ideas to have fun, make money

The Indian stock market ended 2016 at 8185.80, which is just 3% ahead of last year.  

The returns from stock markets are not linear. You cannot expect fixed stream of cash flows from equity; for that you have to go to bonds. Alas, returns from bonds are almost always lower than equities. And in present times, man, it is going to be just equities, if your aim is to make money. 

What amazes me is that people expect stock market returns to be always, always positive. That shows lack of knowledge about what really equities are. 

When you start a business, you are ready to wait for years to make it worthwhile for you. You are aware that some years will be good, and some will be not as good. Yet, you expect the business to be viable in the longer run. When you are a businessman, like many that I know, you are also a highly concentrated investor; that is, most of your wealth is tied to your business. It is because you know that you are making a career out of your business, and want to stay that way for a long, long time. That is great. 

But then, why do you see your stock market investments any differently? When you buy a share in the stock of, say, Nestle, why do you expect it to increase in value every day, week, month, quarter and year? Do you think the value of Nestle as a business should change significantly by the day? Just like your private business, Nestle is also in a business, which is going to be good some years, and not as good in some. This is the crux of investing. The earlier you get it, the wealthier you get in life. 

People who invest in properties do not check price quotes on a daily basis, do they? They are crazy, if they do. There aren't quotes anyway, unless a transaction takes place. Just because there are quotes for your stocks, you are tempted to check. That's crazy too.

The resolution for the coming year is about taming your wild behavior. Stock investing is as much about human emotions as it is about intelligence. If you are not dumb, and are in control of your emotions, you are more likely to be a winner in this game. 

I have four ideas to share which are just enough make someone have fun, and make money at the same time. Don't forget to enjoy life. 

Hate those guys; the crooks

Stop listening to the pundits. Oh yes, stop listening to all those self-proclaimed value investors who write blogs, make up stories, quote Buffett and Munger, and then charge you for their offerings. They quote some philosophers as well just to spice it up. Know that they cannot teach you anything about stock market investing. If they knew, they would have invested for themselves and made money. There would be no need to charge you for their products. I know some of them who also invest in mutual funds; which means they give their money to others to manage. How ironic for someone who claims having knowledge to teach people about equity investing to trust someone else to manage money? It is because they have to pay their bills, they have the need to coin stories to tempt the gullible. Don't get swayed by their morally corrupt thoughts.

Don't care market prices investing

Invest in equities on a periodic basis. The best way is to invest in a broader index in good times and bad. Buying the index each month either in fixed units or fixed currency is good. Here you are not bothered about market prices because the prices average out in your favor in the long run. 

Market prices are the key investing

Then wait for the right opportunity to invest in individual securities. If you think that Nestle is a good business, you analyze the business and come up with a value. You buy the stock only when price is much lower than value. Here you do care about market prices. Your returns are directly proportional to the price that you pay. 

Caution: You cannot play this game if you are not interested in equity analysis or simply have no time. Then you are much better off investing in the index itself. You are guaranteed to earn returns equivalent to the market returns. You would be crazy again if you consider that is not enough. Equities outplay all other investment alternatives if played long enough. 

Control

The promise you have to make is to have a check on yourself, always. Control your emotions: greed, fear and envy. You will not only be having fun in life, but also be wealthier than you ever think you will be.

Speculate in moderation

On a side note, I am also an advocate of speculation. I am aware of the kick it gives; so some more fun is alright. But it should comprise an insignificant portion of your net worth. So if you are so keen, play along.