the twenty percent return strategy

The (so-called) value investors have dug a hole for themselves when they talk about margin of safety and bash (higher) discount rate in dealing with risk in cash flows.

They like to discount cash flows at 10%, bring down the present value by 40% as margin of safety, and then expect the stock to give them 20% return.

In fact, I have seen some of them discount earnings, rather than cash flows.

They also have the habit of beating round the bush so much. Can't put across their point without some bullshitting. 

not investing

What is value investing? It means nothing, or nobody knows what it means. In fact, it is nonsense. 

If you acknowledge value investing, well... If you criticize value investing, well… Heck, if you write about value investing, well... People think that low PE/PB stocks are value investing. It’s fool’s paradise to assume that. 

Academicians come out with stories that bring down the very premise of value investing. And the self-proclaimed value investors have their stories that always uphold their virtues. The truth is that both stories have a lot to catch up. 

Because, there’s no such thing as value investing. The definition of investing was laid down by the great BG long back. It doesn’t have value or growth attributed to it. There’re 3 key components to investing: Thorough analysis, safety of principal, and expectation of adequate return. So it’s either investing, or it isn’t. 

Stocks represent businesses behind them. To be a good investor, you need to understand the business first. You need to know the difference between price and intrinsic value. 

Price changes all the time, and therefore the multiples change too. Because prices change to weird levels, and thus create a wide enough gap between price and value, there’s scope for investing. If this ain’t so, it ain’t investing: It is something else: can be speculation or trading, or anything…

Academicians have a constant itch to talk and write, and even concoct theories. They come up with stories about almost anything, and put up for display. Their job is done.  

Finance is commonsense, in that there’s not much difference between personal finance and corporate finance. Coming out with Greek letters and complex theories don’t make good financial decisions. They make good looking books. Good financial decisions make good financial decisions. 

A business is formed to make money. If it’s viable, it’ll make money. As it makes money, it grows. And it doesn’t happen over a quarter, or a year. It takes time; it’s a long process. In the meantime, people price it based on their theories. Most often, these theories are crap; therefore, investors get opportunities to invest, and make money. 

Investing is neither value investing, nor growth investing, nor momentum investing, or any other. Investing is just investing. 

CAPM is crap; and so is the margin of safety in the sense that some people view it. Cost of capital used in finance to discount cash flows is also stupid because that is supposed to be a theoretical business valuation. What investors want is make money, not theory; and for that their own opportunity cost is a better discount rate. 

Starting a new business is a waiting game. Making it expand, and grow its cash flows is a waiting game. Making business profits is a waiting game. And for the same reason, investing is a waiting game. 

Cash flows are powerful indicators. Focus on them. It is very much possible to earn excess returns (beat the index) if you know how to estimate cash flows, know your opportunity cost, and you’ve the behavioral acumen to play the waiting game. If not, no worries; invest in the index. 

Individual investors are neither answerable to the marginal investors of the business, nor to the academic finance. 

Don’t listen to self-proclaimed value investors; and don’t listen to the academicians. Most people, most of the time are better off not listening to other people’s opinions.

that fi cash

I have written about index investing many times, and I have written about how it is possible to make a reasonable amount of cash in order to claim financial independence. I have noted that making Rs.10 m in India should be relatively easy for anyone. Not many are privileged to be in that camp though. 

The purpose of this post is to assess how much cash is sufficient to sustain long term financial independence. There is the 4%-rule which says that: find out the current annual costs; multiply by 25; and that would be the cash required. This is how it is implemented: in the first year, withdraw 4% of the cash; for the second year, withdraw the first year number increased by the annual inflation rate; and so forth for the subsequent years.

Suppose that a family was able to accumulate Rs.5 m in financial assets at the beginning of 2000 and that the cash was invested in the Nifty-50 index. Assume that the family's annual costs at the time were Rs.125,000 and these will increase by annual inflation rate of 6% each year. That means for the year 2018, the annual costs will be about Rs.360,000. This is a very reasonable assumption for an ordinary family in India. Let us also assume that there will be no further investments.

