Happy Ninth Birthday, Magic Bull!

Hey,
 
Just turned nine!
 
🙂
 
We’ve seen stuff…
 
…in these nine years.
 
What is our endeavour?
 
We’re in the business of creating wealth.
 
What is wealth?
 
It is something that multiplies over a period of time, …
 
…, perhaps over a long period of time.
 
Wealth affords one things – comfort, medicare, education, luxury, and what have you. So does surplus income, but wealth has the capacity to do this whilst keeping its principle value intact, taking care of our need, and still retaining a large surplus.
 
On the grass-root level, wealth is an idea.
 
Look at it as a multiplication matrix.
 
When we’re looking at money through the spectacles of this multiplication matrix, we’re looking to create wealth.
 
When we’re looking at money without using such spectacle framework, well, then we’re looking at sheer liquidity, income, surplus income / funds etc.
 
In this form, funds are spent, or put into an instrument which returns less than inflation. Funds are burnt over time, and over the long-term, their buying power takes a huge hit.
 
Wealth, on the other hand, returns way beyond inflation. Over the very long-term, returns can even be triple-digit per annum (not using the word “compounded” yet). Double-digit returns, per annum compounded (ya, using it now), are normal. 26% per annum compounded gives a 1000%+ return over 10 years (triple-digit per year)!
 
Wealth kills inflation, and then some, actually, and then lots!
 
The assimilation of wealth doesn’t necessarily follow a linear mathematics.
 
It is better to not look at this mathematics on a day to day basis.
 
Wealth is best created out of sight, out of mind.
 
Why?
 
During the journey to wealth, one needs conviction in one’s rock-solid research.
 
Observing day to day trajectory deviation makes one lose such conviction.
 
Worst-case scenario can be to interrupt the wealth-creation process, or to stop it altogether.
 
One encounters many colleagues on the road towards wealth-creation.
 
Sure, everyone wants in.
 
Who ends up creating wealth?
 
In other words, what’s the wealth-creation mind-set?
 
Our basics have been put in place, by us, laboriously, in the beginning.
 
As in, we have a basic income going. Our needs for the next couple of years are taken care of.
 
We’ve been pickling any incoming surplus away.
 
We don’t need to draw on it for a while, for reasons explained above.
 
Our research is rock-solid.
 
Our small entry quantum strategy has been fine-tuned thoroughly.
 
However, we’ll keep at it, tuning further as per requirement.
 
We believe in ourselves, our research and our strategy.
 
WE are going to end up creating wealth.
 
Holding on to wealth and seeing it through to its logical conclusion will be the next challange.
 
Great year ahead, Magic Bull!
 
🙂 🙂

Try retaining one-off Wealth

Easy come, easy go…

…am sure you heard that one before…!

When you come into something too easily, you sure do want to spend it, right?

Well, why not?

However, do take that one step back.

Let’s explore the possibilities here. 

You can spend it all. Have a blast. Blow it up. Yeah. We’ve touched upon that. Know many people like that. 

Or, you can save some and spend some. 

How about that?

Who’s asking you to save it all?

No one. 

You like spending?

Fine. Spend. A bit. Gratify your most burning desires without injuring anyone’s fundamental rights. 

Then, save the rest. Pickle it. Look away. Move on with your life. 

Why?

Lady Luck smiled. You got your one-off dose of wealth. Use some of it to make wealth a permanent feature in your life. 

For that to happen you’ll need to invest, be patient, compound, reinvest and what have you, till many many cash flows take care of all your needs. 

From which point did it start?

From the moment you decided to save some of your corpus and provide it with the necessary environment to grow.

It’s a basic decision…

…, yeah, a real simple one…

…that’s tough to implement. 

Try retaining wealth. 

You’ll then know exactly what I’m talking about. 

The Pinch of Minuscule Loss

Did I drop the 200 bucks this morning?

Hmmmm…

…naehhh.

I don’t drop cash.

It was probably nicked from my rucksack.

