Rohit Chauhan
@rohitchauhan
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Investment manager | Writing on investing since 2005 All talks: https://t.co/iX8EGTZVlm
Joined July 2008
Everyone is a buy and hold investor …. till their stock drops 50%.
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Thank god, my parents did not do a DCF on me like a lot of investors do in their analysis. Negative free cash flow during investment phase (school & college) & conclude my NPV was -ve :). Good thing there is no way to short your kids. U are forced to be long & hope for the best.
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If you are still studying businesses & enjoying the process of investing, after two years of bear market, then you will do well in the future. Not because you are smarter, but because you love the process and are persistent. This has been my learning from all prior bear markets.
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1/4 Rupee is now at 81.5 to the dollars, Pound at parity and Euro below parity. Unprecedented?. No, to only those who have not read history. Read the Asian currency crisis of 97, or Latin America debt crisis of the 70s and 80s.
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In 2008 crash, one could have taken a vacation to get your mind off the market. Now even that is dangerous.
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Investing has become tougher over the last 10 year, not because of market efficiency, but more due to the media noise which distracts us from doing the sensible thing for the long run. Investing has become a T20 than a test match.
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Stock picking is sexy and over-rated. Portfolio management is boring and under-rated. Stock picking is great for party talk and shows up in the short turn . Portfolio management let’s you sleep well at night and shows up in the long run.
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I have been investing for 25+ years and have a lot of experience. There is no single year, where i don't do something dumb. A good year is when the number of dumb decisions are less.
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It's a privileged life, if one of the main worries in life is how to beat the market. Less than 0.1% of humanity has this worry. It is the highest of high class problem.
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The stock market is a regret machine. No matter what you do, there is always regret. In the long run, one just learns to live with it.
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My article in outlook business: The value of overvalued stocks.
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As you grow older, you realize u are not as smart as u think u are, others are in the same boat and we should not take ourselves too seriously. Freed of this constraint an open mind & learning begins. I wish i had realized this sooner . but better late than never :).
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The unfortunate reality of markets is that the last one to panic, loses the most. So if you must panic, do it early or else don’t.
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Every investor should learn to play poker. I have realized it 20 years late. Better late than never.
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I was fully free cash flow negative for my parents till my post graduation. I am glad my parents did not listen to the analysts.
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Any dart throwing monkey would have made money in the last one year . As always, the younger monkeys think it’s their brilliance in throwing darts. The older monkeys are thanking their luck.
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What would i tell my younger self 20 yrs back ? invest 100% of savings in equities for the long run. don't try to time the market. duration of investing beats CAGR anytime. Plan to impart this learning to my kids in the future when they start working.
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Power of compounding: The daily change in my portfolio now is 2X my total portfolio in 2000. This is not a unique experience.
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Everytime i look at PSU bank results, my heart sinks. Even though i don't have a single penny in it, i am still paying for it through my taxes with no end in sight.
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25x is a good threshold for financial independence, where x is annual expenses. Focus on fulfillment and not money beyond that. If you still chase money, then it’s not the money u are after.
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Cannot remember a single year since 1998 when i started investing when there was no worry or macro risk or impending doom. However a focus on buying good business at decent prices has worked through this period. I would have been poorer if i listened to all the chicken littles.
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When you start as an investor, you feel dumb and ignorant. After a few years, you feel confident, sure and smart. After spending another decade of learning, you feel uncertain and ignorant again when u realize how much you don't know.
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You are not in a serious bear market till the majority thinks its a stupid idea to invest in equities.
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Everybody wants to go to heaven, but nobody wants to die. Everybody wants high returns, but nobody wants the volatility.
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Got profiled on the latest issue of wealth insight magazine. Pleasantly surprised
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Investing is such a solitary activity where you are fighting your own bias and lack of knowledge, that it is amazing to see people argue and fight with others about the merit of their investment ideas. Other than preserving your ego, what good can defending your ideas do ?.