As of 3 January 2000, the index was at 1592.20; and with Rs.5 m, about 3140 units could be bought; let's ignore transaction costs. On 1 January 2001, the index closed at 1254.30. The family will have to sell about 105 units for its annual costs of Rs.132,500 for the year. The remaining units on that day will be 3034, and the market value will be Rs.3.806 m. On 1 January 2018, the index was at 10435.55; annual costs are Rs.360,000; and units to be sold are about 35.

After the sale on 1 January 2018, the family will have 2016 units with a market value of Rs.21 m, a sizable number. All that the family did was: strived to make Rs.5 m as quick as possible, invested that in a diversified index, and had fun in life, doing what they liked to do. There is no pressure of working for someone else and meeting deadlines. No commuting time. Focus on things that mattered most and enjoyed that work. Leisurely meals. Lots of fun. If the person was age 40 at the time of financial independence, he or she would be worth Rs.21 m at age 58 which should be sufficient to lead a fun-filled life. I have not considered dividends that the index stocks payout. That should be yields of say, 1-2% as additional annual cash. 

The markets are not linear; and we have considered the exact moves of the market from 2000 to 2018. In fact, the index closed lower for (January) 2001, 2002, and 2003. Due to this, the market value reduced from Rs.5 m to Rs.3.043 m in January 2003. The family was not bothered by the PE; neither bear market, nor bull market. Heck, there weren't any more investments either. 

The only linear assumption was the inflation rate of 6%. We could tweak that here and there, but Rs.360,000 a year of annual costs are pretty reasonable in today's times for a typical family in a low-cost smaller town; it may be lower, but not higher. Why should this ordinary family be living in high-cost cities after financial independence when there are options for lower costs, better weather, and more leisure?

With that income, the taxes will be zero. Yes, we have ignored transactions costs; but I have made a bigger point: that it is not very difficult to be financially independent in India for anyone. For qualified professionals, it should be much easier, but even ordinary people can achieve it. The key is the behavior, not excuses. 

We have also ignored the asset allocation, investing fully in equities. But again, I wanted to make a bigger point, remember. A case could be made for the family to take up part-time work (that qualifies its criteria of fun) to meet just annual costs, and the annual realizations from equity (unit sales) are invested in bonds each year. Over the years, the family would be able to have reasonable amount in debt too. 

Even applying that 4%-rule - Rs.200,000 initial annual costs with Rs.5 m - the closing market value of investments will be Rs.14 m in January 2018. Good enough for that ordinary family. But I don't think, that typical family will have Rs.570,000 annual costs in today's times. Yet the point is made, isn't it?

If the family was able to accumulate Rs.10 m, instead of Rs.5 m, and had double the costs - Rs.250,000 in 2000 and Rs.720,000 in 2018 - the market value of investments would be Rs.42 m in January 2018. This is in fact possible for qualified professionals. Even initial year costs of Rs.420,000 which will be Rs.1.2 m in 2018, the market value would be Rs.26 m in January 2018.

portfolio set up, and strategies

I usually don't offer any advice unless asked for. I am careful about the fact that much free advice is just that, and pretty useless. Sometimes I use the word you in my posts, but generally, it denotes more of I or we than you. Much of this blogpost is a collection of my thought process, and how I like to conduct myself rather than telling others about what to do. If I have not succeeded in conveying that it is probably a shortcoming, which I hope to correct in the coming times. In short, I really don't care what others do, just as I know that others don't care what I do. It is like as someone said: don't tell your problems to others because the half don't care and the rest are happy that you have them. Such is the world. It is better to be the master of your fate and captain of your soul, yourself. Be the Invictus.

Here's how I set up my investment portfolio. Needless to say it again, yet, I don't care what others do for themselves. I have a three-layered structure. 

