Making Time Our Friend

Hurry…

…spoils the curry.

Specifically with regard to Equity…

…one should never, never be in a hurry. 

You see…

…there will always be a correction.

You will get an entry. 

Wait for the right entry. 

You will, eventually, get a prime exit. 

Wait for the time. 

Make time your friend. 

How?

Simple.

Take it out of the equation.

Simple?

In the small entry quantum strategy, time is, by default, taken out of the equation. 

It loses its urgency as a defining factor, for us, psychologically.

We don’t have any immediate timelines. 

We go with…

…the flow. 

When opportunities appear…

…we act.

When they don’t…

…we don’t act.

Most of the time…

…we don’t act.

Then there are black swans, and we act many times in a row. Like now.

Action, or lack of it, depends on what’s happening. 

We don’t force action.

Why?

Because we have all the time in the world. We’ve made it our friend, remember.

We know that we’ll get action…

…eventually. 

We conserve liquidity and energy for when action comes.

You see, when the pressure of a time-line is gone, quality of judgement shoots up.

We make superior calls. 

Of course we make numerous mistakes too. 

However, the quantum going into the mistake is small. This is the small entry quantum strategy, remember. 

Once we’ve made a selection mistake in an underlying, and have realised this, we don’t shoot another quantum chasing our error. Instead we let it be, and wait for a prime exit from our error. It will come. 

We keep going into identified underlyings not falling into the error category, with small quanta. 

Many, Many times, we make a price-error. Price going against us after entry is a price-error, because the market is always right. It’s us who are wrong when things go against us. 

Never mind. After a price-error, we enter the same underlying with another quantum, and this time we get a better price. Once gain one observes the friendliness of time, even after price has gone against us, all because of our small entry quantum strategy.

When price is going in our favour, we might not enter after a level. Though we’re not getting further entries in the underlying, appreciation is working in our favour. 

It’s a win-win on both sides of the timeline for us…

…because we’ve made time our friend. 

Sophistication-Complicatedness-Overmodelling – REALLY?

The simplest ideas in life…

…go the longest way.

It’s also the simplest ideas that…

…make money in the markets.

As in, buying low, then selling high…

…learning to sit…

…not nipping a multibagger in the bud…

…recognising one’s risk-profile…

…and behaving within its parameters…

…for starters.

Do we even know what our risk-profile is?

What gives us a sleepless night?

Have we identified what?

Do we still do…

…that?

Most of us still haven’t gotten our basics together…

…because we’re too busy handling affairs in more complicated manners.

We like sophistication.

Let it cost.

Let it lose money.

Let it bring in lesser earning than simpler models.

Main thing is…

…it looks (and sounds) good.

It looks (and sounds)…

sophisticated.

It gives others the impression…

…that one is a big shot.

We overmodel.

The nth differentials of our models lose touch with real pictures on the ground.

Why can’t we move within the parameters of time-tested money-making principles?

Markets are not rocket-science.

We try and make them look like rocket-science.

What do we lose out on?

Time.

Money spent on sophistication that doesn’t yield.

Energy.

We lose out on the fun.

When we’re having fun, we will make money.

When we keep things simple, we’ll have fun.

It’s like doing five things at the same time, things which are all fun when done one at a time.

Are we having more fun when we do all five together?

Really?

No.

A little bit of sophistication and modelling, built upon a strong foundation of simplicity does give us an edge though.

Can we maintain the balance?

What is the balance?

Never forget the basics.

Sophistication…

…modelling…

…fine…

…as long as we don’t belly-up into overmodelling.

That’s the thin line that makes us lose sight of our basics.

Can we see it?

Can we steer clear of it?

Yes?

Then we’re going to make money.

Secret Ingredients in Times like Corona

Hi,

It’s been a while.

Unprecedented times call for every iota of resilience that’s inherent.

Whatever we’ve learnt in the markets is being tested to beyond all levels. 

If our learning is solid, we will emerge victorious.

If there are vital chinks in our armour, we will be broken. 

Such are the market forces that are prevailing. 

Have we learn’t to sit?

Meaning, over all these years, when over-valuation ruled the roost, did we sit?

Did we accumulate funds?

Did we create a sizeable liquid corpus?

If we did, we are kings in this scenario. 

One of the main characteristics of a small entry quantum strategy is that it renders us liquidity, almost through and through. 

If we are amply liquid in the times of mayhem, there is absent from our armour the debilitating chink of illiquidity.

Illiquidity at the wrong time makes one make drastic mistakes by succumbing to panic. 

We’re not succumbing to any panic. 

Why?

Because our minds are focused on the bargains available.

The bargains are so mouth-watering, that they are entirely taking away our focus from existing panic.

To twist our psychology into the correct trajectory in a time like Corona, the secret ingredient that’s required is called (ample) liquidity. This secret ingredient is a direct result of the small entry quantum strategy, which we follow. 

