Replies to This Discussion

Permalink Reply by Mahesh Khambadkone on November 28, 2011 at 8:49pm

Thank you for this simple explanation!

 

This is so easy and basic for almost anyone not into trading or investments.

 

I thought of the three reasons people worry about where to put their money :

1) The Fund House will close down

- This applies to ANYONE, more so a company that you would invest in (if you bought shares directly).  

2) Want money quick

- There is no solution - we (I) know of people who've made money on shares to go to that F1 Race or that Europe holiday, and they're always an aberration - that person is simply unable to repeat the feat.  

3) Don't have sufficient cash to make lump investments that they can just wait on

- When I look around people I know, those who are invested in happily are either rich in the first place, or have been investing regularly.  The really successful ones in this second group have either got fat-paying day jobs (rightly so) after getting into top companies globally (and all they're doing is saving that money each year into funds, playing with excess into specific shares for the fun of it), or (2) have just focussed on improving their careers (their real wealth) and have jumped onto the hockey-stick of their salary graph.

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Permalink Reply by Mayur on November 28, 2011 at 10:35pm

Ha, ha, your observation's are so simple and dead-on-target.....and this is coming from an ex-investment banker and ex-equity analyst.  The reason I am "ex" is that I realized that none of these so called professionals know shit-all about anything.  As an investment banker, I was nothing more than a well-dressed whore....pay me my 6% commission and I will do any deal....with fancy spreadsheets and pivot tables, I can convince you why buying a crappy xyz company is a great deal for your shareholders.  As an equity analyst, I can come up with a thousand justifications why a stock should be a "Strong Buy" or a Buy or a Hold (notice they never say sell because their investment banking group would kill them if they did)!! but if the stock goes against my recommendation, you were dumb enough not to notice the 20 "ifs" and "buts" and "risk factors" that I peppered my report with, just so I could cover my ass at a later date!! 

So back to stocks......I decided to re-confirm my firmly-held hypothesis - its called "none of these so-called professionals know shit hypothesis".  I found a so called punter experienced trader from a big firm who set off on his own and gave him 10 lakhs and asked him to trade in any manner he wanted - just show me the final returns at the end of the year.  In 5 months he has lost 30% of my capital.  The market as of Nov 28th as lost only 16% in the same period. Experiment 2:  Gave a pestering Kotak broker 3 lakhs (with a promise of another 7 in a couple of months).  In 4 months of orgasmic trading - he is flat.  My conversations with him are exactly like yours "yes", yes", "yes" and "OK". 

A family member in the same busines also confirmed this, and to paraphrase him,"all the guys whose portfolio we mananage, only those guys make money who buy and hold a few good mutual funds for the long run......the guys who trade like maniacs are just doing it for the fun of it and always make much less money than the guy who did nothing".

So I am finally enlightened - ignore the ads, dont bother with a brokerage account - stick 70% of our money in large-cap funds, the remaining 30% in large/mid-cap funds and forget about it.  Eventually with patience, you will make absurdly good returns by just doing NOTHING!  If you need the money within 7 to 10 years - then don't invest it in the stock market. 

Cheers and happy inaction!

 

Cheers

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Permalink Reply by Shridhar Thoda on December 5, 2011 at 12:12pm

Hi Alok

Consider this suggestion very seriously.

- See what role you can play in OCCUPY WALL STREET

OR

- Start and spearhead OCCUPY DALAL STREET

It may not be out of place to share a profound quote : ""Those Who Can, Do; Those Who Can't, Teach."

Cheers

Shridhar 

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Permalink Reply by Alok 'Rodinhood' Kejriwal on December 5, 2011 at 1:17pm

Shridhar - i get ur message. I can't. So I teach.

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Permalink Reply by Shridhar Thoda on December 5, 2011 at 2:10pm

Hey Alok

As you know, I teach too.

I'm enlarging the quote : "...Those who REALLY CAN(but don't want fanfare),  MEDITATE".

"Great minds discuss ideas; average minds discuss events; small minds discuss people. BUT THE GREATEST MINDS WORK IN SILENCE".

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Permalink Reply by Shridhar Thoda on December 5, 2011 at 1:51pm

Yes Alok, The ROT IS SPREADING.