You know what, this incident is pinching me.

I’m trying to brush it off.

Was I careless?

Yes.

Why?

God knows.

Over-confidence?

Maybe.

Do you see?

Even minuscule loss has it’s thought-process-baggage.

Minuscule loss pinches too.

Where does that leave us?

We’re market-people.

We’re faced with minuscule losses everyday.

Hopefully miniscule.

Meaning, hopefully everyone has by now graduated to putting stops.

Don’t underestimate the business of stops.

The human mind gets used to stops very slowly indeed.

Society teaches us to win at all costs. It doesn’t teach us to take a small loss and get out.

Trading works differently, however.

You can’t will a losing trade to win.

Society teaches us to book a winner and post it on social media immediately.

Again, trading is so different.

A small winner needs to be left alone, so that it can grow into a multibagger.

When we enter into the world of trading, we have to first swear to ourselves that we will start to program our minds from day one.

Otherwise, we’re dead-meat.

We need to teach our minds to let winners win some more.

And, we need to programme our minds to cut many, many small losers while they are still small, simultaneously and slowly getting immune to the pinch of minuscule losses by taking these in stride, one, after another after another…

…, till, the rest, as they say, is recorded as successful trading by History.

When Push Comes to Shove 

Genetically… 

… we’re savers. 

Indians. 

Save. 

That’s a good thing. 

Since the ’00s though, our banks have started pushing loans as if there’s no tomorrow.

The motto seems to be : we don’t care who you are, just borrow. If we know who you are, here, borrow some more

That is dangerous policy. 

It sets the stage for a push comes to shove scenario. Savings are being lent further, and they might not come back. 

What counts when push comes to shove? 

Deposits in the bank? No. Gone. 

Real Estate? No. No buyers. No renters. Illiquid stuff just won’t move. 

Equities? No. Dumps. Good entry levels though. No resale value for a while. 

Bonds? Perhaps. Short duration ones, provided underlying doesn’t go under. 

Gold? Yes. Big. 

Trading? Yes. Options, forex, commodities, what have you. 

Cash? Yes. Provided there’s no hyperinflation. Use it for day to day life. Use surplus to acquire great bargains. 

Farmland? Yes. You’re then sorted as far as food and water are concerned. 

Use your imagination. 

Prepare for a push and shove scenario. 

It probably won’t happen. 

However, you’re prepared, just in case. 

Sheer Moat Investing is not Antifragile 

There we go again. 

That word. 

It’s not going to leave us. 

Nicholas Nassim Taleb has coined together what is possibly the market-word of the century. 

Antifragile. 

We’re equity-people. 

We want to remain so. 

We don’t wish to desert equity just because it is a fragile asset-class by itself. 

No. 

We wish to make our equity-foray as antifragile as possible. 

First-up, we need to understand, that when panic sets in, everything falls. 

The fearful weak hand doesn’t differentiate between a gem and a donkey-stock. He or she just sells and sells alike. 

Second-up, we need to comprehend that this is the age of shocks. There will be shocks. Shock after shock after shock. Such are the times. Please acknowledge this, and digest it. 

To make our equity-play antifragile, we’ll need to incorporate solid strategies to account for above two facts. 

We love moats, right? 

No problem. 

We’ll keep our moats. 

Just wait for moat-stocks to show value. Then, we’ll pick them up. 

We go in during the aftermath of a shock. Otherwise, we don’t. 

We go in with small quanta. Time after time after time. 

Voila. 

We’re  already sufficiently antifragile. 

No magic. 

Just sheer common sense. 

We’re still buying quality stocks. 

We’re buying them when they’re not fragile, or lesser fragile. 

We’re going in each time with minute quanta such that the absence of these quanta (after they’ve gone in) doesn’t alter our financial lives. We’re saving the rest of our pickled corpus for the next shock, after which the gem-stock will be yet lesser fragile. 

Yes, we’re averaging down, only because we’re dealing with gems. We’ll never average down with donkey-stocks. We might trade these, averaging up. We won’t be investing in them. 