Then, let’s address the other potential chink, and just sheer do away with it. 

Having access to ample liquidity, are we now greedy?

What does greed mean?

It’s not greedy to buy when there’s blood on the street, no, it’s actually outright courageous. 

Greed Is defined here as per the quantum of buying. 

Are we buying disproportionately vis-à-vis our liquidity-size and our risk-profile?

Yes?

Greedy.

No?

Not greedy.

How will we know the answer without any doubt in our mind that we have the correct answer to this question, since it is vital to our learning curve to answer this question correctly?

The answer will make itself felt.

Are we able to sit optimally even if markets crash another double-digit percentage from here?

50% from here?

No? Greedy. We have bought in a manner that doesn’t gel with our risk-profile. Our liquidity is exhausting, and focus shifts from bargains to panic. Ensuing tension amidst further fall will very probably cause us to commit a grave blunder, with this happening very probably at the bottom of the market. We are poised to lose in the markets like this. 

Yes? Not greedy. We have bought and continue to buy as per our risk-profile. We will win…

…in the markets.

The secret ingredient that locks in great prices and continues to do so as the market keeps falling, is called quantum-control as per the tolerance level of our risk-profile towards further fall. This secret ingredient ensures that liquidity outlasts a longish fall, keeping our focus on the bargains and not on the panic. This secret ingredient provides for the basic mechanism of our small entry quantum strategy.

 

Making Time Work For You

Imagine…

…entering into a stock…

…many, many times.

When would you do that?

When your research is solid, …

… when you’re amply liquid, …

… and of course when the stock keeps giving you margin of safety to enter for a longish period of time.

There’s no excuse for not doing solid research. 

It’s a given.

Research – solid – period.

How do you render yourself amply liquid?

You do this for example by following a small entry quantum strategy. 

Let’s have a look at one advantage that springs up in particular. 

You become an expert in the stock you are entering into again and again. 

You know its nuances over time.

You start getting a hang of its overpricing, underpricing, par value, good results, bad results, and what have you. 

You’re in it till you’re convinced about it, sure. 

While you’re in it, you’ve developed an expertise on it.

You’ll take that, right?

Sure. 

What exactly have you done?

You’ve made time work in your favour.

First up, staying invested in a fundamentally sound stock over a long period of time should give you a good return.

Then, repeated interaction over the passage of time gives you expertise. 

Double-shot, please!

🙂

Listening to Time

Market work…

…has some eccentricities.

One can’t work in the markets all the time.

That’s normal, right?

Well, yes and no. 

At a place of work, one should be able to work. 

Markets don’t always allow work.

So don’t other work places, sure. 

At other times, you don’t feel like doing market work. 

Aha. 

This happens multiple time a year. 

What do we do here?

We create an environment that incorporates this eventuality seamlessly. 

First up, why is this incorporation essential?

Let’s assume that we need to work in the markets all the time. 

When we don’t feel like, and we have to, well, then, we are likely to make mistakes. 

Read mistakes as losses. 

Mistakes in the market translate into losses. 

(Amongst other things), we are in the markets to …

… minimize losses. 

Therefore, when we don’t feel like doing market work …

… we just sheer don’t do it. 

So, back to square one, how do we incorporate this seamlessly?

By making market work our secondary source of income.

Our basic income needs to be sorted through our primary source. 

Now, we can shut off the markets at will without this affecting our basic income. Whether we can also emotionally detach is a discussion for another day. 

There are times when one just doesn’t feel like opening up the terminal. 

Listen to such times. 

Shut out the markets at will…

…only to open them up again when they’re a go for you.

We’re still at step 1, which you’ve just cleared for yourself. 

Now we try and gauge whether times are such that markets allow work.

Listen to such times. 

When you feel like working and markets allow you to work, go all out. Exhaust existing work potential. 

When you feel like working, and markets don’t allow work, do other stuff. Get your research ready. Become poised. 

Sooner than later, your action criteria will be met…

…and you will be able to act. 

Uff, sometimes it’s so boring, that…

…you find yourselves asking,…

…was that it?

Aha. 

Need I remind you, that this is very good indeed?

You want your strategy to become to streamlined, that it’s outright sheer damn boring. 

That’s exactly when the strategy will perform.

Thrill-seekers have a video-game experience of the markets and then burn out. 

You will go on and on with your boring strategy. 

What does this mean for your time?

You’ve got something streamlined, so you’ve got time on your hands. 

Twiddle your thumbs, or do something new. 

I’ll take new. 

I’d go for another strategy. 

Approach another market. 

Anything that attracts you. 

Develop something in that market. 

Make sure there’s no overlap between your markets. 

Why?

When you wind up the day’s input for a market, you want to be exactly there, i.e. wound up with that market. 

Entering the other market is something fresh for you. 

