiance’s parents when I meet them in 5 weeks works better than I want to learn Gujarati.

So let your goal be,
“I want to learn ___________ in ___ time, so that I may ________”

Step 2: Deconstruct the Process

You may have noticed swimming, driving classes for absolute beginners are for about 20 hours in general. In 20 hours they are able to take you from someone who has never been inside water to be able to swim reach from one end of the pool to another, or in case driving as someone who has never been on driver seat to be able to handle from the highways to the chaotic Indian roads.

Josh Kauffman in his research as found similarly that learning any skill can be done in 20 hours.

You are by no means going to come out the other side as the next Michael Phelps or Michael Schumacher but would have learnt just enough to survive the roads or the water.

Any skill involves a series of steps. so first we need to deconstruct the steps. For example, the goal of swimming across the pool would involve mastering steps like:

  1.  Hand Movement
  2.  Leg Movement
  3.  Breathe in
  4.  Breathe Out
  5.  Take Off
  6.  Landing
  7.  Turn
  8.  Landing a Jump
  9.  Body Posture
  10.  Float

Step 3: Select: Identify Key Components

Pareto’s rule of 80/20 fits well into this context i.e 80% of your learning is going to come from 20% of your components. The most important components for the considered Goal according to me would be

  1. Floating
  2. Breathing
  3. Hand Movement
  4. Leg Movement

 

Learning to swim

So from about 10 + components we have identified  key components that we will focus on for our 20 hours of learning. For critical skills like swimming, driving etc which can endanger your or other lives when not practiced properly, it is preferable to have a trainer or atleast an experienced person around you while practicing. But for all skills, it is beneficial to have a trainer, who can provide good feedback and prevent you from practicing incorrectly. But professionals can at times impart incorrect/non-beneficial industry practices that does not suit your lifestyle or goal. You may notice that your driving methods resemble a lot to the person you have learnt from. So choose your trainer well.

Step 4: Sequence the Learning

In pencil sketching, the learning would start with choosing the right HB Pencils, holding the pencil,  lines and then shades.

Similarly in swimming, one has to learn to float to be able to get over the fear of drowning, then combine it with learning of hand, leg movements and breathing to be able to swim. Each of this can be identified as a sub skill and learnt and until it is reasonably mastered.

Step 5: Plan for failures

Visualizing that you have failed and to find out reasons for failure is one of the easiest ways to find out where we may fall before we even start. Pre-mortem your result and identify the weak links that may have caused you to fail and account for them in your practice. You may be too lazy to pull the guitar out to practice, put a stand near your favorite chair. Your partner may get too busy to practice salsa, find an alternative.  You’d be too lazy to follow through and finish lessons on your Gujarati, schedule the sessions with your tutor and pay for them ahead of time. You think you might put off learning cooking again – Invite your friends over a home cooked dinner at a scheduled date. Websites like StickK can really help you in sticking to your commitments.

Practice Stage:

This is the most important stage of the learning, where the initial enthusiasm of learning a new skill can quickly get replaced by the frustration of not making a progress fast enough. This is why the purpose of the goal that we mentioned in planning stage is very important. While our tactics will help you get through it in record time, it is still going to be frustrating and will need the purpose powered willpower to drag you through.

Pomodoro Technique

Short spurts of learning (say 20 mins) before and after your bed is the most efficient time for you to learn. While this can be definitely used for learning a musical instrument, language, typing etc it can understandably be difficult to learn swimming or windsurfing if your practice area is not in your vicinity or if the industry only provides standard slots like flight log or scuba. Go for the next best alternative.

Set up low stakes Environment

This might sound contradictory to the high stake target we set for ourselves. But it is not. For practicing set up a low stakes environment where you can fail without hurting yourself much. Start swimming in shallow waters, practice uni – cycling or bare foot running in soft grass, practice the new language with non-critical native speakers, try rope walking at a lower height or trapeze with the nets underneath.

Practice – Repeat – Commit to 20 hours

20 hours is not a lot of time. Most of us might watch more TV than that in a week. But this 20 hours may seem excruciatingly long, while practicing and miserably failing along the way. But do it anyway.

Monitor progress – Get Feedback – Get better

Have sub goals and timeline for the sub-skills that you have to develop and allot a time to integrate them. This will be no different than assembling a car, while each part that goes into making the car is quality checked on production or purchase, assembling it together will also take time and due steps need to be followed.

Keep realistic timelines for your sub- goals and measure your progress against them. Seek feedback and help as required to adjust your process and routine to help you get to the finishing line.

Taking care of Basics

I was tempted to leave this part, but it surprised me how many people mentioned this as one key part of learning that I couldn’t help but putting this in a separate section.

Hydrate Yourself:

Over 70% of the body is comprised of water and water play a huge role in helping to regulate nervous system and brain function. All the learning experts swear by the need to hydrate oneself well while attempting any learning exercise.

Exercise:

Regular exercises benefits your brain as much as it benefits your body. A fit mind in a fit body. So lace up and get going.

