How Much Money Do I Put In Stocks?

The other day I was speaking to a senior academician at the over 150 year old Mumbai University. He had read Invest The Happionaire Way and like several other people had decided to start learning more about the various investment opportunities available and to then start investing in stocks.

As we were speaking he asked me a very simple question. He asked me how much percentage of his money should he invest in stocks? And as we all know sometimes, the simplest questions are the most difficult ones to answer.

I'm sure many of you might have such thoughts too. I know that because I keep getting so many e-mails from new investors. I am unable to reply to all of them, however as I have mentioned earlier I like replying to queries through my writings. I love reading your e-mails, as I get to know what you want and where I am making mistakes. Only when we know our mistakes, will we be able to correct them and improve.

Now the question of how much percentage of our money should go into stocks is extremely personal and it varies from person to person. There is no simple answer where I can say XYZ% should be invested in stocks. If somebody is just starting out, I feel the money invested in stocks should not be more than the amount he or she needs for daily consumption. I started with Rs. 750. I started with less because I knew I can lose it all. The first few years of investing in stocks will go in learning more through experience. The knowledge gained however will be priceless.

Over the long run I feel most people who are conservative in nature can have around 25%-30% of their capital in stocks. Again age is a criteria - if you are in your 30s you can probably have much more in stocks as compared to if you are in your 70s. Because when you are in your 30s you have time on your side and you can wait patiently for longer periods as compared to when you are in your 70s. Mostly you would also have a regular cash flow when you are in your 30s.

Never make the mistake of investing in stocks from the point of view of cash flow. It isn't a good idea as stocks aren't predictable and not the safest option for a regular cash flow.

If you have invested time and money into learning more about investing in stocks, you can invest a larger percentage of your money into stocks. However no matter how much experience and skill you have, never ever think about putting 100% of your money into stocks. It isn't a good idea. At most I feel 70% of your capital should be allotted towards stocks - while the remaining can be in some form of debt/bonds which guarantee a fixed rate of return. Again please remember I used the word 'allotted' towards stocks and not 'invested'.

This means even after you allot an amounts towards stocks, you should keep a part of your funds in cash (I suggest keeping them in liquid debt funds as you will get a higher rate of interest than a savings bank account.) Cash will help you benefit the most from phases when the market is down. All those who would have read ITHW and also studied how the best investors and business people in the world work, by now very well know that phases of economic slowdown and economic crisis are times when the most amounts of money can be made by those people who are patient.

Read about the greatest investors in history and you will find out that almost all of them created wealth by doing things when others weren’t doing them. In spite of this I still don’t understand why rational investors fear phases when stock markets are going down. Provided we are sitting on cash, we should welcome such phases. We should be happy that so many assets are being sold much cheaper than what they are actually worth. And we know nothing is permanent and nothing lasts for ever. Neither bull markets - neither bear markets.

I have once again started reading one of my favourite books The Intelligent Investor – Benjamin Graham. Every time I read it, it makes more and more sense to me and I learn something new. I like keeping a few good books, to which I can go back over and over again.

I feel that the best moments of life are the ones where we learn and experience something new. I hope each one of you keep learning and experiencing something new every single day.

I'm also curious to know about what you think and how much percentage of your money do you put in stocks? Share your views in our comments section.

Keep smiling and keep spreading The Happionaire Way!

Yogesh Chabria

Happionaire

Does India Need A New Independence? Read What Fellow Happionaires Had To Say.

India Needs A New Independence!

Sixty one years ago we got Independence from the British. Since that time a lot has changed. From being a British colony we have gone to buy British company's such as Jaguar-Land Rover, Tetley and Corus. This is not only good for us, but also for the British who are getting the opportunity to benefit from global management skills and finance. It ensures employment for thousands of employees and increases their efficiency. From being a nation afraid of foreign competition, today we are ready for competition of every sort and thrive in it.

From a time when we had to wait for a year to get a phone, today we can get a cell phone within minutes and have amongst the cheapest phone rates in the world. I am proud to be an Indian and very lucky to be born in a time when India is getting ready to become a major global economic power. But at the same time we as a nation and as people have always believed in respecting other civilizations and not infringing on their rights and freedoms. Respect, equality, peace and dignity should be something that the entire world should have and something which we should share with the rest of the world.

I hope every Indian is proud of our nation and proud of our culture and heritage which is several thousand years old.

But today we are desperately in need of a New Independence movement.
We need Independence from poverty, unemployment, illiteracy, hate, corruption, bureaucracy and inefficiency. We need Independence from pollution and environmental degradation. We need Independence from having the attitude and willingness to accept what is wrong. We need Independence from being afraid to learn new things, being afraid to fail and being afraid of change. We need Independence from fear.

India needs this New Independence and it is in our hands to make our nation truly free. We can all do this by doing our dharma. We all need to do our duty with love, dedication, passion and commitment. If we all start doing our dharma as well as we can, things will start changing. If everybody in our nation does their duty, it wouldn't take too long for things to change.

Today there isn't a shortage of money in our country. Just that the money isn’t being tapped correctly. In fact today India's balance sheet is much more favourable than America's. Imagine how much more wealth can be created by everybody if millions of people got access to basic necessities such as electricity, water and education. It would spiral of a positive cycle of productivity and increase demand.