The first one consists of high quality stocks bought at reasonable prices compared to their sustainable long term competitive advantages. I buy them for keeps irrespective of their current prices, top or low. The intention is to be a part owner of those businesses and enjoy the ride with them. The expectation is to earn decent compounding returns over a long period of time. The portfolio consists of 5-10 stocks. I don't believe in extreme diversification. Obviously, there isn't much of thrill or fun in this, as it should be. When I seek it, I go to my third portfolio. And obviously, a large portion of my cash is allocated here. 

The second one is about investing for not very long. The stocks that I buy are meant for any time from a year or two. The cap is three years. There are plenty of stocks that will be available at prices that are considered to be a bargain, and are likely to yield more than market returns in a short period of time. This is to take advantage of market's folly and profit from it. Although there is no limit to the number of stocks that I buy, usually I restrict to less than 10 stocks. The number is more likely to be 5 than 10. These are not meant for long term, and therefore are not necessarily of high quality stocks. Nevertheless, because by nature I am more conservative, I tend to pick only those stocks which are not low quality businesses. I also avoid those which have disproportionate debts. There are some sectors that I avoid no matter how attractive the prices look to me. A year is a long term and a three-year period is a very long term for the most in the market, and this itself offers opportunities to me to earn reasonable returns over the period. Research for this keeps me busy and excited. Because of the number of stocks that represent this portfolio, there aren't much of buys and sells, only just enough of them to align with the objective. 

The third portfolio is more of fun and excitement. This involves buying stocks meant to sell them in less than a year. It is not possible to do this all the time, but mostly the cap is a year. The sells can happen in a few days to a few months. A few months is an apt period for this activity. Needless to say, I am not a day trader. I don't look at charts, etc. because I find them boring. The idea here is to make money when the markets are volatile. The idea is to have some fun and games as the markets unfold by the day. Usually I get to pay my bills through this, although nothing is guaranteed. No free lunches all the time, remember. And obviously, a very small portion of my stash is allocated to this. 

Frankly, I have too much of leisure. Despite running a three-pronged portfolio, the amount of transactions that I do is very limited. There aren't buys or sells for days together. There aren't meaningful buys for months together. I value businesses that I never mean to buy for instance, just for fun. It gives me an idea as to how businesses should not be run. The leisure time is meant for anything: reading up on the businesses (research), business books, story books, or going out, or spending the day in praise of idleness, or anything for that matter. Dealing with greed, fear, and envy in a manner that should be has been very helpful for me in having fun. 

I find markets exciting is an understatement. I consider myself a student of business, finance, and markets. An earnest student of this exciting game. I am also aware that much of the investment success, or even life's success is attributed to some luck, without which we render ourselves to be both arrogant and useless. Some humility is good. 

financial independence

Wake up early; hurried breakfast, commute to work; hit the machine; read, reply, write, junk emails; attend meetings; hurried bites; emails again; meetings again; take responsibility for someone else's faults; take bullshit from the boss; office politics; little fun, loads of shit and frustration; commute back; work calls while commuting; back home; disgruntled greeting to family; not-so-fun dinner; machine and work again; deadlines; shit; frustration; hit the bed; wake up early...Everyday, five days a week, year after year...Heck, what a pitiful, distressing life, even when you are earning millions.  

If you are like most, your routine is supposed to look like that; and chances are that you are not a happy person. Both male and female, it is similar stuff, just a little bit of shuffling, but the chore is same. I know that you don't like it. Nevertheless, you are doing it because you want to make money, earn respect, take care of family needs, and provide for your retirement. You are kind of forced into this routine. Given a choice you would rather not do this grind; would you? That's the question. And if you are like most, you would rather have that freedom to choose work; where to work; how to work; and of course, whether to work at all. By work, I mean in general terms. In fact, not doing any work is also some work; learning Spanish may not earn money, but it is also work and fun for some. 

I call this person a masochist. In a way, most working men and women are like that. This includes self-employed too. People have made a mess out of their life. And they don't seem to do something about it. 