You look forward to it. 

Why exactly?

Because of no overlap with something you’re done with for the day. 

Slowly, get a few strategies going, such that your working day is taken care of. 

This is how you proceed with a market.

Enter-do-exit. Done.

Next market.

Enter-do-exit. Done.

And next market. 

Once you’re done with a market for the day, only look at it the next day. 

This way you’ll stay fresh, and your time and energy won’t be exhausted by hourly nitty-gritties. 

Once done with all your markets for the day, do other stuff in life. 

Non-market stuff.

Like cultivation of hobbies, spending family-time, sport, meditation, chanting, reading, what have you. 

Do full justice to life. 

The Difference between Winning and Losing

It’s a whisker. 

You’re doing everything right. 

You’re following a proven strategy. 

You’ve adapted. 

You’ve removed many mistakes from your resumé.

Your strategy has undergone refinement. 

Why haven’t you started winning yet?

Yeah, we’re used to asking million dollar questions by now. 

In fact, such questions are all we ever ask. 

What do you think is the answer?

The answer is you. 

Yes. 

There’s something about you. 

It’s not fitting. 

You’ve got two options. 

Either make your strategy fit to this something, or …

… make yourself fit to the strategy. 

Both options can work, and you can start winning. 

Which option is easier to implement?

I think the more relevant question here is a different one. 

Which option befits the situation?

I’ll give you an example. 

I’ve got time issues. 

I make my market strategies fit my time issues. 

I can’t change my time issues, for something or someone will fall short then. Like everyone, I have many commitments too. 

Therefore, I fit my market strategy around me. 

I keep fitting, fitting, fitting, till the strategy either works, or is discarded for want of a win. 

Yeah, that’s me. 

Maybe your situation is different. 

Maybe you need to cater to the public. 

You’re not expecting the public to change to your whims and fancies, are you?

Not as a newbie, no no, that would be a cardinal sin. 

After all, the public is your paymaster, right?

Customer is your king, or queen. 

It becomes different when you turn into a celeb. 

Then you can dictate fashion. 

However, till you become a celeb, fit to the public, if you want to win. 

Behave in a manner that people want to pay for what you have to offer, again and again and again.

Maybe there’s a slight whisker of a trait in your behaviour that people don’t like. 

Change it. 

Whether you’re changing yourself, or fitting your strategy to meet your unchangeable nature or schedule, sometimes it’s only a whisker that makes the difference between winning and losing. 

People have lost olympic medals by one-hundredth of a second. 

What’s that millisecond lag in your own life that you need to get rid of?

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. 

Let It Come To You

Don’t run after the investment.

Let it come to you.

Let it breathe down your neck.

You’re not hungry for it…

…but, if it’s that good…

… you might take it.

Let it reveal its hidden goodness.

Let it ignite your curiosity to look for even more than basic goodness in the investment.

Play a passive-then-active role.

Some call this the sweet spot.

I call it the sweetest spot…

… which you really want to be in, in the world of investing.

Yeah, don’t be in a hurry.

Hurry spoils the curry.

Take your time, to the extent that…

… take time out of the equation.

Give your money the best possible chance…

… to make loads more.

Deciding to Invest?

An investment opportunity comes along.

How do you react?

This is how I react.

First up, funds. Do I have clear funds to invest? No? Forget it, obviously.

Funds – maybe? Meaning, if I do some wangling around, fund demand could be met? Ok, move on to next step before taking a decision on the wangling.

Funds – clear – yes? Next step by default, but I’m telling myself that I’m not letting these hard-earned funds go just like that. The opportunity will need to clear my scrutiny. Period.

Then – time? Do I have 15 clear days to conduct deep due diligence.

No? Forget it. I may be travelling. Some event might occupy my time and mind. No time – no investment. Period.

Yes? Ok. Next step.

Energy? Due diligence is exhausting. I need energy reserves. My body and mind tell me. If they’re up to it, I’ll know. If not, the sheer idea of due diligence at that point will make me want to puke. Such is the power of mind and body to convey a message. No energy means improper due diligence. Not happening. No investment.

Yes for energy? Body is alive. Mind is alert. Moving to next step.

Due diligence. Digging deep buddy. I’m going to get under their skin. I’ll pick out their lie. I’m going places they won’t imagine I could get to. The internet is my oyster. We’ve never had it so good wrt information flow and disclosure. I start digging, and get so engrossed, that I forget about time.

Due diligence scrutiny check block oblique spoiler alert oblique deal-breaker? Could be an uncovered lie. Recently I discovered 100% pledging in a company, with everything else ok. Could be any dirt or its tracks. No investment.

Due diligence cleared. Go back to funds – maybe. Bring out mental weighing scale. Is the investment so worth it that I’ll wangle fund demand?

No? No investment.

Yes? Next step.