The Government today has billions of dollars with it. Instead of keeping a currency which is going to lose value over time, these funds should be invested. This can bring New Independence to millions of people and this also means a great economic opportunity.

As individuals we have the power to not only do what we are doing with complete love and dedication, but also spread the message of change. We can spread and share ideas which will go into building a nation and help build India into an economic and cultural super power. We can share thoughts which motivate and inspire people around us. Everything great first starts out in our minds. Our minds need to think about what is possible and how we can achieve it. That is what I have always believed and also experienced personally as a Happionaire.

We Indians are hard working and I know that if our brothers and sisters across the vast nation are given opportunities, they too can do wonders. I'm sure we will be able to find hundreds of more Dhirubhai Ambanis, Ratan TATAs and Kishore Biyanis.

I have a feeling that it will happen. Something inside me tells me that in the next 10 years we are going to see radical changes in India and more and more entrepreneurs are going to go out looking for opportunities across our great nation. We all have an inner voice and that voice somehow is always true. Isn’t it?

I wish all of you have a very Happy Independence Day and I hope that with the grace of God we shall all be wishing each other a very Happy New Independence Day in the coming future.

Feel free to share this article with every other Indian and spread the joy.

Keep smiling!

Yogesh Chabria
Happionaire


Make the most of our freedom and democracy - let fellow Happionaires know if you agree or disagree with the above post.

Bollywood, Builders and Options!

After my last post, I got several queries from fellow Happionaires asking me to explain a bit more about what Options are. I find it great that so many people are not hesitant to ask questions and learn about new things. Options are something which very few people understand well. Not because they are difficult to understand, but because very few people who know about them explain it in a simple and easy way. By now I’m sure all of you who have read our blog as well as ITHW must be knowing how The Happionaire Way is about making everything fun, simple and interesting.

I remember several years ago when I asked one of my brokers to explain what options were, he told me so many things which made no sense at all to me at that time. Talks about option premiums, calls and puts can be extremely confusing for somebody who has no idea at all about all these things.

Before I explain it to you, let me clarify once again that personally I don’t trade in Options now. In the past as soon as I learnt about options, I got tempted and traded in them. Since the returns possible are quite high, a lot of us get very tempted. We all have greed in us. Sometimes I made huge profits trading in options and sometimes I made losses. In the end I don’t think I made any substantial amounts of money trading in options. Luckily though I didn’t risk too large an amount and learnt a lot from the mistakes I made. By the grace of God, I continue making mistakes and I continue learning from them.

Now let me try to explain in a very simple way about options. Let me share a small story with you, which will help you understand what options are.

Let us say you want to buy an apartment. After searching a lot you find a nice apartment that costs Rs. 10 lakhs. (I know many of you might be wondering where we can get Rs. 10 lakh apartments. I don’t know where we can get them either, but the way the real estate market is behaving I won’t be surprised to find several such apartments.)

Since you like the flat so much, you speak to the builder and tell him to block the flat for you. You want to consult with your family and will tell him for sure in one month. The builder tells you that you will have to give him Rs. 10,000 to block the apartment. You can either pay him the entire Rs. 10 lakhs after one month and take the property or alternatively in case your family doesn’t like it you can let it go but you will lose your Rs. 10,000.

You think about it, and decide Rs. 10,000 is not too big an amount to pay for the flat. You pay the amount and the builder blocks the apartment in your name for a period of one month. Anytime you can pay him Rs 10 lakhs and the apartment is yours.

Now before you can consult with your family you find out that Shahrukh Khan, Aamir Khan, Salman Khan, Kajol, Rani and Preity Zinta have all ended up buying flats in the same building where you have blocked your apartment. This has caused a lot of excitement amongst people and the demand for the apartment you blocked has gone up.

In fact you have fans offering you Rs. 15 lakhs for the same apartment. You have blocked the flat for yourself at a price of Rs. 10 lakhs. This means if you sell the flat you will make a profit of Rs. 5 lakhs. However you have not invested Rs. 10 lakhs but only Rs. 10,000 to block the flat in your name.

You decide to sell the flat at Rs. 15 lakhs. From that you give the builder Rs. 10 lakhs and keep the remaining Rs. 5 lakhs for yourself. This means you have invested Rs. 10,000 and in return got Rs. 5 lakhs in a period of less than a month.

This is a very simple example which try to help understand how options work. Your maximum risk in the above case was Rs. 10,000 but maximum profit potential was unlimited. Unlike futures where the risk can be more than the capital invested.

The above example can be called a “Call Option”. This type of option increases in value when things go in the positive direction. If you buy a call option for the NIFTY, it will rise as the NIFTY rises. In the stock market too options can be used as tools to minimize risks as well as trading tools.

Options can be traded in a similar way like stocks. For instance you can tell your broker to buy a call option if you are bullish or alternatively you an tell him to buy a put option if you are bearish.

Even though I know how they work and I know the basic theory behind it, I have professionals handle them for me. Options need you to be more aware and alert about things happening in the short term and I have trained myself over time to be a long term investor. Very few people can do both trading and investing together. Rakesh Jhunjhunwala is one of the few rare people who does both successfully.

