February 8, 2009

Learning and planning

I wrote in my previous post about time management issues, we face as non-professional investors. We barely have enough time for our jobs and family. How the hell can I one pursue an outside interest such as investing ?

I am not referring to investing one’s capital via other vehicles such as mutual funds, FD etc. These options require much lesser time and can give a decent level of returns. I am referring to pursuing investing as an interest or hobby. In such a case, one is not looking for only returns, but also at learning and becoming a better investor.

The beginning
My own journey started more than a decade ago. I had started managing the finances for my family and had started reading up on the basic such as what is an FD, what is a stock etc. Those were pre-internet days, so access to information was limited. I remember searching for books and finding very limited numbers on investing. My main sources of learning initially were finance textbooks and economic times.

By 1998, I had access to internet and that was like opening a huge door for me. For professionals like us, the internet is god send opportunity. I cannot imagine being able to learn and develop as an investor while still working at my day job without the internet. Even this blog would not have existed without it !

Well, with access to internet and all this information, I started reading and learning the basics of investing. The period 1999-2002 was time spent on learning the basics. During the period 2002-2006, I started reading more annual reports compared to general articles and books. However the reading was random and all over the place.

Reading too random
I realised by 2006, that my reading was quite random and not directed. As a result I was reading the entertaining stuff, but not necessarily the dry and important materail such as accounting, AS standards , annual reports etc.

In order to avoid that, i now have a list of topics I want to learn and improve upon. For example, my current year plan includes learning more on behavioral finance, GAAP accounting and arbitrage.

The process
With these topics in mind, I start by looking for books and will list 3-4 books on the topic. Once I have the books I need, I will generally spend 2-3 months or more on that topic. This ensures that I maintain focus on a topic, explore it fully and at the end of it have more depth in it.

As an example, I am current focussing on behavioral finance. I have read 3 books on it already and plan to read 1-2 more books on it. Based on my learnings, I plan to review my current holdings to check my biases and will also be updating my investment templates (see
here for the templates).

Additional reading
In addition to the focus topics, I continue reading annual reports and tracking the performance of my current holdings. I am currently not searching for new ideas as my current list of holdings have reached my maximum limit (in terms of number of holdings). As a result I am reviewing my current holdings and will require a new holding to replace an existing one.

The above is a reading/ learning plan. All my blog entries and updates are usually centred around the topics and companies I am reading about. So you can see, the blog is an extension of my learnings and current thoughts.

So in summary I can break down my approach into the following points
- key objective is to learn and be a better investor
- all reading and learning is focussed on the key objective
- The objective would be achieved by identifying areas of learning and then focussing on them one at a time

No shortcuts and magic bullets here !

16 comments:

Pebbler said...

Well you've got a good blog on investing. I too was somewhat in a similar spot 2 years ago. And I decided to learn all about investing I could. Last two years have been absolute fun and there has been 1 full year of actual investing experience as well. I am into AR reading phase and have started to enjoy. Do list down the books you read. I read quite a bit of books and don't want to miss out anything. Cheers.

Santosh Nair said...

Rohit,

You have a very good blog. Thanks for sharing your investing experience. Keep up the good work.

Regards,
Santosh

Anonymous said...

Hi all,

Can anybody list some good books on accounting. I am from non finance background. My only knowledge of accouting is that recently i read one very basic book. But i guess my accounting knowledge needs more polishing.

Amit

Miguel Barbosa said...

Hi,

Great post. I like the elegance and simplicity of your message. What I recommend doing for anyone is to mind map what they consider a successful circle of competence for value investing. IN other words all the areas then assign a number 1 out of 10 indicating your strength in that area. And focus on your strengths while slowly building up your knowledge base on your weaknesses.

Anyways, great post I love linking to you on a nightly basis via SimoleonSense.com

Best Regards,
your humble follower

Miguel Barbosa
www.simoleonsense.com

Investors times said...

I face the same problem than you at my age. I work and find little time to update my blog. But find it worth the time because i am myself improving my investment knowledge. Kepp informing us on those techniques.