Think clearly. Very hard earned funds are about to go away for a while. What does the sum total of my everything tell me?

No? For whatever reason. I don’t question my sum total. No investment.

Yes?

Investment.

Happy investing! 🙂

Making it Count

You’re playing a big one.

What’s foremost?

Make it count. For heaven’s sake.

Why?

Big plays don’t come too often. When they do, you have to catch them. You need to have energy left, to play. Then you just go all the way. Till the play plays itself out.

Life is an accumulation of knicks and knacks.

At first, you don’t know what you’re good for.

When you do know it, you start out as a net-net loser in whatever you’re good for, because every rookie needs to pay tuition fees. These are the costs of your mistakes.

Then you start getting the hang of something you’re naturally good at. Tricks of the trade – you learn them. You succeed in making your activity applicable, perhaps even financially viable.

Next step is to scale up.

You need to make your successful model count. Period.

Tired? Want to do other things? Need to borrow? Too big a pain? Time-issues? Overdose? Bureaucracy?

Whatever.

Don’t lessen the flow. Hold on. Ask the Universe for reserves. See the play through.

One life can mean just a few big plays.

When you’ve latched onto one, and have set it up so beautifully, now’s the time make it count.

Best of luck!

🙂

A Secret Ingredient for Equity-People

Racking your brain about how to make Equity work?

Don’t.

Two words work here. 

Be passive. 

Learn to sit. 

Let’s say you’ve gotten all your basics right.

Company is great. Management is sound. Multiple is low. Debt is nil. Model looks promising. Yield is note-worthy. Technicals allow entry, blah blah blah…

Then what?

Yeah, be still. Learn to sit. 

What are the prequisites for sitting?

You need to not need the stash you’ve put in, at least for a long while. 

You also need to get your investment out of your primary focus. 

For that, your day needs to be full…of other main-frame activities. 

Make Equity a bonus for yourself, not a main-course. That’s how it’ll work for you. That’s the secret ingredient. 

How to… … is stated above.

Why to? Aha.

For it to work, fine, but why the sleeping partner approach?

Human capital needs time to show results. 

That’s why you’re in Equity, right, for human capital? The rest is ordinary stuff, but human capital is irreplaceable. Human capital works around inflation. One doesn’t need to say anything more. 

You’ve got your work all cut out.

Get going, what are you waiting for? 

So… Where do Options Fit in?

I’m on the move.

I play the markets.

How do I combine these two facts?

Life didn’t give me a desk job.

It did give me an appetite for risk, though.

Another two facts to be combined…

I like doing new stuff.

I don’t like following old norms.

You got it, another two facts…

I like breathing easy.

I want to participate, though.

I don’t mind losing… small…

… as long as I can win big too…

… without risking too much…

… facts, facts, facts.

What’s the one common denominator?

Options.

What do options mean to me?

– an auto-stop that doesn’t need to be fed in daily.

– low risk market participation.

– freedom to be on the move.

– freedom to not look at the markets for many days in a row.

– implementation of new poker-like strategies with huge reward : risk ratios…

– … for which the price is time-component corrosion of the option premium.

– peace of mind.

– the satisfaction that markets don’t rule my day.

– a very challenging arena that pushes my faculties to the maximum.

– an avenue that teaches me about singular stocks, their nuances, how they move, basically their nervous system… this is invaluable knowledge, which no university is capable of teaching.

I could go on.

Explore your options.

Discover Options.

Happy Third Birthday, Magic Bull!

Hey,

We turn three.

You know it, and I know it…

… that this year’s been a slow going.

Sometimes, life is slow.

Such junctures are great times to recuperate and consolidate.

Inaction is big in the markets.

Very few know how to be inactive – and stay sane.

Those who do – well – they make big bucks when it’s time for action.

That’s only if they haven’t gotten rusty and lazy by then.

Yeah, inaction is an art.

In the markets, it is at least equal in importance to – action.

So, for the most part of the year that’s gone by, my market activity’s been practically zilch.

It’s not that I’ve been sitting and twiddling my thumbs. No! For heaven’s sake! Of course I’ve been doing other stuff.

Inaction in the markets must be coupled with action elsewhere, if one plans to stay sane, that is.

Also, inaction in the markets leads to preservation of capital. That, what you made during active times, remains safe, pickled and intact.

Then, when there’s opportunity, you’ve got your whole arsenal to cash in with.

While changing gears, don’t jump out of your seat with your saliva drooling, though.

Have some rules in place for opportunistic action.

I have some basic rules for myself at such junctures. I don’t put more than 10% of my networth on the line, while pursuing an idea. This rule applies for me while changing gears too, more than ever. Also, I don’t pursue more than two ideas at any given point of time. Most of the time, I’m not pursuing any idea, till an idea appears, refuses to break down, and just sticks.

Safe.

Simple.

Comfortable.