You can usually find a professional options trader to handle everything with the lowest capital base being of Rs. 5-8 lakhs with a profit sharing percentage of 30-35%. So if you get a profit of Rs. 1 lakhs on an investment of Rs. 5 lakhs. You would need to pay around Rs. 30,000 to your trader, so your profit would be Rs. 70,000. However please remember that even though returns can be spectacular, the losses too can be high. The maximum loss that can be made is you losing the entire amount you have invested.

Never let greed take control and always stay sane. I have seen Option traders make amazing amounts of money, however with time a few of them become over confident and greedy and end up losing whatever they had made. I will share more details regarding options in my future posts as I find that it is one area still several people are unaware of.

Aniket Waghmare also shared some interesting details on options here. Rediff also has a fairly exhaustive article on options here. Spend some time trying to learn and understand things better. It always helps.

Irrespective of whether you trade in options, invest or run a bank too much greed is never good. I would suggest all of you look at the results of companies which just came out in the past few days and look at the currency losses incurred by a few. These aren’t too good and one of the reasons for these losses are aggressive people blinded by greed. A major private sector bank in India has made huge losses due to this, and the only thing to blame is greed and a lack of knowledge.

Stay calm, sane and smile. It is great to be aggressive and ambitious, but at the same time be sane and have the knowledge to fuel the aggression and ambition.

Happy wealth creation!

Yogesh Chabria
Happionaire

Get Inside Views From Market Players!

I like emulating the good things people do. All of you might have heard of the billionaire investor and philanthropist Sir John Templeton. He created his wealth by using a contrarian approach and not doing what everybody else was doing. It was based on buying into companies others were not buying into. He was amongst the first people to invest in Japan and also amongst the first to exit Japan before the bubble burst there. He did quite well for himself.

However he would do another thing which many people don’t know about. He would regularly give small parts of his money to people who had different outlooks towards investing and trading in order to make sure he can benefit from opportunities he might have overlooked. I like doing the same. There isn’t only one right way to do things, and I don’t like being stubborn. Being stubborn can mean a loss of opportunity.

As all of you might be knowing by now is that I am a long term investor because that is what I understand best. I believe it is much simpler to select a good company and hold it for the long term rather than constantly stay updated with what is happening in the markets and try to trade. I have traded in the past on my own and am not hesitant to say that have also incurred losses due to trading. What I have learnt is that even though I might like to benefit from every possible opportunity, I might not have the necessary skills, time or inclination to do so.

For example earlier when markets would go down, I would feel extremely tempted to buy put options or go short. Even though this did give me good returns, it also caused me to incur losses as I wasn’t fully aware of how things worked. I did not have associations with other traders in the markets who knew how things worked. Trading does depend largely on what major players in the market are doing. Knowing what they are doing is extremely important.

Presently I have Aniket Waghmare, a good friend who is a professional trader, trade for me. Initially I had put in 15% of my capital, but lately thanks to the recent volatility my trading capital has increased significantly. Aniket trades on the basis of technical as well on the basis of timely information usually not yet available in the media.

Besides me Aniket also trades for a select few HNIs and I usually get returns in the range of 45-50% a month. Of course even though the returns are extremely good, I don’t put larger amounts of money as the risks associated with trading are much higher than long term investing. Mostly trading is done in Options as the downside is limited, unlike in the case of Futures, while the upside is unlimited.

I thought it would be great if I could get Aniket to share some of his trading ideas with more people especially since markets have become so volatile. He has agreed to let more people in onto some of his trading ideas and decided to share his knowledge. To start with he has decided to share his ideas for a month starting from the 1st of August 2008.

All those interested can find out more about it here.

You can also subscribe online to the above service via Paypal/Credit Card.

Keep smiling and happy wealth creation!
Yogesh Chabria

India Is Changing Fast-Very Fast!

I had been out of the country for sometime. Even though I wasn't out for too long, things seem to be changing constantly in India. Within a period of 10-11 days lots has changed in Bombay/Mumbai. The airport is getting modernized, a new highway near the airport is functional, a new TV channel was launched, new buildings and shopping centers are ready, and several new shops have cropped up near my place. All this within a matter of just 10 days. Maybe these were the 10 days when all this change had to happen. Maybe it was a sign for me to take notice of the Indian economy even closer and let me know that markets are not the only barometer of economic growth. Change is good. It is good because it is inevitable and permanent. As they say the only thing permanent is change.

Politically speaking too lots happened, and in the end, that change did work out for the better. Crude prices also have gone down since there highs, and I guess my assumptions along with inputs from a few friends about them not staying up for too long weren't all that wrong. Not that it means anything and most probably it is just sheer co-incidence, for all we know crude could have gone much higher before it corrected.

People might have seen the chaos in the Parliament, however there is nothing new about seeing politicians behaving the way they were. It would have been abnormal had they behaved any other way. In fact things are finally looking good for our nation. With the nuclear deal going through India is going to stay in the good books of several Western nations. This also means more funds flowing in from pension funds in the future. Had the deal not gone through the reverse would have happened. Again when I talk about future I'm not really talking about the next six or nine months. It is like when a child gets admission to a good college. His life doesn't change overnight or within six months, but it is a good start and a positive sign.

A person who was short made a heavy loss today and told me how he felt that such a huge surge in the Index was illogical and irrational. I remembered something which is extremely useful for all of us- especially for those of us who are traders. We always need to remember that markets can stay irrational for longer than we can stay solvent.

