Saturday, August 1, 2009

A Wealthy Investor Long Back Told Me...

“Yogesh, if you want to be rich and make money in any investment, sell when markets rise and the masses rush to buy. When the masses talk about gloom and doom and sell in a panic, you shall buy. I have created my wealth by following this simple, but yet difficult to follow principle in life.”

This is what a very wealthy Gujarati investor and stock broker told me several years ago in his office when I had asked him “What is one thing I need to know to create wealth with my investments?” I was very new to investing and always was eager to learn more from people who were already successful. I didn’t have a lot of money all I had was a burning desire to learn. I still have a burning desire to always learn more, and I hope this desire always stays with me.

Even today every once in a way I pay a visit to his office to learn more about investing and get his advice. Unfortunately most people tend to take the advice of salespeople, journalists, doctors, academicians, engineers and relatives when it comes to investing instead of taking it from people who are already successful at investing.

No wonder millions of people actually believe what is being stated across the media about how the global economy is recovering and how stock markets have hit a high. They are once again rushing to buy, without really looking at the real world state around them.

First of all look at employment, and you will see how more and more people are being unemployed. I know someone heading a major IT company in India, and he told me how they are laying off lakhs of people and are filling up benches just with freshers. These lower costs, lead to temporary hike in profits. A real estate developer confessed to me, that real estate is in terrible shape and there are barely any sales. Since professionals in IT are losing jobs, many of them have defaulted on loans across the country.

He told me how artificially raising prices and spreading news in the mass media about a revival in real estate are just business tricks. Most people do not invest time into interacting with people who will reveal the truth and simply believe whatever is being said and written. Read the results declared by most real estate players, and you will see how miserable the state is.

The past year has been excellent in terms of returns for anyone who has invested in value. Few of my close friends have had returns in excess of 450-500% and at this time most of them have exited and taken large parts of their profits from the table. Unfortunately once again a lot of new sheep are flocking to the markets in hopes of making a quick buck. We all know what happens to such sheep who believe in following the herd blindly.

Things are much worse in USA and I am sure all those who read Happionaire's Cash The Crash will know what I am talking about. I won’t be surprised if a few major financial institutions collapse there and things spiral downwards. As all this happens, I see a major opportunity for India to rise and shine. I am optimistic about India’s future growth for sure, but as the say Sachin Tendulkar is a great player and you might pay Rs. 20 crores for him to have him join your IPL team, but would he be worth Rs. 2000 crores? Never look at price but always see the value offered. There are still companies that offer value, but most people will ignore them and rush for the ‘hot picks’ sold by salesmen. Hot picks usually end up burning people financially!

At times like now I remember what was said to me several years ago - “Yogesh, if you want to be rich and make money in any investment, sell when markets rise and the masses rush to buy. When the masses talk about gloom and doom and sell in a panic, you shall buy. I have created my wealth by following this simple, but yet difficult to follow principle in life.”

The above principle is very simple in theory, but very difficult for most people to practice in the real world. As Happionaires we are all known to follow the simple path.

Have a wonderful weekend ahead!

Keep smiling and stay focused!


Yogesh Chabria

Do you agree? Share your views in our comments section here.

Whom would you choose Laxmi or Saraswati? Read what fellow Happionaires had to say!


29 comments:

Gaurav said...

Very interesting to read about the reality in IT and real estate. You re right when people lose jobs - no matter how much profits a company makes the overall economy will suffer. If one person holds all the money in society, there will be total collapse.

Abhi said...

I am in IT sector and things are really not as bad as they are perceived by some group of investors.

Gopinath said...

Yogesh, you have cited true investment wisdom in this post. However small investors often mistake a small bounceback and sell into it, when the larger picture remains hidden. One needs to develop the sense to smell greed and overdrive in a bull run and resist being part of the herd mentality at this juncture. Same goes with overcoming the fear in a bearish markets. That is when one needs to remember these wise words.

jagadish mohajan said...

This theory mentioned by you, I think most of the investor is aware who are in the market but still there is scope to buy and sell some of the stocks which had beaten terribly and sell which has risen sharply in the recent rally. I think there is no time frame for buy or sell. The current market condition does not rally offer us to buy certain stock but looking at the future economy there is scope to catch some good stock when there is correction where stock selection is of utmost importance.

I would highly obliged to have your views on this.

Regards

Mohajan

Anonymous said...

Hi Yogesh,

Its always nice to read what you write. It reminds me to be rooted at ground. Its very refreshing. I also try to follow the principle which you have described here. But at times I've felt that it would have been better if waited for some more time. Its really hard to know when to buy and it is harder to know when to sell.

Regards,
Setu Shah

Anonymous said...