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Financial plan for my kids: Teach them the value of saving from an early age. Get them to invest in equities (Index funds) on a regular basis from the start. This will take care of 99% of their financial needs. Stock picking and market timing not needed.
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At the current rate, all investors are going to look like geniuses this year.
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The worst thing to say after some one is hurting from a financial loss is to say 'i told you so'. I strongly believe in karma - if you derive pleasure from the misery of others, it will come back to you.
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After 10 years, Small cap index CAGR = 0%. conclusion 1: investing in equities is a waste of time, especially small cap.conclusion 2 : Future returns from small caps likely to be decent.Which conclusion to choose is a matter of individual choice.
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Active investing is a tough way to make a living. It only looks easy during the bull markets. Other career options are far more forgiving and pay off sooner. Returns from active investing are back ended and come after a lot of blood, sweat and tears.
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The no.1 asset class in the world with low risk, high returns and immune to inflation is you. Continuously invest in yourself via skills, knowledge and long term relationships. The cost of these investments also keep falling due to improving tech leading to high IRR.
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If you have done your homework, then all you need now is courage and cash. Ignoring the noise is always a pre-requisite in the stock market.
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I have an unfair advantage over 99% of other investors. It is not due to intelligence or luck. I don't find investing as work (its fun for me) and i am ready to do it even when i am losing money. The magic of compounding amplifies this advantage over time.
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The biggest margin of safety for investors is NOT in the companies they invest, but in their own circumstances. Low to zero debt.Multiple or robust sources of income.Sensible return expectations. And finally good health. There is no compounding if you are not around.
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Every year my appreciation of the qualitative aspects of investing goes up and along with it the realization of the futility of doing DCF calculations. If you get the qualitative aspects and the key drivers of a business right, DCF is not even needed.
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One of the biggest advantage of financial independence is the ability to follow your heart and express your creativity with no financial compulsions. It could mean painting, drawing or writing a blog for 15 years even if there is only a small audience for it 🙂.
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2017 - bullish investors.2018 - bearish investors.2019 - philosophical investors.
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If you ask someone if they can become a cricketer or a musician in a week, they will look at your as if you are crazy. Somehow investing as a skill is assumed to be different. No effort or skill needed. Being able to buy and sell is the same as picking up a bat.
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A bear market is a true test of whether you really understand a company you hold. A lot of investors look at rising prices, assume they have made the right decision and think they deeply understand a company they hold. A rising price does not expand your circle of competence.
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I have consistently underestimated the effect of competition when growth and ROE are high. Very few companies have the moat to defend it over the long term. Investors make the mistake of extrapolating a lucky break for the company to a permanent advantage.
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I find it perplexing that some investors view negative free cash flow as a red flag. I wrote a post on it recently and addressed the topic in a recent note to my subscribers.
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After 14 Years and 600+ posts, I have finally moved my blog to my own site. Feels good to have full control of my content. Hope you will like it.
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Portfolio up 30%, Mom doesn't care. Gold up 15%, she is very happy 😂. Moral of the story: When you make some money, buy gold for wife and mom. They will be happy at all times!.
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I bought this stock on a whim. Its up 50%+ . If i didn't tell you that its 0.1% of my portfolio, you would think i am genius. What matters is your batting average and not whether u hit an occasional six
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There are times when it takes effort NOT to make money. 2017 was one such year. The reverse will be true at other times. Never under-estimate the role of luck in good and bad fortune to remain level headed at all times.
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I used to think 30 times earnings was rich and now 50%+ companies sell for more than this. To support this, you will hear things like, . - India is a growing country with young population and each company will continue to grow for next 20 years.- Indian companies have higher ROC.
15 PE was normal for a long time. Then 30 PE became the norm. 50 PE soon became acceptable. Now 100 PE is cheap, if it is the right story. To infinity and beyond !!.
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Read a good book three times rather than three average books once. What you learn, retain and apply matters more than how much you read.
