Archive for the ‘Investment books and book reviews’ category

Book on Retirement : Retire Rich Invest Rs. 40 a day

January 23, 2010

Book written by me….

RETIRE RICH INVEST, 9789380200071

book review that I found online…

About the Book : – To most people retirement is an age. It of course depends on your health, the company you work for etc. However in the first chapter I would like to introduce you to the concept that retirement is an amount of money! After all, if you have that magical amount why not retire early?

The second chapter takes you through the steps and importance of planning, and to the dangers of not planning.

Retirement is a goal and has to be approached in a financial planning mode. Retirement Goal Setting becomes important. How much money is adequate for a person to retire? Here is a generic answer telling you what are the factors to consider while trying to answer this question. This chapter has many pointers and a calculator which leads you towards the answer.

Can you really retire by investing an amount as little as Rs. 40 a day? The answer is yes it is the power of compounding. If you do have or time on your side, it is possible to create a retirement corpus on an amount as small as Rs. 40 a day. And the fantastic thing is that this small amount can be got by making simple changes in your life style.

If you have accumulated money for your retirement, you should also know how to withdraw. Here we deal with what is annuity, what are the methods of creating annuities, what options are available, and the works about annuity.

A few chapters are devoted to answering how much and what type of insurance should you look at during retirement, the attitude of the Indian family to retirement, the need to make a will, some retirement blunders, etc.

What is interesting are the tables at the end of the book telling you how much to save and invest – and case studies about portfolio make over for retirement.

Available at the following shops:

Twistntales (Pune) Shop1, Siddarth, Gaikwad nagar, Aundh, Ph:-020-25881465 / 25899745

Paperback (Thane) Dayanand – cell no. 9967255843  022-21714414

Bookzone, Fort, Mumbai. (022-25054616/17)    All Crossword Stores in Mumbai and New Delhi.

New Delhi: Jain Book Agency (011-4151380), Land-Mark (0124-4143020), Om Bookshop (011-46075621), Pages (011-46132001).

Chennai: Landmark – has the copies. Odyssey not sure..Crossword has it..

Also available online from cnbc..check out on google..

Best book on personal finance

June 9, 2008

Here is a fine book on personal financial planning! it is called the “Richest Man of Babylon” and was suggested to me by the owner of a cute book shop named twistntales – based in Aundh, Pune.

Here is a book review of the same -hopefully it will inspire you to buy the same, and some of you will be inspired to live it!

Many people think “simple” means easy to do. This is wrong. Completely and totally wrong. Look at an example like getting up in the morning and going for a walk every day.

Though it sounds simple, many of us find the “everyday” really difficult, is it not?

Similarly those who know that “I should save 10% of my salary, but do not” are in that category. If you wish to learn about simple things in personal finance, one book you cannot afford to miss is “The Richest Man in Babylon” by George S Calson.

This book is a guide to financial understanding. It offers insights into how to get money, keep money and make your surpluses work for you. The book takes us to Babylon, the place where the basic principles of finance were established. Babylon became the wealthiest city of the ancient world because its citizens were the richest people of their time. They appreciated the value of money. They practiced sound financial principles in acquiring money, keeping money and making their money work harder.

Historically Babylon is a rich place famous for its treasures of gold and jewels. One naturally pictures such a wealthy city as located in a suitable setting of tropical luxury surrounded by rich natural resources of forests and mines. Such was not the case. It was located beside the Euphrates River, in a flat, arid valley. Babylon is an outstanding example of man’s ability to achieve great objectives, using whatever available means at his disposal. All of the resources supporting this large city were man-developed. All of its riches were man-made.

Seven Cures for a Lean Purse:

The book starts as “Lo, money is plentiful for those who understand the simple rules of its acquisition.

1. Start thy purse to fattening

2. Control thy expenditures

3. Make thy gold multiply

4. Guard thy treasures from loss

5. Make of thy dwelling a profitable investment

6. Insure a future income

7. Increase thy ability to earn

The essence of the book is in the first chapter. Kobbi and Bansir two poor people go to meet Arkad. Arkad is a friend of both Kobbi and Bansir – but very rich. It is nice to see George start the book with both these poor men going to Arkad to learn about finance rather than ask him for a loan or a gift. This is akin to Rich Dad Poor Dad – where Robert Kiyosaki starts by saying that it is not about earning money, but about learning money management. Once you learn money management you know how to earn, spend and invest.