Thus, we asymptotically approach antifragility in a gem-stock. 

Over time, after many cycles, the antifragile bottom-level of the gem-stock should be moving significantly upwards. 

Gem-stock upon gem-stock upon gem-stock. 

We’re done already. 

Who gets 5 Stars for Fund Movement?

Movement?

Or lack of movement?

What will you have?

Who discusses such a topic?

Is this lame?

Is it that we have nothing better to do?

NO.

Fund movement is a central topic.

Funds are blood.

You need to be master of their movement. Winners are.

What’s there to discuss?

Aren’t things obvious?

Well, no.

To most people, things wrt movement of funds are everything else but obvious.

No pipelines are created.

No sheds for storage.

No safety mode in the firing gun.

Gun fires as soon as the load is available.

You see, all this leads to losing positions.

How?

One should not fire as soon as one can load.

One should fire when one sees a ripe target for the taking.

What should one do till then?

Store the load. Elsewhere. Give it some light work to do. Put it in a position that it can make its way easily back to you as soon as you call it in.

When do you call it in?

When you see the big fat target.

Again, isn’t all this obvious?

Again, no, to most people, no, no, no.

Most people are busy getting sophisticated.

They don’t focus on the basics.

Basics win you the game.

Sophistication might deceive you into the false belief that you are winning or are one up, but because you’ve forgotten to focus on the basics, chances are high that you’ll end up losing.

So here’s what one needs to do.

No gun in the house.

No load in the house.

Big fat target. Identify.

Go to load. Load = funds.

Direct load to gun. This is the movement process. It happens online. Funds are directed to a website.

Fire. Pull the trigger on the concerned website. Yeah, gun’s in cyber-space.

Wait for next opportunity.

Repeat.

So on and so forth.

This way, due to sharply controlled fund movement, one creates positions with high potential to win.

Come on, get your basics in order. Leave sophistication to the losers.

🙂

Focused Diversification : Mantra for all Times

I’m more into focus.

One can focus on one thing at a time.

Agreed.

What if after that one thing starts running, it doesn’t require any more focus?

Wow.

Then I focus on another thing.

Get it running.

Then another.

Till my focus window is full.

Let me tell you about my focus window.

I focus on cash, debt, equity, forex, gold, real-estate, arbitrage, and options.

With that, my professional focus in finance is full full full.

I get something running.

That’s it.

Then I don’t need to be with it. Mostly.

Let me run you through.

1). Cash – Bind it in a worry-free and accessible manner. Done.

2). Debt – Study the underlying very thoroughly. Reject 10 underlyings. Take up the 11th which passes all criteria. Be happy with a slightly better than FD-return. Done.

3). Equity – Invest for life. Study till you drop the stock or take it up. Only invest in what meets all criteria and offers margin of safety at time of investing. On top of that – SIP (systematic investment plan). Done.

4). Forex – Get a software robot to trade it for you. Or some human-capital. All available online. Requires a bit of fine-tuning. Keep tuning till you start making a return. Done.

5). Gold – Buy physical gold. Research your source. Needs to be impeccable. Bullion. Coins. SIP. Accessible. No jewellery. Done.

6). Real-estate – Make your real-estate yield you an income. Regular income? Done.

7). Arbitrage – Understand what this is, and why it gives you a tax benefit. Get an online MF account going with Kotak MF or DWS. Divert some funds into their arbitrage MF, either or. I prefer Kotak. Monthly dividend payout option. Done.

8). Options – Get the option-strategy going. You don’t require a desktop. Mobile is sufficient. All you now need to do is take care of square-off. On mobile. This means a slightly higher level of engagement than the above avenues. Only slightly. Are you ok with that? Fine. Done.

In a flow, it’s all doable.

And, you remain focused.

Why all this?

Times demand it. You never know what might come in handy, and when.

Yeah, times are tough.

However, you are tougher.

To use Nassim Nicholas Taleb’s terminology, you are antifragile.