Dear Sir,
What you explained here above are very true. I was just buying when the price was going up, but I lost reasonably. After I read your many postings now I know how to invest and take litttle little profits. Waiting more investment ideas from you. Thanks & God Bless You.
GEORGE K MUSCAT

Sandesh Kamble said...

Hi Yogesh,
It is always good and enjoyable to read whatever you publish/post (Either in books or blogs).
I had raised one question in your previous blog topic "Golden Opportunity To Create Wealth!" regarding Real Estate pricing, to which I did not get any response. But that time I'd not read Happionaire book "Cash The Crash". I had just returned from Norway and was relaxing home for initial some days. I finished reading this book in few days after purchasing it and most of my queries were solved by then.
I would like to mention that people (including me) should keep patience. Because when we see market keeps on rising (like how it is happening now), we gets frustrated that we have missed the opportunity (or possible will miss) and then in frustration we start buying to get some benefit at the end moment and pour our money in the market when market had already risen. Then ultimately market tanks and we start accusing that after we put our hard earned money into market it tanked. If we would have kept some more patience, it would have not been the case.
I also believe in what Yogesh says, "Don't look at the Sensex level but look for individual Stocks". Because there are still stocks which are worth buying (value buy) or not risen so much and at this time the Sensex level is near 16000. As at the Sensex level of 8000 there still were some stocks which were expensive.
I also don't see any reason for market to rise so quickly and that to at this level (nearly 16000).
There could be another big opportunity in the near future for all of us Happionaires to get into the market at lower levels when another big correction happens.
I am looking to buy a flat ni Thane and while searching for the same, I found that the prices are still not fallen much whereas the Realty Stocks have fallen 90-95%.
Waiting for that crash again.... to enter at lower level once again to gain more.
:)

Anonymous said...

very good article

Anonymous said...

yogesh pl answer our questions every saturday

Anonymous said...

I think you are mis leading about properties atleast for Mumbai because we can see actual transaction happening and not just by reading newspaper.

Kindly be more specific or else people will loose out.

Gopalakrishnan K.V said...

This is From Warren Buffet " I am greedy when everyone is afraid and I am afraid when everyone is greedy"

Gopalakrishnan K.V

gautam said...

Yogesh is stating the truth when he says property is still overpriced and headed for a major crash. I have noticed in Mumbai how millions of square foot are lying empty in commercial as well as residential real estate. Mumbai will fall the hardest because prices are insanely high. Today even London is cheaper than some areas of Mumbai.

Very enlightening post for us Happionaires.

Ryan F said...

Hi Yogesh

I have an Important Question. Would appreciate if you could post you views on this ASAP. Is the US dollar heading for a collapse due the mass printing they have done for the bailouts? Would it again tank the stock markets and economies much more than the Sub-prime crisis?

Joe said...

Hi Yogesh,

I have been following your blog for quite sometime but now even doubts
has started creeping my mind for the simple reason market are just
going higher and higher.
Many Technical Analysts are saying that this is a bull market which has
just started.

Even the great Rakesh Jhunjhunwalla has said that once Nifty crosses
4650-4700 it should touch 6000 within a year.

What are your views on it ?? Do you still believe we can touch the lows
of the Oct 2008 ? Kindly guide as most of my friends have also started
believing that we are entering the bull market phase.

Regards,
Joe

The Happionaire™ Blog said...

When I was a kid, I would love playing with fire crackers during Diwali. If you remember the sparklers(fulljhadi) would always tend to burn and sparkle brightest before nearing the end....we can learn a lot from that the way markets are behaving. People might cheer new 2009 highs, but look around the world and you will find answers. Those who have doubts, please have patience. When the Crash was at its peak I was screaming at the top of my voice, but that time too very few people actually bought. New value buys will come, have patience.

Long term for IT sector is very good Abhi. As any business needs IT.

Gopi, what I have cited has been age old knowledge that has just been passed onto me, I am sure more people know it but tend to forget it. Best is to write it in a book and read it every morning along with spiritual books.

Mohajan, as I stated above have patience and use times like now to enhance your skills. Read balance sheets and study how business happens. For instance I am looking at a coffee company because so many people in urban India are getting very high on coffee. First always observe - than act.

Setu, a person who can buy the lowest and thinks can sell the highest is the biggest fool. You can never find exact bottom or exact top. Better to sell before the peak and buy before the full bottom.

Thanks George and welcome to the Happionaire family. May the blessing of almighty God be on each and every person.

Sandesh, welcome back to Mumbai. I unfortunately am unable to reply to all e-mails and messages posted. but always try to address these issues through my writings. I am glad you found answers to real estate in Cash The Crash. I have been learning a lot on real estate from people in the inside and let me assure you that prices are not going high specially in areas like Navi Mumbai-Thane as there is huge oversupply.

The last phases of euphoria can surprise a lot of people.

I will surely try to reply whenever possible my friend.

Very timely thing to quote Gopal.

