P.V Subramanyam, author of the blog www.subramoney.com, starts by discussing why equity investing was probably easier in the 80s when he made his debut, because the only information you had on a company came from its annual report! So every investor needed to do his or her own due diligence and in the process came to understand every business he owned very well. In contrast, today, all financial information and ratios are readily available on screeners. In terms of news and data on companies, there’s plenty of noise but very little useful information.
Talking of why lessons from a Buffett or a Peter Lynch in American markets cannot be blindly applied by Indian investors, he points out that the American economy has had certain unique advantages that have aided corporations such as Coca Cola, which no Indian company can hope to replicate. He cautions that retail investors must not benchmark themselves to a Warren Buffett or a Mukesh Ambani who have created wealth from owning and acquiring businesses. Instead, the role models must be fund managers in India such as Prashant Jain (ex-HDFC mutual fund) or Sankaran Naren (ICICI Pru) who have equally impressive records derived from managing public money.
Asked about the qualities for being a successful equity investor in India, he reels out many: Ability to delve into balance sheets and find out how a company makes money. Curiosity about companies and their business models. Ability to talk to vendors, customers to gain insights about management. An open mind that is able to appreciate the utility of a business like Zomato’s even if one doesn’t personally use it. He also talks of the need for a stock investor to be flexible in his/her views so that if facts change, he/she changes her views. He also elaborates on why equity investing is not a simple matter of looking at numbers and requires having an ear to the ground, as assessing factors like governance.
He shares the view that copycat investing, based on what star investors buy and sell shared on social media, can be dangerous for retail investors because one doesn’t know the context in which the big investor made his or her moves and their overall net worth, position size etc. Highlighting how social media platforms have made it very easy for operators to manipulate stocks by storifying them. He flags that it is impossible for any regulator to keep track of all the scamsters out there and therefore it is up to the investor to avoid the minefields by reining in his or her greed for quick returns. Patience and experience, crucial to investing, can only be acquired by making mistakes and cannot be taught. He recommends keeping a journal of your investment moves so that you can learn from your mistakes, which will be many, over time.
Asked about how young people can make a start on equity investing, he believes that financial education needs to be imbibed from parents right from childhood, as each family’s financial DNA is different. Parents need to impart lessons on the value of money right from childhood and let their children know about their financial position and constraints.
He wraps up the conversation by detailing the risk management measures that every equity investor ought to take. Insurance for a stock investor, may not mean medical insurance in the conventional sense. It may mean having enough money in bank deposits or debt instruments that you can draw in an emergency so that you don’t need to withdraw equity money at inopportune times. It may mean having one steady source of income in the family, while you rely on trading income. It may mean prudent asset allocation suited to your own life stage and goals. It also means periodically assessing your financial needs against your net worth and seeing what changes you need to make at the portfolio level to meet them. Listen in for his anecdotes and insights.
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