A few have realized that life is too short to be bound by someone else's demands, and therefore chose to do things differently. Here's what they do: Wake up when want to unless they are in the mood to see sunrise or do the morning jog; have a leisurely breakfast, lunch and dinner; do things that help them learn and have fun; take no instructions from anyone; choose their work hours and workplace; spend enough time with family and friends; sleep when they want to. 

You must wonder how it is that they are able to do this. Inheritance, may be? Not necessarily. In fact, they are the ones who have taken control of their life. And good news is that it is not that difficult; anyone can achieve that. I call it the ultimate liberation. 

You have to start with the premise that your life is too short even if you allot a hundred. Therefore you need to figure out what you want from your life; and you need to do it yourself, not piggyback. Remember, you are the hero of your life. Like someone said, you need to be yourself, for everyone else is already taken. You come out of school by the time you are 20 or 25. After that, you have to lay the path such that your life becomes fun. Remember it is not about cash, but fun. To see why let's flip it. What do you want: more cash and less fun until your last hours, or more fun and less cash? If you are a normal person, you will choose fun in life. Now, you cannot define fun in general terms. For Elon Musk, it is different from that of Warren Buffett; for you it is different from that of your friend. Nothing I have said so far is philosophical; it is both practical and real. 

So go figure out your definition of fun. Technology, business, cycling, marathons, photography, wilderness, there are plenty of choices to make. And make that your idea of spending rest of your life. But wait, unless there is lottery or inheritance, you are likely not able to tread that path. For most of us that means work to earn a living. 

Now I come to the real point of this post. There is also another word for my ultimate liberation. It is called financial independence. It does not depend upon how much you earn, rather it depends upon how much you have compared to how much you spend. In order to lead a life of your choice, you need to first make some arrangements. My guess is that it should not take more than 15 years of labor for anyone. Whether you are earning thousands or making millions, 15 is the maximum number of years that you should be willing to sort of compromise. I have noted this for a layman both in the US and in India. After 15 years of work, you will be transported to the world of fun and games. 

Some have got it wrong. You cannot have rules such as you need to save 30% when in 30s, 40% when in 40s, and 80% when in 50s for retirement. Although the thought is well-meaning, it is flawed. The best way is to increase your earnings and reduce your expenses as much as possible in your work years; and then throw those growing savings into the investment pot. Because increasing earnings is not everybody's cup of tea, it is far easier to control expenses. Like I have mentioned earlier, your financial independence does not depend upon how much your earn. If you earn a million and spend more than that, you are on a wrong footing. If your annual costs are 100 and your financial assets are many times over, you are financially independent. How many times over is a matter of judgment. Some say 25 times is enough. That means you are done with 2500 when annual expenses are 100. I see it slightly differently. All depends upon what is important in your life. If you have a passion so deep, you may be happy to live a life of absolute frugality to pursue your passion. After all, like I said, it is your life. If I want to make it more general, 25 to 50 times annual expenses should be enough. Don't tell me that your annual expenses are 100 and you are earning just about that; you will never be able to liberate yourself. 

Financial independence is achievable for anyone; from college dropouts to qualified professionals. It is achieved primarily through deferred gratification. That urge to spend is a behavioral pattern. When everybody should pick 15 years of bonded labor to lead rest of life more meaningfully, most don't do that. Heck, that instant gratification, that behavioral disorder called envy, come in their way. What a pity that they are so ruthless to themselves.

Rs.10 M, not too difficult in India for the average

While making $m in the US is not that difficult, making some money in India isn't that much of a hassle either. 

It's just the question of the attitude. If you have it, you can make it. If you are like the most, well, you end up like the most. We are not talking about those who already have plenty to take care of in their later years. The lower and the middle class are the ones who are most affected, and therefore, need to make arrangements for themselves. Someone said aptly, parents aren't emergency funds, and children aren't pension funds. You got to keep your individualism. 

In the absence of any social security system in India, it becomes all the more imperative that a person shows some wisdom in dealing with the finance. It is strange that bonded labor for life in employment is preferred to making slight changes to the behavior. Well done consumerism.