Change is what creates wealth. Welcome change and make sure you use it as an opportunity.

Happy investing!

Yogesh Chabria
Happionaire

Does Boldness Change Everything?

Boldness Changes Everything!

More and more traders are being wiped out every single day as markets move up and down like a bouncing rubber ball. A trader I know was telling me how trading is a game where 99% of people donate their money to 1%. If you belong to the elite 1%, trading is great. However a lot goes into being a part of that 1% and not everybody will be a part of that 1%. Very few people will even get access or know such traders as they are extremely secretive and low profile. I like giving a part of my money to that 1% as I don't have the time to trade and I feel I don't have the mentality needed to trade successfully.

I have been having conversations with a few investors in international markets to understand what is happening better. From what I hear from them, America and the West will be affected very badly and still there are a lot more losses to be revealed. This will lead to a global slow down which will eventually run into commodities causing things like crude, metals, cement, etc. to all fall drastically. In India financial institutions will surely be affected by this and so will other businesses, however the affect on India will be much less purely in terms of economic fundamentals, however it can cause markets to correct as foreign investors will pull out money to save themselves. Personally I feel that this will be a great opportunity as with the rise of products like ULIPs/Insurance and Mutual Funds over the next 5 years, lots of local money will be coming into our markets.

As Laxmi Mittal's company ArcelorMitaal says Boldness Changes Everything. Boldness made Laxmi Mittal one of the richest Indian's in the world and the richest man in Europe. I shared his inspiring and motivating story with all of you in ITHW because I felt we investors can learn priceless lessons from entrepreneurs like him. In fact now is the best time to make use of the ideas you read about in ITHW. It seems the number of people wanting to buy cakes is reducing each and every day. The baker has no choice but to offer things cheaper. Now is the time to be bold because everyone else isn't. However being bold doesn't mean going and buying 100%. It doesn't mean buying based on rumors without research and knowledge. Being bold doesn't mean being crazy and suicidal. Buying 100% at one go, according to me is extremely risky because it doesn't let you benefit from future opportunities. Instead buy gradually into companies you like, I for example bought more into one of the companies I shared earlier which wouldn't be too affected by the international economic challenges. While reading my post there, you will notice how the same companies which had shot up over 20% within a matter of weeks are once again much lower. In fact almost all the companies shared earlier are much lower today in terms of stock prices. A few of you had written to me that time telling me how you regret not buying, but I had simply told you that don't worry about the stock prices and spend time learning. Opportunities will come if you have patience.

As Warren Bufett, the richest man on earth, says:

"Interpreting market volatility as a destroyer of opportunity when it is instead a creator of opportunity. If your approach is sound then volatility allows you to buy that which was cheap yesterday cheaper today"

Do you agree or disagree? Share your thoughts in our Comments section. I would love to hear from you.

Also several of you have been asking me about Exchange Traded Funds (ETFs). I shall be sharing my views on them shortly, however till I do that you can find out more about them by going through the FAQ at Benchmark Fund's website. I had met their executive director Sanjiv Shah, sometime ago and I found their fund quite interesting.

Have a great weekend and make the most of life and the opportunities life gives you!

Yogesh Chabria
Happionaire

Read the wonderful thoughts shared by fellow Happionaires on Politicians and the theory of Karma.

Have Politicians Forgotten The Theory Of Karma?

Politically things are not that good in India. I have always believed that whatever good has happened in our country has been because of people like you and me and never because of politicians. During the time of independence we had great people giving up their lives for the freedom of our nation, but after that we had politicians who were not afraid to take away lives for their own benefit. Not letting the economy and the common man prosper is the worst form of mass murder according to me.

To be honest I feel that politicians all over the world are the same irrespective of which political party they belong too. However they unfortunately have forgotten the theory of Karma. They have forgotten that as we sow, so shall we reap.

For example today our country has extremely high inflation and this is affecting all of us. But does it affect the ministers who are living in castles and have everything paid for with our taxes? Inflation can be reduced significantly if we increased efficiency and supply. We could cut down our consumption of fossil fuels by having a world class mass transit systems in major cities running on nuclear power. Imagine how much nicer it would be if we had a mass transit system like major cities in China. We would all reduce the use of cars and make sure we used the public transport.

Instead of doing what is needed, our politicians are busy hurling chairs at each other in the parliament and constantly arguing on petty issues. I find it disgusting when politicians come on TV and take credit for whatever economic growth we have. The sectors which have had growth have had it because of entrepreneurs who in spite of politicians were able to succeed. It has been because of intelligent and hard working people who have made sure their organisations and business grows. All that politicians would have done is eaten money and filled their own Swiss bank accounts.

Wrong policies and decisions by the government bodies affect all of us. They affect our investments and our lives. For instance if the nuclear deal doesn’t go through, it would certainly affect our investment grading abroad. A nation whose Prime Minister can’t decide on his own is never an encouraging sign for investors. It might lead to capital rushing out of the country in the short term.

I agree that the need for politicians has reduced compared to what it was say twenty years ago and that is been one good thing. But still we have parties like the Left trying to take our country back to the Stone Age. Not that other political parties are great. Personally I am of the view that inflation in India is not just around 11%, but much higher. Figures can be manipulated, and they always are. Just look at the prices of things we use in our daily lives, they have gone up by more than 40% in a matter of a few months.

