Experienced Levels Coming Soon

Next Version of Stock Market Gamification App is Coming Soon.

It will complete the Experienced Level and mainly Covers :

  • How to do a basic evaluation of a Business
  • Institutional Money Managers and challenges they face
  • What it is to be an Individual Investor
  • Basic Investment Guidelines for Individual Investor
  • Efficient Market Theory (EMT)
    • Opinion about EMT in Academia & Real World
    • Fallacy of EMT
    • EMT to Behavioral Economics
  • Value Investing
    • Introduction to Value Investing
    • Concept of Mr. Market
    • Basic Tenets of Value Investing
    • Attributes of a Value Investor
    • How Value Investing behaves in
      • A Bull Market
      • A Bear Market
  • Concept of Moat
    • Things that constitutes Moat
    • Role of Moat in evaluating a Business
    • Dangers to the Moat
  • Health Check of a business through important numbers
  • Concepts of “Intrinsic Value” & “Margin of Safety”
  • Importance of the Management for a Business.

Overall this level will take you from Knowledge to Basic Strategy.

Advertisements

Mistakes : The learning opportunities

One thing that is very essential to have success in any endeavor is Mistakes.

There is a saying that:

“The Person Who Never Makes a Mistake Will Never Make Anything”

Mistakes presents the best learning opportunities and they provide the essential feedback mechanism to improve any system or strategy.

When mistakes are incorporated in any strategy as a feedback mechanism they minimizes the chances of the same mistakes again.

The key is, to never hesitate to do anything because of the fear of mistakes and the rule is to never repeat the same mistake.

If we fail faster, we’ll succeed sooner.

–Tom Peters

All the Masters in their respective fields do make mistakes and in fact they make BIG and a diverse range of mistakes and they keep learning from those mistakes that helps them to be the master of their trade.

Mistakes are inevitable, be it the legendary athlete like Michael Jordan

“I’ve failed over and over and over again in my life and that is why I succeed.”

Michael Jordan

Or,

from the realm of investing “The Oracle of Omaha” the great Warren Buffet himself.

Buffet invested in early 1990′s in a shoe company called Dexter Shoes after analyzing the competitive advantage (“Moat” as Buffet calls it) of the company at that time.

But, as it turns out, the company lost its competitive advantage in subsequent years and eventually proved to be a bad investment amounting to the loss of whopping $3.5 Billion.

Was it disappointing for him ?

Certainly …. Yes

Did that deter him from his core value investing approach ?

Definitely …. No

Actually, it only helped him to strengthen his approach by learning from his mistakes and to apply more diligence in subsequent endeavors.

In his own words:

“Dexter is the worst deal that I’ve made. But I’ll make more mistakes in the future – you can bet on that.”

Like all the other masters, he is never shy of making more mistakes because he knows the importance of mistakes and the invaluable learning from them in the process of success.

In order to succeed, we too need to embrace mistakes as inevitable part of life and do the necessary course correction.

Value Investing the ‘Model’

Human mind is amazing in its capability to create models and we can try to understand Value Investing through the concept of Models.

What is a Model?

A Model is defined as “A hypothetical description of a complex entity or process”.

In our context, the entity is Stock Market or the process is investing in Stocks.

Now don’t be alarmed by the term complex here. The nature of entity need not always define the nature of Model that can help us understand it.

Another important thing to note is that most of the times a Model cannot explain all the things about the entity and focus only on some aspects of it.

So we need to have a clear distinction between what a Model CAN do and more importantly what it CAN’T do.

Let’s try to understand “Value Investing” as a Model that we want to use to explain the investing in stocks.

Main thing to remember is that it’s just a Model like the numerous others.

Which brings us to another question:

Why we want to consider “Value Investing” Model instead of other Models?

The main USP of this Model is Simplicity.

Value Investing does not try to predict the timing of stock market prices. It only helps to buy at a bargain and then waits for the Market to inevitably move towards “Intrinsic Value”.

“Intrinsic Value” is nothing but the fair,optimum value for a business that is supported by some quantifiable aspects of the business.

The “Intrinsic Value.” is determined using methods that produce a fuzzy but very important benchmark.

Now, “Intrinsic Value” calculation is important…. But and that’s a BIG BUT…. The more important thing is to understand that ….It’s NOT the level of accuracy of “Intrinsic Value” that makes the core of Value Investing but the concept of having a “Value” as a benchmark. …..This distinction sometimes is very hard for people to grasp.

Simplicity is just a matter of taste. Some like it complex and some like it simple.

Though added complexity could make the model more accurate but that’s not always the case and most of the times it does not worth the efforts.

To accommodate this possibility of error in calculation another important concept in Value Investing Model is that of “Margin of Safety”….which just states that you only buy at the maximum distance possible from intrinsic value.

“Margin of Safety” is embodiment of the concept of giving up the accuracy for the sake of simplicity and at the same time maintaining the effectiveness of the Model.