Ideal circumstances…

… to hit the sweet-spot…

… when it’s time for action.

Wishing you happiness, safety and profits in whatever market activity you pursue,

Yours sincerely, and just there for you, period,

Magic Bull.

Taking the Pan out of Panic

Panic – Pan = ic = i see = I SEE.

Times are unprecedented.

We’re breaking new lows of evil everyday.

Ours looks to be a hopeless nation.
Is it over for us?

Shall we pack up our bags and migrate?

Just take a deep breath. Bear with me for a moment. Try and cast your panic aside. Try and think clearly.

I’ll share with you an observation. Take any Indian. Doesn’t have to be an outperformer. Take an under-averagely performing Indian, for all I care. Weed him or her out of our pathetic system, and place him or her in a nation with good governance.

Lo and behold, our candidate will start performing. Not only that, soon, he or she will be outperforming. After a decade or so, he or she will probably have mastered the system and punctuated it with innovative short-cuts.

Get my point?

We are a resilient race. We might look fickle, frail and harmless superficially, but we can struggle, bear, survive, and finally break out. Just give us good governance.
Don’t panic. We’re not going down that easily.

What’s happening currently is a purge. Yeah, it’s a catharsis with a big C. While it continues, asset classes across the board will probably get hammered.

What does that mean for you?

Only one thing.

Stay in cash. Accumulate it. Learn to sit on cash. Sit on it as long as the purge lasts. Let its value depreciate, doesn’t matter. Park it safely with a conservative private bank. Fixed deposits would be the instruments of choice. Yeah, you don’t want to leave unattached cash lying around. Potentially, unattached cash could be susceptible to online fraud. Attach your cash, safely, and keep it before your eyes. Put some watch-dogs in place, as in sms and email alerts. Password-change attempt? You are immediately alerted. New payee added? You are immediately alerted. Watch-dogs bark.

As per my instinct, though we probably won’t go bankrupt as a nation, we might just go a long way down before the purge is over. After the purge, there will be tremendous bargains on offer, across the board, in all asset-classes. Cash will be king. Save your cash and sit on it – for that day.

Meanwhile, your wealth-manager will try to push you into panic purchases with your cash. As in, buying gold at 32k, and the USD at 65. Don’t listen. These are crazy levels. One doesn’t invest at crazy levels. These are not even normal trading levels. Yes, they are institutional trading levels. One does not invest at institutional trading levels.

It’s time to use your common-sense and maintain a cool head.

You can only do that by refusing to panic.

So, … … , When’s Judgement Day?

The “fiscal cliff” thingie has come and gone…

Gone?

People, nothing’s gone.

If something is ailing, it needs to heal, right?

What is required for healing?

Remedial medicine, and time.

Let’s say we take the medicine out of the equation.

Now, what’s left is time.

Would the ailing entity heal, given lots of time, but no medicine?

If disease is not so widespread, and can be expunged over time, then yes, there would be healing, provided all disease-instigating factors are abstained from.

Hey, what exactly are we talking about?

It is no secret that most first-world economies are ailing.

Specifically, the US economy was supposed to be injected with healing measures, which were to take effect from the 1st of Jan., ’13. Financial healing would have meant austerity and a more subdued lifestyle. None of that seems to be happening now. The healing process has been deferred to another time in the future, or so it seems.

You see, people, no one wants austerity. The consumption story must go on…

So now, since the medicine’s been taken out of the equation, is there going to be any healing?

No. Disease-instigating lifestyles are still being followed. Savings are low. Debt with the objective of consumption is still high. How can there be any healing?

Under the circumstances, there can’t.

So, what’re we building up to?

We’re all clear about the fact that consumption makes the world go round. What is the hub of the world’s consumption story? The US. That part of the world which does save, and where there is real growth, well, that part rushes to be a part of the consumption story. It produces cheaply, to sell where there’s consumption, and it sells there expensively. Yeah, like this, healthy economies get dragged into an equation with ailing economies. Soon, the entanglement is so deep, that there’s no turning back for the healthy economy. It catches part of the ailment from the diseased economy. Slowly, non-performing assets of banks in such healthy economies start to grow. The disease is spreading.

Hold on, stay with me, we’re not there yet. Yeah, what are we building up to?

Healthy economies take time to get fully diseased. Here, savings are big, domestic manufacturing is on the rise, and there a healthy demographic dividend too. Buffers galore, the immune system of a healthy economy tries to fight the contagion for the longest time. As entanglement increases, though, buffers deplete, and health staggers. Non-performing assets of banks grow to disturbing levels.

That’s what we are looking out for, when we are invested in a healthy economy which has just started to ail. Needless to say, we pulled out our funds from all ailing economies long back. Our funds are definitely not going back to economies which refuse to take medicine, i.e. which don’t want to be healed. Now, the million dollar question is …

… what’s to be done with our funds in a healthy economy which has just started to become diseased due to unavoidable contagion?