Richest Man In Babylon” is a book that was first published way back in 1926. Since then it has sold more than two million copies and has become a financial cult classic. The brevity and simplicity of the book can be deceiving as it is a powerful little book with a powerful message that can change lives. It is only 144 pages but a dynamite of a book and a very well read book. It is arguably the first book on financial planning – for people who bother to read and implement the book.

Richest Man In Babylon Book Quotes

  • “Gold cometh gladly and in increasing quantities to any man who will put by not less than one-tenth of his earnings to create an estate for his future and that of his family.”
  • “Gold laboreth diligently and contentedly for the wise owner who finds for it profitable employment, multiplying even as the flocks of the field.”
  • “Gold clingeth to the protection of the cautious owner who invest it under the advice of men wise in its handling.”

When you read these quotes you realize that what some of the newer money managers are true. It becomes very difficult for a retail investor to know how to invest – it is easier for him to invest through a mutual fund.

  • “Gold slippeth away from the man who invests it in businesses or purposes with which he is not familiar or which are not approved by those skilled in its keep.”

Does not Warren Buffet say “ Risk is when you do not know what you are doing”? Do we not see incompetent “advisors” ruin their client’s portfolios?

  • “Gold flees the man who would force it to impossible earnings or who followeth the alluring advice of tricksters and schemers or who trusts it to his own inexperience and romantic desires in investment.”

Momentum investing, Investing in fads, day trading, are all ways for a man to lose money. Only the terminology changes but the world is full of tricksters and schemers, so this advise is also timeless.

Countless readers have been helped by this timeless parables of Babylon. The fact that it has sold 2 million copies (and counting) and the fabulous presentation style in a nice manner has ensured its popularity. We in India are of course going the American way in the way we spend. However, reading this greatest of all inspirational works on the subject of thrift, financial planning and personal wealth will surely inspire you to learn about financial planning (chapter 1), budget for your expenses, guard against lending to friends and relatives, own your home, invest in a pension plan, take term life insurance, keep increasing your ability to earn, create a cash flow independent of your job, and using all these techniques become seriously rich and not live from one EMI to the next.

Reminiscences of a Stock operator – a book review

May 3, 2008

I had done this piece for SENSEX – a magazine run by the BSE (the mumbai stock exchange or bombay stock exchange)

Reminiscences of a Stock Operator (Wiley Investment Classics)
by Edwin Lefèvre

Once upon a time, quite long ago – the US was a highly unregulated market.

Very briefly, Jesse Livermore’s life as a stock and commodities trader is portrayed in the book through the character of Larry Livingston.

It is a story well told – and is surely gripping. It is racy and you will be able to read it in a short time. Readers who have been in the Indian equity markets since the 1970s should be able to identify with some of the happenings in the book. A note of caution though – this book is only meant for the persons who understand how brokerage houses work – concepts like churn and price rigging are clearly broking concepts!

It is also important to remember that Jesse’s life had many upheavals – and he died by committing suicide.

Jesse Livermore was supposed to have been responsible for the market crash of 1929, the tsunami of all market crashes. A clear indicator perhaps that not too many fortunes have been made by trading. Livingston started out life at the age of 14 as a quotation board boy (those of you who went into the ring at the BSE would surely remember the “kaka” who would write the quotations on the black board – just outside the “ring”). Here he developed an uncanny knack of predicting the patterns – just a good feel for numbers. Surely as a trader (even as an Investor perhaps) having a feel for numbers is necessary.

A friend wants him to play on “Burlington” – he quickly amasses $ 1000 – and his mother wants him to “save up” because no boy so young could have made so much money. But a trader is always a trader so all the money constantly becomes margin and Livingstone goes through many ups and downs in life. Traders have this peculiar trait of playing – it is not about money – it seems like a game – its about winning. And like Yudhishtra of Mahabarat they cannot ever seem to walk away with a small loss or a small profit.

You will also see some absolutely foolish ideas being touted to Larry and even as a small boy he realized the foolishness of the idea. In page 45 you find mention of one such idea – making a client buy a share and immediately close the deal. Sure, clients like action, but at least at the year end the client sees his P&L account and knows he has been had!

He tells us about being invited to New York by Williamson & Brown. Their biggest client is Alvin Marquand who is rich and is also Williamson’s brother-in-law. Williamson wants Livingston to trade through W&B and gives him a seed capital of $ 25,000. Livingston uses the capital, makes enough money to repay Williamson. Williamson does not take it back – and tells Livingstone that he is needed to protect his big clients. The ability of Livingstone to see through the transaction – and not allow Williamson interfere with his deals is amazing in hind sight. It is difficult to guess the motives of brokers or poker players!