A Value Investing Model just boils down to…”You just have to be good at only one thing… and that is identifying mispriced businesses.”

This involves understanding the fundamentals of the business and doing some relatively simple math related to the performance of the business.

We’ll explore more…Stay Tuned.

Nivesh Niti in Nutshell

   “Investing is simple, but not easy.”
                                   – Warren Buffett

Nivesh Niti (Nivesh Niti – Android Apps on Google Play ) is an attempt to impart the right investor mindset.

Most of the financial content on the internet is designed for short-term traders which gives the idea that it is very easy to make money in short term whereas the opposite is true.

It is difficult to predict any stock performance in short term and at the same time it is pretty easy say with greater chances of being right about the long term prospects of a company given that the company is doing something you understand and they have a earning model that you understand.

It is more likely for a company who is doing good for last 10 years to perform well in 11th as well as subsequent years and is actually relatively easy than predicting what it is going to do in next few days.

This process is an inherent part of what is famously known as “Value Investing” pioneered by Benjamin Graham and then by his disciple Warren Buffett.

Value investing is all about Paying the Right price for the company.


Core idea of Value Investing is trying to BUY something only at SALE (50% or more Discount)

Just like in SALE of any kind you need to know the MRP (Maximum Retail Price) to know it’s on how much Discount.

In Nivesh Niti every stock is assigned a value that reflect what should be its MRP (known as Optimum Price) by quantifying various aspects that matters as per Value Investing Principles.

For easier reference they are assigned with the Star Rating which is just an indication of their current level of Discount from Optimum Price.

So, the Current Price of a stock at any day place them to have one of the following levels of Discount from Optimum Price.

Level of Discount               Stars
50% or More                           5
40% to 50%                           4.5
30% to 40%                            4
20% to 30%                           3.5
10% to 20%                           2.5
0% to 10%                               2

And when,
Current Price >= Optimum Price (NOT at SALE)  i.e.  1 Star

Like in any SALE our aim is to get Maximum Value for our Paid Price.

“Price is what you pay for something, but value is what you get.”
–Warren Buffett

OUR AIM IS :
          “To Buy Great Businesses at Maximum Discount.”

A value of above Optimum Price just means that it’s NOT yet at SALE so just stay away from it till it’s on SALE (if ever).
That’s the only thing to focus and all the other things will automatically fall into place.

Currently, Nivesh Niti hides all the complexities and just present the most crucial things to impart the right investing mindset.

Nivesh Niti has a small (but growing) set of stocks selected according to Value Investing Principles and User can invest only among those.

The current takeaways from Nivesh Niti are:

  •   To stay focused on the value of the business and only look at the stock market when you want and too as its Master not as a Servant.
  • It helps user imbibe value investing principles which by nature is highly selective approach and isolate user from herd like mentality of the crowd.
  • It reinforces that investing is easy, not rigorous and painstaking.
  • It NOT necessary to have opinion about all the things in financial markets.
  • And above all Patience.

Use it according to the way it’s designed for some time and evaluate if you experience any difference in your outlook towards the investment in the Stock Market.

Finally,

It’s a Journey not a Destination…there are exciting things ahead……Stay Tuned

Disclaimer:
It’s for imparting the knowledge to help spread a right mindset to approach the investing and does not suggest any stocks and it should be used as an education tool only.

Step towards financial literacy

“To get the right answer, you have to ask the right question”

Have you ever wondered about some of the following questions?

  • What makes you comfortable giving your hard earned money to any stranger in a hope of amazing returns?
  • Who convinced you about the fact you don’t need any finance education and you cannot do it yourself?
  •  Why you are always afraid of financial jargon even though they are just simple terms garbed under the veil of sophistication?
  • Why many sensible persons and most of them successful in their respective professions are paralyzed by ‘Fear’ when it comes to finance and investing?

There might be more questions that you can ask to yourself and wonder why you have never tried to find answers to some of these basic questions.

One possible explanation could be that to be a successful investor of any kind requires actual work and since work is necessarily involved, many people will try to avoid it, since that is human nature.

One very valid reason to avoid learning is that we’ve got limited time and in that time we have several things to do like spending time with our loved ones and jobs that already take more time than we have.

So what makes it important to educate and train yourself in matters of finance and investing?

While trusting others with your money can be a viable option given that you have the ability to find and evaluate skilled people on whom you can rely.
Learning about Finance and investing is that ability that gives us power to evaluate various options and choose the one that we deemed more fruitful.

It is actually a mindset that we can employ to every aspect of our life and not just to the matters related to money.

“Investing is simple, but not easy.”
Warren Buffett

It is indeed simple but not easy and it’s not about any ‘secret’ formula but about encouraging people to understand the right mindset while it comes to investing.

As the saying goes,

“In the long run, if you want the best financial advisor in the world, you need to look in the mirror.”

So let’s begin our journey towards financial literacy.