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Defense funds and power funds being launched. Nothing new here. Been there, done that. 1999-2000: Invested in IT/ Internet funds and lost 70% of my capital in these 'theme' funds. In the market, there is nothing new. It's just old lessons learnt by a new generation of investors
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RBI governor resigns, Ruling party loses much anticipated elections.Media : expect markets to drop. Actual : markets are up.Lesson: For the nth time, ignore the chatter and focus on companies and their business. Over the long term, the noise cancels itself out.
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Running a business in India is stressful & all consuming. Very few businesses can earn 20%+ ROC over long periods despite all the blood, sweat and tears of the entrepreneur. Why should making 20%+ CAGR in the equity market be easy from the comfort of your home and lesser risk ?.
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Finding quality stocks is easy, buying it at the right price is difficult. There are enough examples where the company did well, but investors still lost money by paying too much. If it was easy, everyone would be rich.
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Often the most promising stock in your portfolio does not deliver, and the one with low expectations does much better. It only shows the limits of our knowledge and accuracy of our beliefs.
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If the market can be irrational on the way up, why can't it be irrational on the way down? Markets don't care for our preferences.
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My new post : Good company, bad stock.A high quality, good company is not always a good investment. Quality is a means, not an end in investing.
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We have posted our advisory letters on the blog. Why now ? After 8 years of operating the advisory, i think we now have a long enough track record to share.
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Started investing in '95, thought will get easier by '05. In '05, thought it will get easy by '15. 2015, finally realized it never gets easy.
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My annual letter to subscribers - 3000 words, mostly on risk & thinking long term.
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Individual investors have a superpower which professional investors don't. Ability to change their mind without having to worry about the optics or pissing off their customers. Unfortunately they don't use it often enough.
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Saving and investing consistently from an earlier age in life is under-rated. Multi-baggers, beating the market and full time investing is over-rated.
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Dad was a chemical engineer and added value to the society. Son became an engineer and then spent his life buying and selling stocks. Child is pursuing biotech and will again add value to the society . Life comes a full circle !! 😀.
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My personal investment journey during a slow and grinding bear market (2000-2003). Lesson : not easy to stay the course after six years of no returns.
A sudden crash and quick recovery is just a disguised opportunity to make money. The real painful market is the slow grinding bear market where you die everyday with a thousand cuts and your hope of a recovery slowly drains away. 2000-2003 is an instructive period for that.
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Value investing is intellectually easy, but emotionally tough. It is easy to find the unloved, low priced stocks or avoid the over priced ones. The tough part is to look like fool 80% of the time by avoiding exactly what is popular.
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Wrappping your ego around the stock market is a dangerous game. The highs are great, but the crashes are brutual. The damage to confidence is worse than the financial loss and takes much longer to heal. It is healthy to keep your identity and self worth independent of the markets.
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Recessions clear out businesses with weak business models, fragile capital structure and incompetent managements. The same applies to investors. It will clear out those with a weak process, too much debt and lack of emotional resilience.
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I have friends who have known me for 15+ years, know my investment approach and track record. We meet regularly and they have never taken even a hint of suggestion from me on investing. And then there are strangers who came to my blog 15 years back and never met me personally.
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How to fall in love (with a stock).1/4 The best way to fall in love with a stock is to buy some of it. After that, most negatives will become invisible. To strengthen the love, recommend it your friends and talk about it on twitter.
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In compounding, duration is more robust than rate. Risk rises non linearly with rates of return. Risks involved in making 30% cagr is much more than 2x than making 15% cagr. To end with a higher number, focus more on duration of compounding than rate of compounding.
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Once you become rich, all your thoughts about money are considered profound.
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There are very few wise investors out there @VijayKedia1 is one of them. This interview of his reminds me of a quote - if it is in the numbers, it's in the price.
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Look at the results and not the stock price, of your portfolio companies to check if you are doing well. If the company is performing, stock price will follow, always, even if one cannot pin point the precise time.
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The best time to quit your day job to become a full time investor is in the middle of a bear market, after you have suffered losses. If your confidence is intact and you are mentally & financially ready, then the only way is up. In a bull market, you may be compounding your.