I am with you when you say that the "rot is spreading".   In fact, it is as old as the Advertising Industry. Just have a look at the Wealth Creation contribution of "Investment Bankers"(-7) AND "Advertising Executives" (-11)

 

After reading the following research(http://news.bbc.co.uk/2/hi/8410489.stm), see the following videos.  Let me assure you it will take A LOT OF COURAGE to see the truth.

- CENTURY OF THE SELF (Part 1) : Happiness Machines

- CENTURY OF THE SELF (Part 2) : The Engineering of Consent 

Cleaners 'worth more to society' than bankers - study

By Martin Shankleman, Employment correspondent, BBC News

Hospital cleaners play a vital role, the study found

Hospital cleaners are worth more to society than bankers, a study suggests.

The research, carried out by think tank the New Economics Foundation, says hospital cleaners create £10 of value for every £1 they are paid.

It claims bankers are a drain on the country because of the damage they caused to the global economy.

They reportedly destroy £7 of value for every £1 they earn. Meanwhile, senior advertising executives are said to "create stress".

The study says they are responsible for campaigns which create dissatisfaction and misery, and encourage over-consumption.

Waste workers promote recycling, researchers note

And tax accountants damage the country by devising schemes to cut the amount of money available to the government, the research suggests.

By contrast, child minders and waste recyclers are also doing jobs that create net wealth to the country.

The Foundation has used a new form of job evaluation to calculate the total contribution various jobs make to society, including for the first time the impact on communities and environment.

Eilis Lawlor, spokeswoman for the New Economics Foundation, said: "Pay levels often don't reflect the true value that is being created. As a society, we need a pay structure which rewards those jobs that create most societal benefit rather than those that generate profits at the expense of society and the environment".

Tax accountants are said to destroy £47 in value for every £1 generated

She said the aim of the research was not to target individuals in highly paid jobs, or suggest people in low paid jobs should earn more.

"The point we are making is more fundamental - that there should be a relationship between what we are paid and the value our work generates for society. We've found a way to calculate that," she said.

A total of six different jobs were analysed to assess their overall value. These are the study's main findings:

• The elite banker

"Rather than being wealth creators bankers are being handsomely rewarded for bringing the global financial system to the brink of collapse

Paid between £500,000 and £80m a year, leading bankers destroy £7 of value for every pound they generate".

• Childcare workers

"Both for families and society as a whole, looking after children could not be more important. As well as providing a valuable service for families, they release earnings potential by allowing parents to continue working. For every pound they are paid they generate up to £9.50 worth of benefits to society."

• Hospital cleaners

"Play a vital role in the workings of healthcare facilities. They not only clean hospitals and maintain hygiene standards but also contribute to wider health outcomes. For every pound paid, over £10 in social value is created."

• Advertising executives

The industry "encourages high spending and indebtedness. It can create insatiable aspirations, fuelling feelings of dissatisfaction, inadequacy and stress. For a salary of between £50,000 and £12m top advertising executives destroy £11 of value for every pound in value they generate".

• Tax accountants

"Every pound that a tax accountant saves a client is a pound which otherwise would have gone to HM Revenue. For a salary of between £75,000 and £200,000, tax accountants destroy £47 in value, for every pound they generate."

• Waste recycling workers

"Do a range of different jobs that relate to processing and preventing waste and promoting recycling. Carbon emissions are significantly reduced. There is also a value in reusing goods. For every pound of value spent on wages, £12 of value is generated for society."

The research also makes a variety of policy recommendations to align pay more closely with the value of work.

These include establishing a high pay commission, building social and environmental value into prices, and introducing more progressive taxation. 

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Permalink Reply by Anand on December 6, 2011 at 2:48pm

Alok, echo your thoughts completely... I do this for a living and my take has been to invest into good stocks and funds and just forget about it.. Fill it shut it forget it.. If you remember the very old tagline of Hero Honda and thats true for investments as well..

Reminded of a story where a little boy asked his father how to grow a mango tree.. His father gave him a seed to sow..this kid came back after a couple of weeks complaining it isn't working.. The father said it requires good soil, sunlight, water to grow to which the kid confirmed that he did that.. Then the dad consoled the kid saying all seeds may not germinate, some could be just bad seeds. The kid replied it's not possible since he cleaned and washed it everyday before putting it back in the soil..