Let's deal with the finances of an average person in an average employment; yeah, it comes with an average salary.

In January 2000, Nifty was at 1592.20, with a PE lurking at 25.91; dangerous tread for a rational stock picker. By now, it appears that it isn't so for a rational equity buyer. If the index was bought as of January 2000 and held through December 2016, the annual returns would be 10%; not bad. If the investor had bought the index on a monthly basis instead, the annual returns would be over 12%. It would be slightly more, if we include dividends. 

So how can an average employee in India enrich oneself? Let's pick someone earning a salary of Rs.25,000 per month, with a spouse matching that sum. Not too unusual in these times; in fact, quite modest. Left to themselves, they would be swayed by the waves of consumerism, and would be bonded for life. Throwing caution to the winds comes natural to them. If only we could tame them, and teach them to behave, it would be a different life. Alas, we can't.

If the average couple can spend one salary for living costs, and invest the other salary, the value of their financial assets would be over Rs.16 m. Assuming they started at age 25, they would be quite fine compared to their own lifestyle by the time they are 42. At 6% average inflation, the present value of their assets is more than Rs.6 m. If the couple increased their investment by about 7.40% annually reaching Rs.84,000 per month in the last year, the value of their assets would be approximately Rs.27 m, and the present value of which would be Rs.10 m. Even when the growth in investment is matched to the inflation rate, the assets would be worth some decent money in today's terms.

Yeah, Rs.10 m is the number that is illusive to the lower middle class in India. Yet we found out that it is very much achievable. With that much of cash, the couple who worked only for about 17 years, can move on with their life. Chase their passion. One way that can be possible is to move to a place where housing and living costs are much cheaper. Life then is only fun. They can even continue to work, but on their own terms; choose the location, employer, work hours. The lower middle class too has the power to make life more purposeful.

Imagine what people who are better than the lower middle class could do. We see them everywhere earning decent salaries; yet, they are in the rat race, not able cope. When in fact they can be financially independent within 15 years of their work time, they choose not to. Getting pleasure out of self-torture?

If the couple, who are better off than the one discussed earlier, are able to invest Rs.600,000 annually, they would have more than Rs.12.50 m in today's value; this is made possible in 15 years, if the annual increase in investment is 5%. We are talking about someone earning Rs.50,000 per month, which is matched by the spouse. Such salaries galore in these times. Their investment in the 15th year would Rs.1.25 m. The formula is the same: save one salary, and invest the other.

I hear a lot of excuses. Instead of focusing on what they can do, they spend time on things that are not in their control such as the government, employer, and the workplace. They have no problems in spending on the status car, large TV, expensive cell phone, fancy gadget, and regular fine dining. Cash for investment purposes, heck, life is too short and momentous to dwell on uncertainties such as the long term; for them it is preferred gratification.

It is a simple trade off: A maximum of 15 years of deferred gratification, or work under someone else for life. Guess, what they pick. Like I said earlier, human behavior has reasons that reason cannot understand.

$M, not too difficult in US for the average

The median income in the US in 2015 was $55,775; there are places where it is more than that. 

It is also true that average Americans cannot save enough to fund their retirement. This is why they also end up working in places otherwise they would not have liked to. This is also why they are sort of forced to take up work for longer years than they would have otherwise liked to. What a life! Even a masochist wouldn't like it. 

Someone said it long ago: Twenty years from now you will be more disappointed by the things that you did not do than those you did do. So throw off the bowlines. Sail away from the safe harbor. Catch the trade winds in your sails. Explore, dream, discover. 

It is an apt statement. Life is too short to stick to the comfort zones. Nevertheless, it is not very difficult to come out of it; neither does it take too long. The key is to become financially independent. Note that it is not being rich, which is actually relative. Someone with $500 k is richer than the one with $100 k; one with $1 b is richer than the one with $100 m. Talking in terms of the rich is not only useless, but also stupid. 

