There is a report in Business Standard which mentions many Indian Companies amongst the world’s largest value creators in this decade. The report is here :
Mukesh Ambani-led Reliance Industries has been ranked second in the list of world’s 10 biggest ‘sustainable value creators’, companies that have been successful in creating the most shareholder value over the last decade, prepared by Boston Consulting Group.
Reliance Industries again comes second in the ‘Large Cap firms’ for 2005-2009 of 112 global companies with a market valuation of more than 35 billion dollars.
In the chemicals industry, Reliance Industries has been named the second biggest value creator of 53 global firms during the period behind South Korea’s OCI.
“No amount of talking or reading can teach you swimming. You will have to get in the water.”
There are these little general rules which are applicable and useful for decision making and taking actions. And these simple rules are applicable in so many aspects of life, they are just some small reminders, some common-sense stuff which are really useful.
And yes most of them are applicable in investment planning as well.
a. Perfect Plan – Forget it.There is no such thing as a perfect investment plan and no such thing as a perfect time. The right time is now. Tomorrow is and always will be uncertain. Perfectionism is the enemy of action. Do not let perfect investment plan or a perfect time to invest stop you from starting.
b. Analysis Paralysis – Too much thinking will often result in getting stuck.Some thinking is good — it’s good to have a clear picture of where you’re going or why you’re doing this — but don’t get stuck thinking. Just do.
c. Get the Broad Picture and Start. You need to get the broad picture in your mind. You need to understand your future requirements or what do you want to achieve (goals). You need to know the time you have to meet those requirements. And, then you should have the broad plan to meet the goals. Once you have the broad picture. Get going.
All the planning will take you nowhere unless you take that first step, no matter how small it is.
d. Keep things Simple and take Small Steps. Small steps always work. Little tiny blows can break down that mountain. And then each step counts. Keep the big picture in mind, but start by taking small steps.
Understand the advantage of Investing Early here.
The Little Rules to successful action To be contd … Part 2.
“The investor’s chief problem – and even his worst enemy – is likely to be himself.” ~ Benjamin Graham
Sensex is at 18000 once again.
(A) Many Investors who had invested since 2007 when the markets were around the same levels are not happy. Most of them are waiting to get out of the markets when they are able to get cost to cost. Reasoning — they could have got better returns in Bank FD’s in last 3 years.
(B) Many Investors who invested in Markets in 2009 are super excited as almost all their investments have doubled. Most of these investors have become developed short term view. They believe that they know everything about markets and they can easily generate good returns time and again. Many want to get out at these levels and reenter at sensex 12000 levels only now. They are experts you see.
Greed and Fear works in both the directions of the markets.
Investors who fall in the above categories do not realize the following fundamental rule of nature which is applicable to markets as well : “THIS TOO SHALL PASS AWAY”.
My view is that investors in either of the above categories will probably never be successful over a investment lifecycle of 3 – 5 – 10 years. Period. Because the above reasoning of exit from market is based purely on market returns and not based on fulfillment of life objectives. And this kind of reasoning falls in the category of speculation.
Do you fall in any of the categories mentioned above…..
Life can only be understood backwards; but it must be lived forwards.
In the process of investing, one often makes mistakes. There is nothing wrong in it. However, repeating the same mistakes should be avoided. This is so much easier said then done. Never-the-less, we can always try. So, Here are some of the most common investing mistakes which investors generally make and some of which even I had made in the earlier part of my investment years.
I have been investing since 1997. Earlier part of the investment was when I was in US and then later after moving to India in 2005. I have been investing in both shares and real estate.
Of course, learning from the mistakes, continually, the investing experience has truly been rewarding experience. You can also cultivate good habits of investing by avoiding the following most common mistakes.
So here goes……..
#1. Investing without a Goal
If one does not know to which port he is sailing, no wind is favorable.
Beginning investors often begin by Casual Investing without any goals. This quite often leads to pain and heartburn because, without any goals, investments are treated as speculation instruments solely aimed at making more money in a shorter span of time, by chasing market performance and acting on market swings, something similar to get-rich-quick scheme. (Speculation is a different ball game and of course, many people do succeed at it. However as in Investments, there are different set of rules, full time efforts, and a different mind set and discipline which needs to be followed.).
Different goals require different strategies. Broadly goals can be divided into three types according to time frames.
