“The secret to investing is to figure out the value of something – and then pay a lot less.”
– Joel Greenblatt
Deep inside the “Greed, Impatience, Shortcuts, I know everything, and Low-life” you won’t be able to find value. We need to drop them and move to better qualities to be able to shine in the darkness like a star.
Millions of articles are written about Value Investing. I am, as a Wealth Creation Advisor, influenced by many amazing ones. In the Stock Market parlance, “Value Investing is Buy Low and Sell High”. How simple that sounds, right? Prima facie simple-looking things can turn out to be the most complicated ones too. I have seen dime a dozen such events in my 2 decades of financial consultancy life.
This article was triggered by a conversation on my Twitter timeline. I wrote quoting Warren Buffett, “Price is what you pay Value is what you get.” Started a SIP of Rs. 4000 in a @barodabnppmf with 17.49% 1-year negative return. My belief in India is maturing like the flavor of aged wine.
To understand further, you must have some inherited qualities, this I won’t be able to help you gain from me. Then you must have some acquired traits, if you don’t have them now, I can help you develop them.
Inherited one’s – Saving mentality, Safety first, and Paying for quality.
Acquired one’s – Life goals, Ability to take a calculated risk, Value of Time, Patience, and Philanthropy.
When you are making an investment, you have to pay a price for future value. Price is a function of Demand, Supply, and Inherent Value. It is a comprehensible metric value. However, if any one of them is fudged to showcase a price too unrealistic, you are bound to make a wrong buy or sell decision.
The act of displaying the future value in both directions is often orchestrated in these investment vehicles. Some of the best examples that you can correlate to this phenomenon are found in the vehicles and baskets that came up in the last few decades that I have listed below.
Penny Stocks, Cryptocurrency, and Political Power influenced Bluechip stocks, New age FinTech IPO’s, War induced commodities, Virtual art assets, Geographical leverage, and “Once in a lifetime” advertisements.
Short and Long Term based investment holding is another strategy that has Value Investing properties. What troubles me the most is the actual time horizon in these so-called Short-Term and Long-Term investments when an investor plans without knowing the underlying risk.
a) Buying at 9:15 am and selling the same before 3:30pm is the most popular among newbies also known as Intra-day trading.
b) Buying for a week or for a month. At times the Short Term ends in 6 months.
The only thing that these investors are struck with is the price points and accumulated greed. The latest craze is following an investment strategy based on a random YouTuber adviser. The only credentials most of these fly-by-night people have are their unimaginable number of followers. Now the million rupee question is what is short-term? Be it Debt or Equity funds it surprisingly stands at 3 years horizon.
Long Term Investing is a concept that is often not discussed or just brushed under the carpet. A few ingredients of value investing are:
a) Financial Goal based investment.
b) Like them, buy them and learn to continuously love them.
c) Never stay fully invested.
d) Believe in AAA – Advisor Asset Allocation.
“A combination of good value parameters, portfolio diversification, and a robust weighting approach can assist in capturing the value factor to a large extent.” Says NJ Asset Management Team
When you realise that “You are anything but a personal wealth manager” you will have the humility to call out for an expert to manage your future lifestyle.
One of the very important messages that I inform all my Investors is “You decide the amount and time, I shall decide the funds and risk profile”. Make life easier. A portfolio allocation of 50:50 or 40:20:40 or 90:10, all amounts to 100%, however, they are as different as the day and night. Only an Advisor can draft this for you.