Rohit Chauhan said...

hi pebbler
you can find the books under the link - books i have read and liked. need to update the site with the more recent ones

santhosh - good to know that you like the blog

amit - there is a book by benjamin graham on accounting. you can start with that. also look at icai website to read the AS standards. that will give you a good idea of accounting standards

Rohit Chauhan said...

hi miguel
great to hear from you. i have been visiting your site and think it is good place for value investors. will be linking back to it from my blog. i think the readers of this blog could benefit from the compilation you do

regarding the post - i thought hard and tried to come up with something clever :) ..but then eventually realised there is nothing new in the process. just like other things like exercise ..the process is simple ..execution is diffcult.

i think mindmap would a good way to approach this issue. i want to do that, but have not been able to do a good software for it (nice excuse !). maybe i will just do it on a piece of paper

regards
rohit

Rohit Chauhan said...

investor times
i see you do update your blog once every few days. i follow a similar approach. i rarely post more than 1 -2 times a week. not only i dont i have the time to do it more frequently, often i would not have much to say. i prefer to read and learn and publish something based off that

Anonymous said...

Rohit, one query. How do you seat on your cash for such a long period? Is that through self control only or you would like to share a few tips what you have done. Would appreciate a reply from you.

Regards
Gcpradhan

Anonymous said...

Hi Rohit.

Currently I am reading about Abhishek Dalmia. The guy seems to be hard core buffet fan. Hold 7 BRK-A stocks. Goes to Omaha every year for Shareholders meeting.
What i am wondering is, How are going to make a difference when we buy shares of typical Value company? He got successful because he had huge cash when he started. So it makes sense buying reasonable stake in a bargain company and unlocking value. But at our level, how we can unlock value? Graham & Newman started buying companies, smae thing buffet did, same thing Dalmia is doing. Unless we have huge amount to deploy it will not make sense that we are doing value investing. What is your thought on this?

Thanks
Ani

Rohit Chauhan said...

Hi GCpradhan
i did not understand the following part of your question , can you clarify

How do you seat on your cash for such a long period?

regards
rohit

Rohit Chauhan said...

Hi ani
yes , abhishek is a hard core buffett. read his annual reports ..he mimics buffett style in that.
also he thinks and acts like buffett and is a good allocator of capital. so revathy CP is a bet on abhishek and not the business alone
i think abhishek was well off to start with and has gone the control route - buy undervalued companies 100% and then allocate capital well.
we unfortunately dont have that much money :) ..so we cant. you have to remember buffett did not start that way ..he used and even now buys minority position in good companies where he cannot influence the management.

I think your question gets answered well by this quote from buffett
'better to buy 10% of hope diamond than 100% of rhinestone'

we cannot unlock value and have to depend on the market to do it. Most of the value investors work that way and do pretty well. A very small % of investors are control investors and unlock value directly

So in our case it is all the more important to bet on good management who will do the same for us

regards
rohit

Anonymous said...

Thanks for your clear reply.

i have added revathi & thermax (we discussed it along with Neeraj couple of months back) as thermax settled down below 160. Now my portfolio has started taking shape, thanks to your blog.

regards
Ani

Anonymous said...

Hi Rohit,
Urs is a great blog on investing!!
I am complete novice in investing and follow Ur suggestions to improve.
I need ur suggestion on something off investing:
1) How much of the help can art of investing be for a person who has to do an MBA (in any specialisation)?
2) Being a hardcore techie (storage & communication) which specialization should I do in MBA (except Marketing) so that I can utilize my technical knowledge?
I am asking these questions to you as u are an MBA and as ur posts suggest 'a very logical person'.
Or if U can give pointers to platforms on which I can ask these doubts?

Rohit Chauhan said...

hi ani
i need to analyse revathi further to take a decision. i have not seen thermax for a long time

Rohit Chauhan said...

hi anonymous
i think you learn about accounting, finance, business etc when you are learning about investing. so there is a considerable overlap with an MBA program. however the focus of an MBA is different, so this knowledge has only a limited utility in a program.

For an IT person, i can think of only operations and systems as a specilization where you can leverage your tech background. but dont expect much on that too. look at an MBA as a passport for a better and higher paying job. but if you love technology then an MBA will be a mismatch.

regards
rohit