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The worst time to invest in a stock is when it becomes religion. Say anything negative about it and the pitch forks come out and you get roasted for it.
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The most unexpected benefit of writing my blog over the years is that it has helped me think more clearly. I think I have benefited equally if not more. When u write, you realize your own gaps in understanding which leads to learning.
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You have to admire Public sector banks for their consistency - ability to consistently grow their npa's every quarter . They are the financial equivalent of a black hole - A financial singularity into which once money is sucked in, it can never come out.
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A new regulation from rbi - if you report an npa below 10%, you lose your status as a psu bank. Only 10% npa and above qualify for this special tag. 20%+ npa means u are a special Ratna bank and can give out cash for free at the branches.
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I write to subscribers twice a year about portfolio performance. Also use it to share & re-affirm our investing philosophy which drives all our decisions. I have covered other topics such as risk, cash, diversification etc which I hope you will find useful.
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Its a mistake not to learn about the new business models listing in the public markets.Zomato.Nykaa.Nazara.& more. No dearth of information & lots of comparable companies globally. Key is to understand the business models deeply and not fixate on finding an investable idea.
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Just because you call yourself a value investor, does not mean one should not learn about technical analysis, momentum and quantitative techniques. The same holds true about learning about businesses listed in the US and other markets. One of my key learning of 2019.
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When you find a company growing rapidly and earning a high return on capital, the first question to ask is - what prevents competition from entering into this space? if you cannot answer this, then its likely the performance is temporary and will fade away.
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Save 20% of salary & invest 80% of savings in index funds from age of 21. Takes care of 90% of financial planning. Health + Term life insurance is another 5%. The rest is just noise. Took me only 25 years to figure it out 😀.
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My personal investment journey till 2008. Next 11 years needs a separate post now. Will write one in future.
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My Masterclass session with SOIC (@soicfinance) members . Covered these topics with case studies . How it started & mistakes .Inflection Point.Saved by caution (2008).Buy Quality,but avoid overpaying (2016) .Stock selection process.20 years of learning.
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Whenever i have tried something new in investing, i have always, without fail, lost money initially. It was painful and discouraging earlier, but now i consider it as a tuition fee. To avoid meaningful loss, i also start small.
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Risk management appears dumb like a helmet most of the time, till you face a crash.
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1/2 Best way to reduce stress in investing ? Make peace with the fact that you are average and not smarter than others. This will lead to the following.1. You will not look at portfolio returns to validate your ego. 2. You will accept the inevitability of making mistakes.
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There is no free lunch in the markets. Value stocks can be value traps. Momentum stock can have sudden momentum crash. Quality stocks can be overvalued and lead to opportunity cost. There is no simple formulae to beat the market. Anyone claiming so is misleading everyone.
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Buy and hold is a context dependent approach which works best with companies in steady growth industries with high barriers to entry and low rate of change. Applying blindly to other contexts is a recipe for disaster.
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The best time to buy is when everyone is running for the exits, there is blood on the streets including yours and every nerve in your brains is screaming at you to sell - provided you have done the work beforehand to have a rational view.
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Inflation a key variable in investing has been out of syllabus for a lot of investors. A big tuition fee could be on the horizon.
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For some reason investors with labels -HNI, FII, DII etc are considered smarter than the small guy. Being able to invest larger sums does not make you smarter, only your absolute losses and gains are bigger. This is not smart money, its only big money which is often equally dumb.
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Its humbling to see an idea where you spend 30 min analyzing it, work out whereas another with 30 days of effort fail. It boils down to getting the key driver of performance right. Extra effort often leads to extra confidence with no increase in success rate.
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I feel much younger & nostalgic these days. Its feel like 2001-2003. A slow, painful and grinding bear market.
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20+ years of investing in private and 8+ years of investing for others and i realize that we criticize ourselves far more than others do. I try to be less harsh on myself, but its not easy. Removing ego from investing is a good start - simple but not easy.
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