The story of how a bucket shop tries to pull a fast one on him – of the sugar speculation is spine chilling to say the least.

Some of these methods may not be happening in the bigger cities, but I recently heard of bucket shops in rural India – however could not verify the authenticity of the same. Surely in rural India where banks are a rarity, broker’s contracts would be a dream. Surely some kind of bucket trading could be happening. Only in a bear run would some of these horror stories come out.

However, if you see stories like Consolidated Stove- you get feeling in your stomach that you just saw it happening!

Like a Random Walk Down Wall Streets many axioms, this book too has some axioms.

“SPECULATION IN STOCKS WILL NEVER DISAPPEAR”

Sounds so simple and so profound, and true! Till date you hear horror stories of clients calling their brokers to buy “ISN E 42300” – many of them do not know the names of the scripts that they are buying. You need to be in a broker’s office to believe this statement!

“WHATEVER HAPPENS IN THE STOCK MARKET TODAY HAS HAPPENED BEFORE, AND WILL HAPPEN AGAIN.”

We have all been there, seen that, and again believe the pundits on Television when they say “This time it is different” – it of course requires a John Templeton to call these the most dangerous words in the Investment world.

“WEAPONS CHANGE, BUT STRATEGY REMAINS STRATEGY.”

Whatever you do, this is true. When you do make money (or lose money) you need to go back and question your strategy. Livermore had clear strategy – whether it was in a bucket shop or the New York Stock Exchange! I think whatever works for you as strategy – should be questioned repeatedly so that your brain does not blind side you into a false sense of confidence.

“THOU SHALL NEVER FIGHT THE TREND”

The trend is your friend. This is a timeless, and perhaps a useless saying, because the human mind’s ability to see a trend is not so simple. In fact, what you see as a trend is just the mind wanting to believe the trend. Many books on mathematics and statistics keep telling you that recognizing a trend is difficult.

“LET YOUR PROFITS RUN AND CUT YOUR LOSSES SHORT”

* “NO STOCK IS TOO HIGH TO BUY OR TOO LOW TO SELL”

Jesse Livermore was everything you think he was, and more. His untimely death at his own hand is not what should be studied, and learned. We all have our pains that we must deal with. Read this book, and change your investing life forever, or don’t read it, and pay a price with your portfolio, and forgone profits. Good luck

Best books on investing – must read list

March 21, 2008

Here is a complete and full list of books that I like my students to read. Extremely long, and randomly written i hope to write reviews on all these books and it should be available soon. Some of these book reviews have already appeared in the In house magazine of BSE called Sensex. Some of the reviews may also be available online – in the personal finance section of myiris.com. Books have been listed completely at random – and I have intended it to look like an index. Keep coming back to this page – will add short summaries or comments on each book from time to time as well as full reviews. One of the links on the blogroll is a quaint friendly neigbourhood book shop – twistntales. The other place where I have bought most of these books is bookzone.com based in Mumbai.

A Random Walk Down Wall Street by Burton Malkiel.

Jeremy Siegel’s Stocks for the Long Run

Commonsense of Finance – Dr. Prasanna Chandra – get the basics of finance and accounts from here so that you understand concepts like P&L, B/ Sheet, write offs, taxation, etc.

Analysis for Financial Management by Robert Higgins.

Accounting Shenanigans.

Why Smart People Make Dumb Money Mistakes by Gary Belsky and Thomas Gilovich.

Parag Parikhs’ book on Behaviourial finance has brought some Indianness to this science! The book is called Stock to Riches.

Roger Lowenstein’s Making of an American Capitalist.

Benjamin Graham‘s The Intelligent Investor is a must-read. But it can be kind of painful for today’s kids who do not like to read about bond valuation. However, if you realise that bond valuation is the basis from which equity valuation evolves, you will appreciate this book better!

Phil FisherCommon Stocks and Uncommon Profits

Speaking of Phil Fisher leads us to Ken Fisher – and his latest book “The Only 3 questions you need to know” is also an excellent book to read, and as useful as his father’s book. It clears a lot of cobwebs – turning the PE ratio is a useful example!

Peter Lynch‘s Beating the Street is the journal of a successful money manager, who is also a good communicator. CIOs should do their job well and also be able to communicate their skills and strategies. The Indian examples of course are Mr. Nilesh Shah of Icici Prudential and Mr. Nagnath of DSP Merrill Lynch.

You Can Be a Stock Market Genius by Joel Greenblatt –it’s relatively short, full of case studies, and engagingly written.

