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What to Do When There’s No Stock to Buy?

The Sketchbook of Wisdom: The second print of my book – The Sketchbook of Wisdom – is now available. Click here to reserve your copy . Send me an email at vishal@safalniveshak.com if you wish to place bulk orders.

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Investing is difficult.

But not investing – sitting with cash and not finding stocks worth buying – is more painful.

After all, to most of us, activity equals achievement.

The need to remain active at all times is what leads CEOs to make bad capital allocation decisions, especially during heady times. And that is what leads most investors – big or small – to buy overpriced stocks.

We all want to be in the thick of action – largely because we hate the feeling of missing out on the party.

Beware the IP-Ohs

People indulging in the stock market are often people with a lot of emotions. They get excited by something new, especially if it holds the promise of making them a whole lot richer and provides bragging rights at their next social gathering.

Maybe that’s why amateur and professionals alike tend to lose their minds in bull markets, particularly when a hot initial public offering, or IPO, is offered to them by their broker.

On one hand, had you bought into the IPOs of Infosys (yes, remember?), HDFC Bank, Sun Pharma, or TCS, you would have had some volatile price fluctuations along the way, but there is no question that you have made enough money to substantially change the quality of your life. Clearly, a well chosen IPO can be a life changing experience if you simply make the right choice and stick with the stock for years.

On the other hand, there is a large majority of IPOs such as those of Reliance Power, Suzlon and DLF, which have destroyed investors’ capital. With such businesses, even the “long-term” cannot save you from permanent capital destruction.

[Read more…] about Beware the IP-Ohs

Safal Niveshak is 10 Years Old

After I had decided to quit my job in late 2010, we got to know that our second child was on the way.

There was a momentary dilemma whether to go ahead with the decision or not, as an added member in the family would have meant added responsibilities, and that too in a period of high financial uncertainty.

I had exhausted a large part of my savings to pay off my home loan to be able to quit that job, and now there would be an extra mouth to feed, apart from other expenses that come along with a new-born – medical bills, diapers, etc.

“Go for it!” was my wife’s call. “We will see what happens only after we take this step,” she comforted me. “Worst, if nothing works out after you quit your job, we will sell our house and move back to our hometown.”

Of Free Brains and Effortless Money

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In the hospital, the relatives gathered in the waiting room, where a family member lay gravely ill. The doctor came in looking tired and dull.

“I’m afraid I’m the bearer of bad news,” he said as he surveyed the worried faces. “The only hope left for your loved one at this time is a brain transplant.”

“Oh, how risky is the procedure?” a relative asked.

“It’s an experimental procedure, very risky,” the doctor replied, “but it is the only hope for your loved one. Insurance will cover the procedure, but you will have to pay for the BRAIN.”

The family members sat silently as they absorbed the news. After a time, someone asked, “How much will a brain cost?”

The doctor quickly responded, “Rs 20 lac for a male brain, Rs 5 lac for a female brain.”

The moment turned awkward. Some of the men had to ‘try’ to not smile, avoiding eye contact with the women.

A man unable to control his curiosity, finally blurted out the question everyone wanted to ask, “Why is the male brain so much more than a female brain?”