What we need to attain is financial independence. It is always measured in terms of how much cash one has compared to one's expenses. The higher the multiple, the higher the assurance. Someone with $100 k in financial assets and annual expenses of $10 k is wealthier than someone with $500 k assets and annual expenses of $250 k. To become truly financially independent, one needs to increase the multiple. 

There are only two ways to achieve an early financial independence: Increase income compared to expenses, or Decrease expenses compared to income. For most, it is much easier to do the latter; yet, they do not realize it. For them, life is to enjoy the moments on splurge. Little do they know that there is plenty of fun in delayed gratification. 

So how does an average person, employed with an average salary, become financially independent? If the two conditions are fulfilled, it is not very difficult: One, restrain; control; and behave. Two, invest savings in equities, preferably, in the S&P-500 index fund. 

In January 2000, S&P-500 was at 1394.46; in December 2016, it was at 2238.83. A 2.82% annual return over 17 years is no fun. Yet, the average employee could have become a millionaire by that time. 

It is because the markets are inefficient. They fumble on occasions; act irrationally at times. That's how they provide opportunities to the average employee. In February 2001, the index fell over 9% from the January 2001 value. 

Sure one could have bought in March 2001 and sold in April 2001; again bought in October 2001 and sold in November 2001; and so on. But we are talking about the average employee. In fact, here, we should be talking about everyone. It is very difficult to time the market on a consistent basis. Let's keep that story for another day. 

I am going to talk about the average 25-year old couple earning a combined salary of say, $50,000. Not very unlikely for the average. They are ordinary individuals, engaged in ordinary employment. How could they become financially independent? As we noted, it is easier to cut expenses than to increase income. 

If the couple saved and invested $2000 per month, which is $24,000 annually, in a low-cost S&P-500 index fund from January 2000 until December 2016, the total investment would be $408,000. Another way to see it is to keep one salary for living costs, and invest the other; there is not much excuse. Remember the buzz words: restrain; control; behave. It's possible. The investment value would be $707,000 as of December 2016 before the fund expenses, which are not too high in a low-cost fund. So the couple would be worth $707 k at age 42. The annual return changes from the paltry 2.82% to a more reasonable just over 6% due to the dollar-cost averaging, which happens thanks to the market inefficiencies. I have not included dividends, which if reinvested, should increase returns. 

They might say, the salaries weren't that much in 2000. It turns out that the numbers are not far off. If the investment was increased by 5% annually reaching $4600 per month in 2016, the investment value would be just over $1 m; not too bad. $4600 per month translates to $55,200 annually, which is the median salary anyway.

The losers might talk about taxes, etc. Remember, though, we are talking about creating enough wealth for the ordinary individuals early so that they too can let go of their shackles, and explore life. This is to show that it is very much possible for the average. The trade-off is clear: work for someone for life, or call your own shots after 15 years.

Their behavior is more important than income they earn. Cut costs relentlessly, and invest every month irrespective of the index value. After 17 years, at age 42, the couple could have $1 m in financial assets, which would also give quarterly dividends.

With $1 m plus financial assets, the average couple could move to a place where home and living costs are much cheaper, and have a fun-filled life. Why do they have to care to work for another unless of course they actually do love it? There is a superior life outside of the Bay Area and Wall Street too; and it can be more purposeful.

And now for the not-so-ordinary. If the couple can save $5000 per month, the investment would be worth $1.7 m. There are plenty of households whose annual income is $120 k. $5000 per month with 2% annual increases, i.e. $7000 per month starting 2016, would turn into investments worth $2 m.

Again, they might talk about the hindsight bias: where're the future returns?; Europe and Japan are already down; China is on the way; the US is not going to be an exception. Heck, these are the people who don't want to give up on the status car, large TV, expensive cell phone, fancy gadget, and those regular $5 coffee twice a day. If only they learn to defer their gratification, they would have to work, without choice, for only a maximum of 15 years.

But, heck no; human behavior has reasons that reason cannot understand.

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.