Today when I look around, I see thousands of opportunities in India. Anyone born in this era should realize how fortunate he is to be born at a time when coffee costs Rs. 150 and it takes an average of 15 minute to be served a takeaway. To not capitalize on the opportunity the market presents today would be grave injustice to capitalism.
Ever since I was young, I’ve been fascinated by the idea of growth. Be it plants, businesses or money, nothing is more satisfying to me than to see them grow. As a child, I was always surrounded by professionals. My immediate and extended family is filled with lawyers, engineers and teachers, and while I did my fair bit in academia, I always wanted to do something that would offer unconstrained growth. The kind you can achieve only in business ventures.
My introduction to the art of stock picking
It was the year 2005. I went for a guest lecture organized at my law school. The lecturer had proved himself as a fairly successful stock picker over the years. By this time I had developed some idea about stocks and investing but never remotely imagined that someday I would be doing this on a full time basis.
A couple of hours that afternoon completely changed the way I looked at businesses and money. I use the word businesses over stocks because THAT’S WHAT IT IS – stock picking is about buying businesses.
In case of interest, in an earlier piece I had written about the investing style of Al, as he spoke of it at the lecture – you can read about it here.
I started looking at things in a new light. I started evaluating and looking at projections. I got into the “refinement of everyday thinking” mode.
Soon enough I was spending a lot of time researching businesses and stocks. Officially, at work I drafted documents for companies looking to raise money on the stock markets. It was a boring job, but one that paid rather well. Like many others, I kept earning my salary and investing it in stocks. Eventually it reached a point where I was doing X and was being paid for Y. It was an odd situation.
I did what I thought was right
To stop practicing law was a tough decision made even more difficult by those around me. I studied law at Pune and New York, worked as a lawyer in Delhi, London and Mumbai for close to 7 years and gave it up for something which had no revenue model other than one of multiplying my existing capital in stocks. Nevertheless, I was convinced that I had saved enough to start something of my own.
One unusually funny explanation for not pursuing what I enjoyed the most came from someone who wanted me to work at his company. He was convinced that I was intelligent and well educated and so I should never get into doing anything on my own. To him, if one had these traits and had spent money on getting good education, he should target to get a high paying job and work for others.
“Why not keep earning salary and investing it in stocks?” I had no answer for him then, I have none whatsoever today. I did what I thought was right. Today by subscription sales alone, I earn far more than what I used to as a lawyer. 3 years back, I never remotely thought that this could be a full time venture.
Thank you for those who encouraged me
A few friends and a few clients who read the earliest posts that I wrote encouraged me to start writing here. I will always be thankful to them.
Starting a business venture
Some of the earliest stocks I wrote about did extremely well over the last 2-3 years. This was particularly pleasing given how badly the broader markets performed during this time. Success I learnt has its own kind of logic.
I realised how much more could be achieved by tying your interests with your business. When more people like what I write, my subscriptions grow. When my subscriptions grow, more people join me in doing what I do. It’s all related.
I started thinking like a businessman. I continuously thought of offering more value to the client. I started cutting costs. I focused on what makes an “unhappy client” and spent time ruling out doing any of that.
I STRONGLY BELIEVE THIS – If you want to get better at stock picking – start a business venture. You will learn more about the principles of value and price than you ever will by any other way.
Stock picking is no rocket science – The business of stock investing thrives on 3 things – psychology, intelligence and information.
Far too many investors think of stock picking in terms of learning XYZ. They believe that once they learn the XYZ, they will be infallible. Nothing could be further from truth. Stock picking is nothing more than selecting good businesses to invest in. When businesses do well, business owners become rich. There is loads of stuff you will find on stock selection criteria and portfolio allocations.
The truth is that no one can predict the future with 100% certainty. The best of business ideas have failed in past and some very unusual ones have succeeded. Things are unlikely to be any different in future.
Rules to follow:
- Research with a focus on discovering good businesses.
- Check if they are available at great prices.
- When both the above rules are met – buy them.
- Give your investments time to grow.
And always remember – you will never be 100% successful with your stock picks, the greatest of investors have made investments which in hindsight look extremely unintelligent. What can I say, sometimes businesses don’t do as well as you thought they would. This too is unlikely to change in future.