Ryan, the dollar is headed for doom if US does not take any action. They seem to be digging a deeper hole instead of solving issues. If that happens, USA will tank much more. However, as USA tanks India will emerge stronger and people will want to be a part of the action in India. The end USA will give rise to new powers in the financial world. So from a longer term perspective I will park my money in India.

Joe, whether we touch the lows of 2008 or not is not important. What is important is that if we can get more value by waiting, why not wait? If we have made 100-500%, why should we not take the money? Profit is earned only when you book it. If you feel it will rise, book at least 50% of your profits.

As they say in the Geeta - one of the greatest evils is inaction. Having patience and not buying and selling in a panic, is also a state of action.

Fellow Happionaire, just a small request, please share your knowledge with anyone who respects knowledge. Never share it with people who can't respect it and value it. Knowedlge always grows with sharing.

Keep smiling!

Yogesh Chabria
Happionaire

JAWNSIN@@@@@ said...

Now that you are at it, i.e replying to mails periodically,this blog looks more interactive.......10q....

Vic said...

Yogesh,

I agree with you on the Herd mentality but not on Real Estate and IT situation points.

The real estate and IT are not headed for crash. The RE prices are stable now and are showing upward movement. One should also keep interest rates and inflation in mind as well.

Same situation is with IT companies. They will continue to do well.. though the growth, margins andare/ profits won't be the same that were few yrs ago.

One should do enough due diligence of his/her own. You sound the same as other guys/celebs on TV..can hurt ppl who just follow ur advice blindly...which many do here.

Sorry for stating these facts..but I have noticed u repeating the same stuff again and again. And ppl follow u like God..not a good thing.

I agree with u on many things..but not on everything.

Vikas

udhay said...

Yogeshji has always encouraged all us Happionaires to invest in knowledge and learn more and has always made it clear that anyone and everyone can be wrong. His views on real estate in fact saved me and am sure millions others like me lakhs of rupees. By not buying real estate thanks to his guidance I was much safer. Real estate here in Mumbai is in terrible shape and heading southward rapidly.

He has been a guide to me and taught me a lot. Keep spreading this knowledge Yogeshji and we are always going to support you.

Anonymous said...

Hi friends,
Dont feel bad on the comments (posted by anyone) or even the contents of blog itself. Through happionaire Blog Yogesh wants to express/ educate people what he thinks and how he looks at the situation from time to time...Any one can be wrong.. His intention is to encourage people to learn and succeed and take informed risks to lead a wealthy life, than a mere gambling. If anyone don't like it, don't take it.. Yogesh is not forcing any one to accept what he thinks.. VIC's comment looked like offensive to Udhay (But if Yogesh wanted to.. he can block that comment.. but he didnt do that... thatz a greatness, he posted it so that all others including me should know that there is a person with different opinion .. thatz all.. now it is up to us to decide what we decide....based on what each one of us thinks right). Right and wrong changes from person to person.... so lets use this blog as a platform which encourages us to learn.... Also it looks more polite if anybody express the dislikes only to the person indented, rather than in public.. but each one may differ on this too.... (Thatz India.. the largest democracy in the world). thank you

prajesh said...

Today's fall and sudden change in the voice of 'so-called' analysts on TV simply proves how sound what Yogesh has been saying here. Gold has gone up and the markets are getting ready to fall.

I loved the fact in the past when Yogesh simply said "Let time prove who is right or wrong." Beautiful.

Am looking forward to more gems.

sanjay said...

Dear Mr. Chabria,

I have been following your philosophy of investing in value and knowledge for long now and I thank you for this lovely guidance. I am seeing how the markets are once again going down as you had shared with all your followers. China's problems also are out.

I do understand you must be busy but I almost every single day try to see and learn more from your views.

Keep it up.

Zeenat Shah said...

Yogesh Sir where are u from 4 aug.pl tell me the advantage of investing long term and what is meant by it.give me some examples...

Sandesh Kamble said...

Hi,
The real estate stocks had come down more than 90% last year and went up suddenly few months back. As per Yogesh's views they are still expensive at this price. I tried to hunt for residence in Thane area near Mumbai and I found the prices are still very high. The residence prices were down few months back but now they have gone up again and though they are not at the peak of what was a year back. But the valuations are still at higher end. I see people still buying the flats though they are costly. People are saying that this will be last chance if u want to buy a house because this time when the prices start climbing it will be difficult to buy in future and it will remain a dream to buy home. Yogesh and others please share your views in this scenario.
Yogesh, I tried to find out the approx price as per your formula( of Rent * 180) but then also it seems too costly even in such time.
Does it make sense to buy home at this price? The current price in certain areas of Thane should have been in the range of 1800-2500 max and we are getting it for 3500-4200/- which is almost double.

Vic said...