Recommended Read:
The First 20 Hours – Josh KauffmanAmazon.in / Amazon.com

The Master Deconstructor Tim Ferris on Accelerated Learning

Why to break your routine for one day?

In today’s world, we have an acronym called TGIF (Thank God It’s Friday). The basis for this acronym is that people who put in difficult hours at work during the weekdays do not have to do so during the weekend. Instead they ‘get to do’ something leisurely and things they really love. TGIF suggests that you are slogging through your week and doing what’s not important to you. It says that you have given up control of your life to someone else who isn’t allowing you to do what you please. It says that you are a slave. It says that your life as you want it only happens during the weekends. TGIF is a depressing acronym.

With a career I love and with my each day being an opportunity to learn more and work on things I care about, the concept of TGIF is lost on me. But, I agree with one aspect TGIF suggests. Do something different from your daily routine at least once a week. Here is why. Continue reading Why to break your routine for one day?

How to Learn just about Anything? – Part I – Acquiring Knowledge

Schools, the hub of education has taught us what to learn. But has surprisingly never taught us ‘how to learn’. So often kids with different learning requirements are labelled ‘slow’ than find compatible teaching methods. No wonder Einstein, Edison, Graham Bell were all labelled ‘learning challenged’.

Process of Learning - JK Quote
Process of Learning

So how do we go about learning.  I’d like to broadly divide into acquiring knowledge i.e on subjects of chemistry, philosophy, investing etc and acquiring a skill. In Part 1. let us focus on acquiring knowledge. Continue reading How to Learn just about Anything? – Part I – Acquiring Knowledge

How to get Lucky?

Lucky People

We have all known people for whom things always fall into place at the right time and right place. These lucky people meet their future spouses by accident, they get a brilliant business idea from a random conversation, strangers seem to help them everywhere they go and they get introductions and guidance from the most unexpected places and people. We have all heard stories like the FEDEX founder who gambled with the last $5000 in the business and won enough to save the business and thrive. Life is full of fortunate coincidences for these lucky people.

The Everyone Else: Unlucky

They are also the other kind of people for whom bad luck and misfortune follow everywhere. After a long wait and much trying they scheduled an appointment with a big prospect who had to cancel  due to an emergency, the stocks that they invest in fall, the parking fills up just before they come, the traffic lights turn red on seeing them, they loose their valuables routinely, they don’t get the big breaks they think deserve despite their talent and hard work. The many like the talented Vinod Kambli who despite his superior batting talent had a short career unlike his friend who went on to become the little maser.

So does luck exist?

Continue reading How to get Lucky?

What to do when choices overwhelm you… everyday!

You know the feeling when you stand at popular ice-cream outlets such as Gelato, Baskin Robbins or Natural’s. There are more than a hundred choices. If you’ve had a difficult day at work, you are tempted to walk out as your brain feels the fatigue of taking one more decision from a staggering number of choices. “Let’s just go eat the falooda from the road side vendor”, you say as you walk out. What should you do when you are overwhelmed with choices? Continue reading What to do when choices overwhelm you… everyday!

How to keep your Brain Young?

Brain is the most important and vital organ in our body. Unfortunately, numerous modern age practices have taken a toll on our brain. But it is not only possible to reduce the aging of your brain, it is even possible to reverse the aging effect i.e get younger. The good thing is none of them are terribly difficult to do. Let us look at the the 10 things we need to practice to keep our brain young.

1. A Good Brain Diet

Brain needs numerous nutrients esp Omega 3 to keep it healthy and running. These nutrients are found in plenty in foods like Walnut, Avocoda, Brocolli, Bluberries etc. Eggs and Salmon Fish as well for those who eat them can be extremely good supplements for the necessary nutrients.

Having withdrawal symptoms ? Check out how I won this one !!

Reference: Brain Super Foods

Brain Foods
Brain Foods

Continue reading How to keep your Brain Young?

Book summary: Work clean by Dan Charnas

Book title: Work clean – The life changing power of mise-en-place
Author: Dan Charnas
ISBN-10: 1623365929
ISBN-13: 978-1623365929
Buy on Amazon.in | Amazon.com

Introduction

Mise-en-place is a French term that means that there is a place for everything and everything must be in its place. The use of French is because the term originated in culinary circles in France where chefs emphasise the importance of a clean and organised kitchen counter to do things efficiently and ensure high food quality. As a result, just like everything culinary, saute and hors d’ouvre, words from the romantic language stuck around in English too.

Having worked with leading chefs in the United States, the author Dan Charnas talks about how to plan, organise and clean up so that you get the best out of your activities. Throughout the book he illustrates stories and scenes from the America’s top restaurants that exhibit thorough planning, organisation, cleanliness, minimalism and maximum utilisation. Charnas extends the knowledge gained from cooking into his personal and professional lives. In this book, he teaches us how to do so. Continue reading Book summary: Work clean by Dan Charnas


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