Long term Goals– typically 7+ years (e.g.: retirement corpus, child education, child marriage etc.) should invest in Long term high risk/high return growth investment assets.
Medium term goal– typically 2 – 7 yrs (e.g.: deposit on house, planning a sabbatical from work etc.) Require balanced risk investment strategy,
Short term goals– typically less than 2 yrs (e.g.: overseas holiday, purchase of car, any major house improvement expense etc) require conservative investment strategy.
So, Some of the following questions have to worked upon and answered to full satisfaction before setting out for investment: What am I investing for (Goal)? How much do I need for the goal to be met? What is the time frame of the investment going to be? Where do I need to invest? Should I do lump sum investment or Periodic investment? And so on…
Remember, failing to plan is planning to fail
#2. Not Starting to invest Early enough
This is one of the most common mistakes made by investors. Most of us keep waiting for the right time, or the right price, or the right time to begin investing. Remember, Time in the market and not timing the market is the simple way to success in investing. Please read my earlier post on Invest early, Invest Wise, Utilize the power of compounding.
#3. Emotional Investing , being short -sighted, falling to greed and fear, Not following the Investment Plan
A wise man should have money in his head, but not in his heart. –Jonathan Swift
Investing is a long term deliberate process. Long term investment strategy may not make you super rich overnight, but it will not make you a pauper either.
Getting emotionally involved with the portfolio movement is another mistake committed by many. Becoming greedy when markets rise or fearful when markets drop.Paper Money plays on emotions. Investors begin to time the market. Emotional buying and selling of shares based on sentiments often leads to selling low when market sentiments are bearish OR buying high when market sentiments are bullish.
This often results in additional costs, lost opportunities. And of course, if at all the investment was to meet some goals, and then all of that goes for a toss.
To be contd………. Part II. You can read Part II of this series here. (Costly Investment mistakes to avoid at all costs – Part II)
The world of finance can be intimidating, But as Raplh Waldo Emerson says “Fear always springs from ignorance”. The stock market and so called greater financial world is not complicated once you become aware of the basics of investing and dispel fear of ignorance.
First let us see What is not a Investment? Now, This is fun….
First of all, Investing isn’t a get-rich-quick scheme. (There are other risky, very risky avenues of speculation to get-rich-quick which very often turn to get-poor-quick for people with no discipline and patience. Remember – High Risk , High Return, Less Risk, Less Return) . Investing is not speculation. Investing is not buying stocks on a “Hot Tip”. Always remember a Hot Tip leads to a bottomless Pit.:-). Investing is not following the herd which often leaves the investors high and dry. Investing is not listening to channels to analysts and always clicking on your portfolio to see it (along with your heartbeat) fluctuate on a daily basis. Investment should not be done emotionally (Oh, my uncle’s wife’s son’s friend’s sister wants to sell me a insurance cum investment policy, How can I say No. Well — Learn to say No. There are many things in life where you have to say No. ). Investment is also not just about returns.
So that brings us to What is a Investment : Well, What does wikipedia have to say : “Investment is the commitment of money or capital to purchase financial instruments or other assets in order to gain profitable returns in form of interest, income, or appreciation of the value of the instrument”
Investing is putting your money to work for you in order to generate wealth. Generally Money is earned by income generated for some work done for which we trade our precious time. Problem is: for more money, you have to work more hours and give more time. And time is a limited resource. One way is to make your money work for you and start earning. Quite simply, making your money work for you maximizes your earning potential.
Again, Investments have to be planned and done with a purpose, a meaning, and should be done to realize goals of life. Investments are not a one-size-fits-all manner and are individual specific, situation specific. Goals like, Retirement , Child Education, Child Marriage, House Purchase in future, Purchasing assets in future, — goals in different times/ stages of life. etc. And so Investment Planning is utmost important. Plan , Plan , Plan and then execute. Look at the big picture and do not miss the forest (long term enrichment goals) for the trees (unplanned short sightedness)
There are many different ways you can go about making an investment. Stocks, Mutual Funds, ETF’s , Money Market Liquid Funds, bank FD’s etc., or real estate , or starting your own business. It does not matter which method you choose for investing your money. However, the objective is always to put your money to work over long periods of time (5 yrs-10yrs-15yrs+) with adequate margin of safety, and let the magic of compounding take over, so that it beats inflation and generates wealth and fulfills the purpose and more or less achieves the goals.
This is the most important concept in investing.