Inflation, political problems, energy crisis, credit crunch, higher interest rates, sub-prime problem are all going to affect the markets. Investors are usually extremely jumpy and do not take rational decisions. Simply on hearing all this there is a flight of capital which has been bringing the markets down. Markets can go down further- I don’t know if they will or they won’t. Most retail investors who do not believe in value and do not bother too much about fundamentals are constantly grumbling and cursing everything now. Many of them have gone bankrupt due to taking leverage in the form of trading in futures. I understand their problem, however I wish that all of them learn from their mistakes and try to use this time as an opportunity to learn more. I too have made such mistakes in the past, but luckily I have learnt from them.

For value investors the markets going down is a great opportunity to buy, however the sad part is that most retail investors do not think this way and now even if they do, they might not have sufficient funds to benefit from this. Many will panic and sell and again after a few years will curse their luck for selling so low. My advice to them would be that use this opportunity has a time to start afresh. Every day is a new day and every day gives us the chance to start a new life. Once Edison had his whole lab burnt. Lots of his work and research was there in the lab, but he still was very happy. People were surprised and wondered why is he smiling even though his lab is burnt. He told them that all his mistakes have been burnt and he has the opportunity to start afresh. If you have made mistakes, do not worry and use this time to learn.

Less than around 4% of India’s savings goes into the stock markets. As more and more people are educated about investing, this figure is bound to rise. As this figures rises, unethical operators and dirty money belonging to politicians will be less likely to control the stock markets. As more and more people have a stake in our country’s growth politicians will be more responsible to make sure that their decisions are beneficial to investors and the capital markets. This correction has been one of the best things that could have happened for any value investor. It is giving us a chance to buy assets into an economy which still has a long way to go.

I am a strong believer in the theory of Karma. If we work hard today, learn more and invest in knowledge we will be rewarded. I was at the BSE building the other day and a good friend there who has been a part of the markets as well as the BSE for several decades very beautifully told me something from the Gita, which he has used in the markets. He told me that the Gita tells us to do our duty and not worry about the fruits and rewards. If we do our duty we will get the fruits either sooner or later. The same applies to the markets. We need to do our work and not worry about the returns in the short term. If a business is good, it shall be discovered by the masses sooner or later. These ideas are not very popular, but these are the very ideas which have stood the test of time. This simple idea runs into every area of our life. Let us all sow seeds of good in every area of our life. Do you agree with this way of thinking? Share your thoughts in our comments section.

Keep smiling and feel free to share whatever you read here with friends, family and loved ones!

Yogesh Chabria
Happionaire

Have you read what people had to tell Rakesh after he shared the wonderful list of L&T suppliers?

Any business needs people. Gautam Ghosh, one of the country's leading management consultants, shares a list of HR consulting firms across India. Do check it out and feel free to share your ideas with him.

Arun of Trak.in also shared an interesting list of Top 10 Things India Needs To Achieve Its Potential by Goldman Sachs. The first thing on the list is "Improve Governance." I hope our politicians are reading this.

A Happionaire Shares His Ideas!

Our Pune event went well by the grace of God. It was great to see so many people of all age groups sharing ideas and asking questions. I could have never imagined that so many people would get interested in finance and investing. This knowledge will surely go a long way. I have got several e-mails from people in other cities, curious to know what happened. Inshallah we will be having such events across the country and ideas will be shared here too.

I remember sharing my nimbu-paani story from ITHW and it was great to see a mother buying a copy of the book for her young son after listening to the story. She told me how the story was so simple that even her young son understood what the stock markets were. If I am not mistaken her son was barely 10 years old. That young boy is very lucky to have an intelligent mother who is investing in his future. With time I'm sure more young people would be empowered with knowledge and realize the power investing wisely has. If we stick to the basics, we can create wealth. However many of us simply choose to watch and listen to external noise, and thus forget the basics.

Several times retail investors ask me where and how they can get information. One of our fellow Happionaires proves that information is certainly available, we just need to find it. In my last post I had told you about Mr. Rakesh Khosla and how he shared something very interesting. He suggested I share it with all other Happionaires. I got an e-mail from him after my post where I talked about L&T's growth and how we can look at companies which will benefit because of this growth.

He shared a list of companies that might be doing some work for L&T or might be suppliers of some kind. Looking at this list we can find out a lot about companies that might benefit from growth in L&T. A few of these companies might even be listed and might be investment worthy. Even if you don't find an investment worthy company, you can certainly learn more about the work L&T outsources. I too am spending time trying to learn more about these companies. We should all thank Rakesh for sharing something so interesting. We can use this strategy for other companies too. Feel free to thank him and share your views in our comments section.

There is a lot of information available out there, and as investors sometimes we can be over burdened with information. With time and experience we will be able to figure out what is needed and what isn't.

A lot of our Happionaires also have queries regarding index funds, futures and options. I shall be sharing my views on this in my next few posts. Our last post has some interesting discussions on luck, karma and investing and I got to learn a lot.

I will once again quote Rakesh on something. He very beautifully said that at the moment it is sowing season for all us investors. The markets are down (and might go lower, we don't know-nobody really knows.) and the seeds we sow today will give us the harvest in the next 3-4 years. We can all either worry now or look at this as a sowing season. What we do today, will decide our tomorrow. The investment decisions we make today, will decide our wealth in the future.