Nothing for now. Watch your investments grow. Eventually, since no one is doing enough to stop the damage and the spread, big-time ailment signs will invariably appear in the currently “healthy” economy, signs that appeared a while back in currently ailing economies. Savings will be disappearing, manufacturing will start to go down, and bad-debt will increase. Define your own threshold level, and go into cash once this is crossed. You might not need to take such a step for many years in a row. Then again, you might need to take such a step sooner than you think, because the ailing mother-consumer economy is capable of pulling everyone down with it, if and when it collapses. And it just stopped taking its medicine…

Let’s get back to your funds. In the scenario that you’ve gone into cash because you weren’t confident about the economy you were invested in, well, what then?

Option 1 is to look for an emerging economy that gains your confidence, and to invest your funds there.

Not everyone is comfortable investing abroad. What if you want to remain in your own economy, which you have now classified as diseased. There’s good news for you. Even in a diseased economy, there are pockets of health. You need to become a part of such pockets, just after a bust. So, remain in cash after a high and till after a bust. Then, when there’s blood on the streets, put your money into companies with zero-debt, a healthy dividend-payout record and a sound, diligent and honest management. Yeah, at a time like that, Equity is an instrument of choice that, over time, will pull your funds out of the gloom and doom.

You’ve put your funds with honest and diligent human capital. The human capital element alone will fight the circumstances, and will rise above them. Then, you’ve entered at throwaway prices, when there was blood on the streets. Congrats, you’ve just set yourself up for huge profit-multiples in the future. And, the companies you’ve put your money with, well, every now and then, they shower a dividend upon you. This is your option 2. Just to share with you, this is my option of choice. I like being near my funds. This way, I can observe them more closely, and manage them properly. I suffer from a case of out of sight, out of mind, as far as funds are concerned. Besides, when funds are overseas, time-differences turn one’s life upside down. This is just a personal choice. You need to take your own decision.

At times like this, bonds are not an option, because many companies can cease to exist in the mayhem, taking your investment principal out with them.

Bullion will give a return as long as there is uncertainty and chaos. Let there be prolonged stability, and you’ll see bullion tanking. Yeah, bullion could be option 3 at such a time. You’ll need to pull out when you see signs of prolonged stability approaching, though.

One can use a bust to pick up cheap real-estate in prime localities. Option 4.

You see, you’ve got options as long as you’re sitting on cash. Thus, first, learn to sit on cash.

Before that, learn to come into cash when you see widespread signs of disease.

Best part is, widespread disease will be accompanied by a big boom before the bust, so you’ll have time to go into cash, and will be ready to pick up quality bargains.

You don’t really care when judgement day is, because your investment strategy has already prepared you for it. You know what to do, and are not afraid. If and when it does come, you are going to take full advantage of it.

Bring it on.

Your Personal War in Cyberia

Are you illiterate?

Literacy is not just alphabetical.

The meaning of literacy has expanded itself into your cyber world and also into your financials.

I mean, can you call yourself literate without knowing computer and financial basics?

I don’t think so. Not anymore. Times have changed, and so must you, in case you want to be called literate.

One of the first things one learns during one’s quest for financial literacy is the operation of one’s netbanking.

Once you are logged in, you soon realize, that your assets are under attack, and must be appropriately secured.

Login password, secure login, phishing filter, security questions, transaction password…you are learning fast. Your vocabulary is changing. Your defences are up. Yes, you are at war.

What kind of a war is this?

More of a cold war, till it gets hot for you, which can happen, but is not a must.

Worst-case scenario is that someone cleans you out. As in, a cyber thief steals all your money that was reflecting in your netbanking.

Your common-sense should tell you that your netbanking password is the all-important entity. Tell it to no one. Store it in a password safe. Keep changing it regularly. Don’t forget to update it in your safe. The safe of course opens with its own password, and is in sync between your mobile and your desktop. On both your mobile and your desktop, internet security prevails. Meaning, don’t use an el cheapo antivirus. Use a good one. Pay for it.

If there is a large amount reflecting in your account for a number of days without being used, secure it. Even if someone hacks in, available amounts should be as minimal as possible. Let the hacker first deal with unsecuring a secured amount. This gives you a time-window, during which you read and respond to any sms sent by your bank, that a secured amount has now been unsecured. The shot has been fired, your watchman has alerted you, and you now need to respond.

For the amount to be actually transferred out of your account, one more thing needs to happen. The hacker needs to set up a new payee under third party funds transfer. Some banks take three days for this, during which they coordinate with you whether or not you really want this payee to be set up. Other banks have a one-time password (OTP) system, where a transfer can only be activated by an OTP sent by sms to the registered mobile number linked to the account. Works.