How many of us just invest and allow it to grow into a mango tree!!! You need to invest in good funds and give it plenty of time.. My problem is that people 'talk' long term but 'behave' very short term.. When there is bad news and everyone talks of doomsday it perhaps is a sale which nobody is buying into.. Unfortunately some of the biggest sale in the stock market is known to us after it is over..

When 2008 meltdown happened how many went against the Market and dared to buy.. Admittedly you might look stupid in the short term to be buying in a Market which is correcting but over the longer term you will be the one who will be smiling ear to ear..

My simple hypothesis, the sensex inception was 100 in 1978. we have seen licence raj, harshad mehta, ketan parekh, Asian Market crisis, kargil war, nuclear tests, tech bust, NDAs defeat, parliament attack, 9/11, 26/11, global financial meltdown, Lehman bros, satyam fraud and now european crisis!! It encompasses political, economic, corporate and all types of crisis and the sensex is still at 16k+. A whopping 165 TIMES RETURN over 30 yrs. Need I say more... 17% CAGR over 30 yrs.. Any PE. Investor would give a hand and a leg to get that!

Just shut yourself from all the noise and remain invested and we will all be very wealthy.. My question is what or we looking for.. Mangoes or mustards????

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Permalink Reply by manjunath on January 31, 2013 at 9:46pm

Well i thought only my parents feel so bad about trading but its not. I feel addressing traders as fools and mentally stable is something that surprised me because i don't think one should talk crap about some legal profession just because you had no one taking up your challenge or something else and that's why you felt so or something else. You seem to have written this as if you were an experienced trader ( were you?). I also feel that you jump into conclusions so soon. And your 5 years waiting for someone who can get you 20% return a year should end as i want to accept your challenge and how about 20% per month just for a change with paper money i mean not your real money. And regarding guarantee, no one in the market can give you guarantee and if someone is giving, he probably is a liar or may be he might compensate the losses with his personal money. And if you want guarantee you can get risk free return of 8-10 % a year from the banks and so, all in all the risk and reward are inversely proportional. You can get a 100% return in a year but this comes with a risk whereas with banks, its just 10% guaranteed. And that's why its told to put in only that much money in the markets that you can afford to lose so that even in the worst case scenario, even if you lose the entire money, your life quality doesn't change except that now you know what markets can do.

        Kindly accept my apology  if i have somewhere crossed the line. 

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Permalink Reply by Alok 'Rodinhood' Kejriwal on January 31, 2013 at 11:05pm

20% per month??

this is why i dread people like you

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Permalink Reply by manjunath on February 1, 2013 at 2:03pm

no need to dread bcoz its just paper money just to try to prove that what you think might not be what it is. Let me know whether the challenge is still valid.

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Permalink Reply by Nishant Agrawal on January 31, 2013 at 11:02pm

Reading your articles is a mixed bag for me. While I strongly agree with your views, I often find myself amazed at your (IMHO) shallow study.

Your advocation for the MFs is based on the premises that the funds will, in any case, continue to generate 20% return over the years to come,

Also, your are considering the TOP MFs, and not the average ones. The ones in the TOP today might be at the bottom tomorrow.

No one. I repeat. No one can give you a near-risk free 20% RoI. And numerous mutual funds even fail to outperform the market.

I am not defending the despicable bankers. 

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Permalink Reply by Sageraj Bariya on February 1, 2013 at 8:17am

Nishant,

whole point behind Alok is very simple.

let me try simple trick, let say you want hire somebody to as CEO of IT company (that has atleast 100 employees). now what kind of person you would prefer?

a fresh graduate or experienced pro?.....answer is simple.....experience guy.

if i want my money to grow...why shud i give to a person who has no proof of doing it ever or has very small history? rather give it to existing guy who has been doing it for long. money making is difficult task, alok's quiz.

i agree with standard risk that market has and any mutual fund can be at bottom tomm, but stock market is one of those places were one gets lot wiser and intelligent as days pass and if a guy has been generating return of 20% for past 10yrs....boss hats of to him....warren buffett has generate in region of 15-18% over some 50-60yrs. plus alok mentioned spread over few mutual funds...why risk it one...that is rule of diversification.

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