Keep smiling and keep learning!

Yogesh Chabria
Happionaire

True Wealth, Luck and Pune Event!

A few days ago my grandmother was telling me about her neighbour. Her neighbour, a middle aged lady, was speaking very rudely to a young girl who does an excellent job of keeping their surroundings clean. This young girl works hard to make sure that their surroundings are clean, there isn't any garbage and people are able to live in hygienic surroundings. Not only was she speaking very rudely, she also had a lot of ego and thought herself to be much superior to another human being.

Just because she had a house worth several lakhs and wore fancy clothes, she thought she was superior and wealthy. Thankfully the young girl did not take any of it and replied back to her and even cursed the middle aged lady. I am glad she had the guts to do so. I like it when people stand up for themselves and don't tolerate injustice. With more economic empowerment we will have millions of more people not tolerating any form of injustice.

Someone who keeps the surroundings clean is a boon and not at all inferior in any way. We should all thank them every single moment, because without them we would probably be suffering from some major disease and would not be able to function. I find it very strange when I hear people behaving and speaking in an inhumane manner to people who might be helping them in several ways. Whenever I see someone behave badly with their driver or domestic help, I somehow how know that these people do not have true wealth with them. If such a person is good with me, I know the only reason they are good is not because of who I am as a person, but because of monetary or financial reasons.

True wealth isn't about how big our houses are and how many cars we have. It doesn't matter, because we all need to remember that at the end of the day we are not going to be taking any of this with us. If we can make people around us smile and make them feel nice, we will be sowing seeds which will benefit us in the future. I feel that luck and blessings have a very strong role to play in our life. Not many people talk about it, but the truth is that our luck also plays a major part in investing.

I don't know for sure what brings luck, but I have a feeling that the more good we do and the more smiles we spread, the more luck we get. There is certainly a higher force, which does justice in its own way. We might call it God, Bhagawan, Allah, Rama, Krishna, Jesus, Ganesha, Mosses.....

Why is it that people who are PHDs and MBAs and run big hedge funds end up losing millions and billions on the stock markets, but simple people without a proper education make millions? Yes, knowledge is important but luck and that special something is equally important. Luck, destiny, blessings all are. What do you think? Do you think luck is important as an investor and also in life? Share your ideas with us in our Happionaire comments section.

Ego, arrogance and hatred will never attract what is good and positive. We need to remember that anything is possible at any time. I have got several interesting e-mails, and recently I had Rakesh Khosla, a fellow Happionaire share something very interesting with me. I will be sharing it with you in my next post. It is nice to see more and more people doing research on their own.

I also hope to see all you fellow Happionaires this Sunday in Pune.

We are having a free workshop on “Investing in Indian Stock Markets The Happionaire Way” on Sunday, 22nd June, 2008, 6:30 pm onwards at

Crossword Bookstore, ICC Trade Tower,
Showroom No 1, Senapati Bapat Rd, Pune -411016
Tel: 020-66033050/51/52

It will be a lot like our earlier event in Mumbai. Feel free to get your friends and family along. I’m sure it is going to be tons of fun meeting all Happionaires in Pune!

Keep smiling and happy wealth creation!

Yogesh Chabria
Happionaire

Do You Think Opportunities Will Be Lost Again?

Will Opportunities Be Lost Again?

Economics has conventionally told us that as prices go down demand goes up - look at what is happening to the stock markets. Prices are going down, but is demand going up? It makes me laugh at times to think how millions of investors behave and I remember when I was very new to the markets, I too would behave in a similar fashion. I made mistakes, but I am glad I made them because I learnt a lot from them.

One thing I learnt is that every once in a way, we investors are given wonderful opportunities and the only mistake many of us make is to let these opportunities pass by, just because people around us are talking about doom.

I keep hearing people telling me how stock markets will hit 12,000 levels and they will buy at that time. The same people start grumbling when the stock markets rise and say "I wish I had bought then." Personally I don't know if stock markets will hit 12,000 levels or will hit 21,000 levels, I don't think anybody really knows it. What I know is that there are companies which are offering wonderful opportunities today. Investing in them today, doesn't mean that their stock prices won't go down in the near term- I always buy into them prepared for them to go down in the short term because I have learnt that investing is not a 'get-rich-quick' game. I follow a simple principle of never investing all my money, so that in case things become cheaper, I can buy more. The rewards from these opportunities will not be instant and you might have to wait for at least 3-4 years, but that is what investing is about. We can't plant a mango seed and expect to have a mango tree within one month. That might be possible if we plant weeds, but not with a tree which will give you and your family fruits for life.

At the moment you need to make sure that you ask yourself a very simple question. Ask yourself "Do I want to lose out opportunities which have the power to change my financial future or do I want to follow the herd?"

I hope that you decide wisely and don't lose opportunities again. You might be knowing about a few of my past investments, if you realize most of them were made when these stocks weren't the talk of town. You will realize that after buying into them, the stock price did go lower and I had to wait for a few years to be rewarded. Once again we are blessed with opportunities and this time I hope all of you make the most of them.