Nevertheless, hackers seem to be getting around these systems, because one hears and reads about such cyber thefts all the time. However, the window created by your systems in place gives you crucial time to respond.

What is your first response, after becoming aware that you are under cyber attack?

Relationship manager (RM) –  call him or her. After you’ve alerted your RM, login if you can, and secure any unsecured amount. Change your login and transaction passwords, along with security images, words, questions and answers. Delete all payees. Logout. Close all windows on your desktop. Clear all history, cache, temporary files, cookies and what have you. Run a virus cum spyware scan. Clean any viruses, then shut your computer.

How does one go about securing unsecured amounts?

Make a 7 day fixed deposit with your unsecured amount. Or, configure your mutual fund operations through your Netbanking itself, and transfer the unsecured amount to a trusted liquid scheme offering 18-20 hour liquidity, all through your netbanking. Pretty straight-forward.

After you’re done, join your RM in finding the loophole. If you’ve incurred a loss, file a police report along with an application for reimbursal, citing all security measures you undertake as a given while also outlining the chronology of your actions after you realized that you were under attack.

That’s about it, I can’t think of anything else that you could do. If you can, please comment.

Right then, all the best!

The Frog That Lived in the Well

Once upon a time, there was a frog.

It lived in a well.

Its cousin, however, lived in the ocean, and this particular cousin came to visit.

Cousin froggy was stunned. How could one thrive in such a small space? Our original froggy, however, did not believe that one’s world could get any better. It loved the well, and only after much coaxing did it agree to see what the ocean was like.

Upon seeing the magnitude of an ocean, our original froggy’s head exploded. This story’s from Paramhans Yogananda. 

I’m sure you’ve heard this story from someone. Something similar probably happened to you too, of course on a much smaller scale of magnitude, with no head explosions and all that.

I used to walk around pretty smugly with my Blackberry, thinking that I was like there, connected. Experienced kind of a head explosion upon moving to an Android smartphone.

What is it about us humans?

Why are we so limiting?

Why do we create barriers around our life-experience, around our possibilities?

Market conditions keep changing. Just as we get tied up into a rut and define a market as range-bound and going nowhere, it breaks out. Are you able to cope?

Be honest.

Can you adapt to such changes in conditions?

Are you quick on your feet? Or are you lethargic, and full of inertia?

What’s that song by The Black Eyed Peas?

“don’t…don’t…don’t … … don’t-stop-the-party!”

I know you’ve been humming this song during your continuing debt market party, but there is more to the scene than just the debt market. The debt market is not where things start and end in the world of investing. There’s more.

The world of investing is like an ocean.

The next buzzing market will make itself known. It’s only a matter of time. Be ready for it. Don’t remain clogged up within the claustrophobic walls of one market only, out of sheer laziness and a false sense of security.

Get out there.

Experience the ocean, without your head needing to explode.

So, When Does One Attack Here?

Ammunition.

Your game revolves around it.

We’re not talking war over here.

Or are we?

The marketplace is a war-zone, come to think of it.

Question is, how do you use you ammo?

Do you fire the bulk right away?

Who are you trying to scare?

This is the marketplace, people, overall, it’s not scared of your few rounds. There are just too many players, with varied interests and ideologies. Your few rounds might cause a mini-spike in the underlying concerned, but that’s about it. That mini-spike is not going to make it to tomorrow’s paper.

So, why bother? You don’t need to attack here. Straight away, that is. You can attack when the time is ripe, and when you are ripe too.

What does being ripe for an attack mean?

It means that your defences are fully in place and on auto-pilot. Your basic income is taken care of and suffices your family’s needs. Actually, let’s go a little further and say that your family is able to live comfortably on income generated by you which is independent from any of your speculative / risky activities. This is the first step. You need to work yourself into such a position, even if it takes you a long time. Without knowing that your family is safe, no matter how you fare in the marketplace, you will not be able to trade freely.

Then comes the second step in setting up your best defence. You need to have access to an emergency fund. Meaning, this kind of a fund needs to be salted away first. It then needs to be made accessible when required, and otherwise, it is to remain unused. Don’t let your emergency fund’s miniscule return bother you. In lieu of that, you are getting safety. Your emergency fund needs to remain safe, sound, and there, when you need it. This way, if and when something happens, and funds are required, a). you won’t have to tap into your family’s basic income, and b). you won’t have to tap into your trading corpus. You’ll access your emergency fund. Your family will remain financially undisturbed, and so will your trading, despite the emergency.

Now comes the final step, before you can get on with your trading, yes, even aggressively. In this step, the focus is on you. While setting up your family’s basic income and your emergency fund, you have struggled. Your health could have taken a knock. Your mind could be in a whirl. Normalize, my friend. Take time off. Stare at the wall. Get your body-chemistry back to equilibrium. Take a vacation. Take many vacations. Finally, when you are in shape, go for it.

Ok, so you’re in shape, and ripe for attack.