Sandesh,

I had posted earlier because of your current situation. I usually avoid posting something where I don't agree with Yogesh (which is rare). He's spreading and educating lot of ppl..have to admire him for that.

But telling somebody not to buy his/her primary home at this point..i couldn't take it. Also his statement of "Better to sell before the peak and buy before the full bottom.". even Warren Buffet says that he's not sure of what markets will do in short term, therefore buys a security at discount..which Yogesh also vouches for.

First of all, nobody can predict future very accurately whether it is in the financial markets or RE. We go by our research/analysis/factors etc.

I'll tell you my view as I have been a genuine seller as well as a buyer and been successful for the most part..in markets as well as RE. I sold an apt in Pune last year and one in Gurgaon in 2007 (both highly desirable locations/pockets) as I could see at the max 15-20% more upside at their respective Sale times..but more downside or just stable. Also I needed funds for other purpose.

Currently I'm looking to buy a plot in Pune (good location) for self use, the prices are down about 10-20% from the peak..for good locations. The owners are just holding onto to their plots/apts and not in a rush to sell.

What you have described regarding Thane RE..holds true for many metros/desirable locations. Of course..some builders went bankrupt or came up with Low income housing..that's a diff story.

Of course, I don't see the possibility of 50% return/appreciation in next one year in RE but it is possible that it might go up slowly by 25% in next one year. At the worst.. might stay at the same level.

AS u know the markets have already shown positive sentiment/action over last few months. The Emotions of investors play a big role. Who knows.. the Herd comes back again and pushes up the prices..it has already started..though not full force yet.

I bought good stocks (as they had more discount) during 9-15K Sensex levels. I know most MF managers and advisors didn't buy.. waiting for Sensex to go down to 6-7K. Will it go down to that level in short term?...it is possible. But I see more chances of not that happening. Most of the experts never predicted that the Congress will come in Power full force..took them by surprise.

Another thing u have to understand is that in India..most ppl still prefer RE as their primary investment/savings, black money goes around and builders/politician connections keep it afloat to some extent.

Usually the markets rebound b4 the economy..which u have seen this year. Also, next year is of Commonwealth games..Global sentiment is improving...though many risks remain.

I'm based in the US. Yes..there are many foreclosures across state but there hasn't been a single foreclosure in my subdivision (400 homes) yet because it is desirable place for the families to live and raise kids. Some cities are growing while others falling.

I have friends that are looking to buy a house...not able to find a good deal which were available earlier this year. The mortgage rate has also gone up.

I'm still going ahead with my decision of buying plot for self use. I can negotiate better now instead of next year..though I can be wrong. My instict tells me of more upside or stable than the downside.

But who cares whether it goes down or up..it is for my primary use!!

Sandesh Kamble said...

Thanks Vic for your views.
To all Happionaires, I found one article on VROL site and I think all happionaires should have a look at it.
_http://new.valueresearchonline.com/story/h2_storyview.asp?str=100711

Sunil said...

Hello All,

I am writing after a long time. Looking at the ongoing argument on this blog all I can say is ... "Suno sabki par karo apne dil ki" or "I listen to all, but at the end of the day I take my call"

ASTALAVISTA!

Abhi said...

It actually a tug of war between bulls and bears. As always. There is no dubt that american economy is growing thru means which are unsustainable. Take for e.g American govt is giving around USD 3000 to any individual who buys a new car. Now even if economy shows greent shoots we should be really worried. On the other end, there are large oil discoveries made in bakken feild - larger then combined oil in saudi arabia and iran together. This can certainly clear all the problems with american economy. The future of american economy is good in long term but i think it will not be a V shaped recovery and there will be a dip going forward ... where we can buy more stocks provided one has cash in hand. When that will happend, no body knows .. so it is not prudent to sell every thing and be in cash but one should keep booking profits from time to time.

Sandesh Kamble said...

Hi Happionaires,
I somehow now agree with Vics too. Because as Yogesh said that the prices in Thane/Vashi areas are not very high because of oversupply. But when I was looking for house in Thane area I found the prices are still high and now in the range of 3500-4500/-.
In the last 10-15 days the prices have increased overall nearly 15% and that had come in newspapers and mentioned on some websites too.
I still believe that the real estate too works in cycle and I expect this time too it should take longer time to recover like it happened in 90s. I am still surprised and confused how the recovery in real estate is in sight so soon? Why prices are going high just because there are more investors and buyers coming forward? But due to the existing interest rates and latest price hike by developers, how long these new prices will sustain?
There is another news about Chinese bubble and how it will affect the entire market and especially Real Estate.
Yogesh and Vics I would like to know more about this from both of you.

Anonymous said...

in bangalore, the outside areas have come down by 20%.but the areas inside city have not come down at all.

even software engineers who earn a lot r finding it v difficult to afford the crazy prices