I would also like to thank all you lovely Happionaires for sending me such lovely e-mails, however it is extremely difficult for me to reply to over 200-250 e-mails in a single day. It would be great if you could use the comments section in the blog to communicate and share your ideas and views. I hope you understand and I apologize for it!

Also since it is Father's Day, I thought I will share a wonderful story written by a fellow Happionaire- Gopinath Mavinkurve called Daughters are Forever!

Happy Father's Day and Happy Investing!

Yogesh Chabria
Happionaire

Find Out What Happionaires Had To Say About What Needs To Be Done With Inflation

What Do We Do With Inflation?

In our last post I talked about how oil prices are rising largely because of speculation. We saw how violent the oil prices have been through last week. There are reports which say that if (oil) trader margin requirements are raised by 25%, oil prices would fall as much as $30. The thing about commodity trading is that a few people do make a lot of money, but the common man and woman simply suffers.

Things are not always fair. Now inflation too has been rising across the world and several people are worried about it. The thing about inflation is that if you do nothing with your money and just keep it in your bank account, inflation will slowly erode it.

The best way to beat inflation according to me is to invest in assets which go up with inflation, and not just go up, but go up several times faster than inflation. In fact during such times, a few people make extremely large returns because of the assets they hold. Once again, I know I will sound unfair and even heartless but such challenging times are in fact the best times for investors.

Something which is good for an investor might not be good for someone who is keeping all his or her money in bank savings account. Inflation causes prices to rise and thus holding commodities is one of the best things to do during inflationary times. However buying commodities when inflation has peaked is not a wise thing. Instead holding commodities when they are out of flavor is what is one of the best ways to create wealth. Just look at what has happened to iron ore, copper, cement, steel over the past four years. Anybody who invested in these today would be a happy person. I have easily made over 400-500% in some of my investments which deal with commodities.

Many of you might complain and say that you didn't buy into them four years ago. However this doesn't mean you won't get opportunities in the future. This also doesn't mean that at the moment there aren't assets which are ignored by the masses. Yes, you need to have the patience to wait for a few more years. But what really is the problem of investing and waiting, if the world's richest do the same thing? Markets might go down or might go up. You should not give a damn, because successful investors only care about there own investments and not about where markets are headed. Be like Arjuna and only look at your target and not what everybody else is investing in.

To fight inflation, you need to have a long term strategy because it is something that will always be there- maybe less or maybe more. Sometime ago everybody was going crazy behind real estate companies and real estate IPOs. See what has happened to them now. See what happened to IT in 2000. History teaches us a lot, and if we spend time learning and reading about historical events we will be able to understand investing better.

Some of the most successful investors I know are not great mathematicians, economists or accountants, but regular people who read and learn from history, psychology and simply observe everything around them.

Think about assets which will go up with inflation in the future. Think about how you can benefit from it and you will get several answers.

Happy wealth creation!

Yogesh Chabria

Happionaire

Read what Gautam Ghosh, one of India's leading management consultants, had to say about Invest The Happionaire Way.

Have You Seen The Happionaire TV Promo?

Real Estate and Retail Play!

All of you might by now have realized the importance of both growth as well as value. Investing should be holistic and you need to consider every possible factor. Just because a company has made low profits in the recent quarter, does not make it bad. In fact several times just because of a few special situations profits might decline, and this leads to the hammering of the stock price. Not necessarily that the company is bad. For example sometime ago cement company stocks got hammered because of government regulation and price control. Every analyst, journalist and broker out there was telling to sell cement. However was it really the time to sell cement or rather buy it when everybody sold in a panic? In the game of investing you need to keep your emotions under control and be able to see what others are not seeing. I know I might sound a bit ruthless when I tell you to buy when others are selling in a panic, but that is one of the best ways to play the game of investing. Just because everybody says something is right, does not make it right. Similarly just because everybody says something is wrong, it doesn't make it wrong. What makes things right or wrong are simple facts.

One company whose stock price has been hammered from a high of over Rs. 300 to around Rs. 90 has caught my attention, and I have started investing in it. This company is involved in manufacturing as well as retail and has had rapidly growing sales over the past few years, even though profits have not grown as well. One of the reasons I like this company is because it can benefit largely from the domestic Indian growth story. The retail sales are projected to grow exponentially in the next 3-4 years and large investments are being made into establishing a competitive retail chain. Besides that, this company also has significant amounts of land in major cities like Mumbai, which are being developed.

The company offers a lot of growth ahead and at the same time the land and factory make the remaining business almost free. This mixes elements of growth as well as value. As I mentioned earlier that companies should never be judged just by immediate returns and the last two quarters. If you go back into history, you will see how it makes sense to invest when there are challenging moments being faced. Laxmi Mittal bought steel mills in Kazakhstan when these units were all loss making and the government wanted to shut them down. He made his billions by having the guts to buy when nobody else had the guts to buy these sick steel mills. He did not have that much money and went around knocking several doors till he could raise the money. He is an inspiration for all of us and we should all follow those who have created wealth.

I would like to stress as usual that this report is being shared to help you learn more and you will need to try to search for more information on your own. The reason I am doing this is because this way you will learn more and understand better. What you learn can be applied to companies universally. Please never ever invest blindly without proper understanding and learning.

You can find out more about this company by downloading this report here. You would be directed to a Paypal page where you can pay securely via credit card/Paypal and once the payment has been received you will be able to download the report online.