Now, the time needs to be ripe for attack too.

Mrs. Market has three basic modes of movement. She trends, moves in a range and then, she just plain goes nowhere, i.e. she’s flat.

Your aggression needs to be implemented only when she’s trending. Period.

That’s when it’ll yield mind-blowing returns.

Fire away when she’s flat or moving in a range, and you’ll keep getting stopped out.

How can you tell when she’s trending?

Through technical analysis.

So, study. Learn to differentiate between her three basic modes of movement.

Then, when she trends, and only then, use your ammo aggressively.

Deductions – Aren’t They Making You Sick?

The human being likes it easy.

Well, most do.

That’s why, many of us like to give out our hard-earned savings to be managed by a third party.

We like to believe that our full energies are required for our mainstream profession. We don’t want to get into the nitty-gritty of managing our savings.

In fact, we want to know as little as possible about the way our savings are being managed by the third party.

The third party starts from where we left off, and takes it to the Goldman level. Believe me, today, a Goldman attitude is the norm. Wealth manangers are looking to make the maximum out of you. They talk more about ways to squeeze fees out of you than about ways to make your corpus grow.

Chew this, digest it, and when you’re ready, please say the magic words.

All right, all right, I’ll spell it out for you. The magic words are “Enough! Enough! I’ve had enough of fee deductions! I’m ready to manage my savings on my own!”

See, that was simple. Say it, and then do it.

Deductions are a pain. Many strike behind your back. You feel you didn’t know about them. Well, it was all in the fine-print. Did you bother to read the fine-print?

Who reads fine-prints? Wealth managers know the answer to this question. That’s why, all the nasty stuff is put in fine-print. The sugary stuff is saved for the pitch. When an investment is pitched to you, it sounds so sweet, that you feel like jumping into it. Careful. The people, who have prepared the pitch campaign, have spent many days deliberating over it. The person pitching the investment to you has spent long hours practising the pitch. No jumping please. Tell the pitcher to buzz off, and that you’ll call him or her back if and when you’re ready for the investment. Meanwhile, read the fine-print.

This is when the pitcher takes out his last and most deadly weapon. “But Sir, deadline is till tomorrow noon,” is the sound of this time-weapon. Earlier failings have prepared you for this. You have learnt to ignore the time-bomb. You are going to take your own sweet time to decide. It’s your hard-earned money, and the least it deserves is thorough due diligence on your part.

Meanwhile, you’re reading the fine-print. You’re realizing that the game is stacked against you. There’s a monthly mortality / cover deduction in the insurance policy being pitched to you. Then there are administration charges to cover day to day expenses. Don’t forget fund management charges. Now, there’s probably even some adjustment for short-term capital gains tax. Also, there are upfront deductions on the first few premiums, pretty sizable ones. There’s a 3 to 5 year lock-in. Switching charges. Hey, where was all this in the pitch? And remember when they spoke about how you could take a loan against your policy. Did you hear anything about the huge loan disbursement fee, or whether or not service-tax and education cess charges would be passed on to you? And may heaven help you find solace if you surrender your policy prematurely. Premature surrender charges were conceived by the descendants of Shylock himself. Such surrender charges carve out chunks of flesh from your investment’s corpus.

For the company pitching the investment to you, accountability has been made very easy. All they have to do is to deduct all background charges from the daily NAV, and then publish the NAV after these deductions. You will be sent an yearly statement (if you don’t ask for a statement sooner), where stuff like mortality and cover charges will be shown in small-print. Take all this into account while calculating your returns on the investment, before wondering where a chunk of your profits went.

That’s a common scenario in unit-linked insurance policies. The market goes up so much, but your ULIP only yields you this much. Where did the rest go? To answer this question partly, look at the deductions.

The classic counter-argument (made by fund-managers) to above discrepancy is this. The market went up so much, fine, but the scrips in the mutual funds, to which the policy was linked, didn’t move up so much.

Maybe, maybe not. To find out, you’ll have to dig even deeper. Most of us don’t want so much hassle, and we resign ourselves to the dictates of the investment’s deduction policies.

Meanwhile, here’s an alternative. Learn. Study. One hour a day. Your savings deserve this from you. Every learning resource is available online, and most of what is available is free of cost. Make use of this unique opportunity. In a few years you’ll be savvy enough to manage your own funds. Thus, you’ll save yourself from the scourge of deductions.

Connect to market forces by playing with your own money, yourself. Learning solidifies in your system when you put your own money on the line. Play small for many years. Make all your mistakes in these years. Get mistakes out of the way. Learn from them. Don’t repeat them.

Soon, you’ll realize that you are ready to scale it up. Your system will sense that you have now gone beyond making big blunders, and will send you the appropriate signals telling you to scale up.

Welcome to the world of applied finance. May yours be a long and lucrative tenure.