Happy Wealth Creation!

Yogesh Chabria

Happionaire

See What Happionaire Had To Say About Being Traders and Investors At The Same Time

Don't forget to attend our free workshop on investing in Mumbai on Saturday, 24th May 2008

Is It Possible To Be An Investor and Trader?

Several times people ask me if I trade besides just investing for the long term. People want to trade so that they can have a regular cash flow, which can be used to fund their investing. I understand that very well.

It is possible to trade and invest at the same time. Rakesh Jhunjhunwala is one of the few rare people who does it quite well. However it is not something everybody can do without having the necessary discipline to keep trading and investing separate.

Most people end up mixing the two based on the way their investments are doing and that is one of the worst things that can happen. They enter with a trading mindset in a stock, and when the stock doesn't move up or falls 15-20% they end up telling themselves and everybody around them that the stock was meant for the long term.

On the other hand people who call themselves investors, enter a given stock and as soon as it goes up 15%-20% in a few days they end up selling. Only to see the stock growing exponentially in the next 3-4 years.

I have made the mistake of being both a trader and investor in the past and learnt from it. I am glad I made those mistakes, because they taught me a lot. I learnt that my mindset was built more for the long term. I learnt that I have many other things to do and can't sit hours in front of a trading terminal for the rest of my life.

Those who plan to do both, i.e. trading as well as investing must keep two separate accounts. I know investors who also trade, very clearly maintain that they have separate trading and investing accounts. Another thing you need to know as a trader is that you need to spend time understanding technical analysis and also keep your emotions under control. You need to know when to book your losses and when to book profits. It can get very stressful and very few people can do this for several years. Most people do it for sometime and then move on to other things with the money they have made.

As a trader it also helps to have internal contacts besides just technical knowledge. I'm sure all of you understand what I mean.

Personally I have someone who is very good with technicals trading for me with a small part of my capital. This keeps my head clear and lets me study companies just for the long term most of the time. Of course sometimes a few trades do come in that are too tempting to miss.

Trading isn't for everybody and you should trade only if you have the time, dedication and emotional strength to handle the volatile nature of markets. Your broker might encourage you to trade more even as a beginner and will tell you how you can buy now and exit in the next two days to make a quick buck. But please remember that the main goal of a broker is to make brokerage and not to make you wealthy. Of course not all brokers are this way - but many are this way.

If you are somebody just starting out in the markets, please note that markets are unpredictable and it isn't the best idea to depend only on them for a regular cash flow. You need to have some other source of income- at least till you make sizeable amounts of money.

What do you think? Do you trade and invest? Have you traded and invested in the past? How has the experience been? I would love to hear from you. Feel free to share your ideas in the comments section.

Happy wealth creation!

Yogesh Chabria
Happionaire

How Free Are Free Tips?

A few days ago I met a friend who I had introduced to investing several years ago. I started investing when I was 16 and I remember a few of my friends getting started after I told them what I was doing.

I hadn’t started with a lot of money and I remember how a large part of my time was spent learning and trying to find out more. However this friend of mine would always tell me that he knew some ‘punters’ and they provided him with ‘hot’ tips. He used to tell me that markets are all manipulated and I am wasting my time by doing research and reading so much. Most of the times the stocks he would suggest would run up 20-30% within a few days, however I still would not invest in them.

I wanted to study and learn and be sure before I invest. Fortunately or unfortunately several stocks I would invest in would either not move at all for a few months, and in some cases prices would even go down. I would select these companies after spending a lot of time learning about them. However I knew from studying about the history of stock markets that good companies always make good investments in the long run provided they are bought at a good price. I wasn’t wrong- those stocks did reward me in the longer run.

He would tell me that if I wanted to make quick money I need to stay in touch with ‘hot’ stocks and just invest in them. I continued following my investment strategy or investing in value and fundamentals, and by the grace of God it hasn’t been too bad over the years.

Unfortunately for my friend things haven’t been that good. He told me how he did make a lot of money, but after that he became very over confident and started investing n futures. He made even more money after that. However the recent crash caused not only his capital to be wiped out, but now he is heavily in debt. He told me how he will never invest in his life now as he has learnt his lesson.

I explained to him that till now he hasn’t been investing, but gambling his money and he needs to start learning and investing in knowledge before he invests his money. I know I keep emphasising this all the time. But it is a simple truth if you want to create wealth for the long term. In our business the more knowledge you have the more wealth you can create. In fact not just in our business, but in any other field of life.

Once again when markets start to rally, millions of people will forget about the risks involved with following supposedly ‘free tips’ and not investing in knowledge. As Kishore commented- those ‘free tips’ are very expensive. They cost him over Rs. 3 lakhs. Millions of retail investors end up paying lakhs and crores of rupees for such so called ‘free tips’ because most of the time such tips are motivated and spread by manipulators through their chain of brokers.

Life is simple. It is just that all of us need to be reminded about some basic facts on a regular basis. I want to motivate all of you to hunt for knowledge and learn as much as you can. This blog will of course not give you all the knowledge you want and is just there to motivate you to keep searching. There is an immense universe out there- go explore it and don’t forget to have fun while you are at it! My search for knowledge is eternal.

Keep smiling and have a great weekend!
Happy wealth creation!

Yogesh Chabria
© Happionair