John Train‘s Money Masters of Our Time and The New Money Masters

Reminiscences of a Stock Operator – Edwin Lefevre. Reads like a pot boiler!

Seth Klarman‘s Margin of Safety.

Marty Whitman‘s The Aggressive Conservative Investor- I personally found this a difficult read!

David Dreman‘s Contrarian Investment Strategies.

Munger’s biography–Damn Right! by Janet Lowe.

John Kenneth Galbraith’s A Short History of Financial Euphoria.

Devil Take the Hindmost by Edward Chancellor is a fantastic and in-depth history of manias through the ages.

Ron Chernow’s The House of Morgan

Peter Bernstein‘s 2 books – Capital Ideas & Against the Gods

The Money Game – Adam Smith

Michael Lewis’s 2 books: Liar’s Poker and Moneyball.

Roger Lowenstein’s When Genius Failed, which chronicles the rise and fall of the Long-Term Capital Management hedge fund in the late 1990s.

Bethany McLean’s The Smartest Guys in the Room,

Kurt Eichenwald’s Conspiracy of Fools

Robert Cialdini‘s Influence Fooled by Randomness, by Nassim Taleb, is more directly about finance, and is thought-provoking. Taleb explores how easily we confuse luck with skill, and the importance of knowing which is which. He has followed this with Black Swan. Frankly if you are planning to read, or have read Black Swan, his earlier book Fooled by Randomness becomes unnecessary.

Bruce Greenwald‘s Value Investing

Michael Porter‘s Competitive Strategy.

The Intelligent Asset Allocator: How to Build Your Portfolio to Maximize Returns and Minimize Risk – by William J Bernstein

Asset Allocation: Balancing Financial Risk by Roger C Gibson

Rich Dad Poor Dad – Robert Kiyasaki Market Wizards – Jack D SchwagerThe Warren Buffet Portfolio – Robert Hagstorm

Future for Investors – Jeremy SiegelCommon Sense on Mutual Funds – John BogleNew Perspectives for the Intelligent Investor – John Bogle

The Art of Short Selling – Kathryn F Staley

Barbarians at the Gate – Bryan Burrough and John Helyar

Beating the Dow – Michael O’Higgins and John Downes

Buffet – the Making of an American Capitalist – Roger Lowenstein

Extraordinary Popular Delusions and the Madness of Crowds – Charles Mackay

45 years in Wall street – WD Gann

Great crash of 1929 – J K Galbraith

How to lie with statistics – Darrell Huff

John Maynard Keynes (Volumes 1 and 2): Robert Skidelsky

Soros on Soros – George Soros with Byron Wien and Krisztina Koenen

Technical Analysis of Stock Trends – Robert D Edwards and John Magee

Think like a Tycoon – W G Hill

Where are the Customer’s Yachts – Fred Schwed Jr.

The Investor’s Guide to good financial health

February 23, 2008

If this sounds like the title of a book, well it is!

I have collected a few of my articles – they may well be available on my blog and elsewhere that i have written – which means rediff.com, moneycontrol.com, and myiris.com.

This book is a part of M3 – Msigma – as iris calls it. Msigma is a tool which helps you consolidate all your financial details – bank book, credit card statement, life insurance policies, salary slips, share statements and HEY BINGO once you do all this, it helps you file your tax returns.

Not that I am trying to push this product on you, but i believe it is available on the myiris.com site…and a trial version is available…just try it!

Jeremy Siegels thoughts on investing…

February 5, 2008

When Jeremy Siegel speaks you listen! Author of the book “Stocks for the long Run” Jeremy is surely one of the investment gurus. He has said a few things in his latest comminque. This is worth listening to. I am producing it as it is, and (1) is not even relevant to you and me if you are also not in the US of A. So read on….

1. Investing abroad is essential. “Sticking only to U.S. equities is a risky strategy for investors.”

2. Don’t be too optimistic. With the increasing popularity of foreign investing, Siegel predicts that today’s globalized world will result in higher price-earning ratios, but as a result, average returns are going to be lower for foreign stocks. Hey that means us (!). You have to look at equity returns to be better than debt returns. So if your equity returns are about 12% p.a. thank your stars. Forget 30 and 40% returns that the market has pampered you with.

3. This technical system works! The only technical system that has really worked to beat the market over the long run is the “Dogs of the Dow” strategy, picking the top 10 highest-dividend-paying Dow stocks. No system works every year, but Siegel found that this Dow 10 technique has staying power. Please remember Siegel is talking about the past, I am not too optimistic about this theory. I am more convinced that the greater the success of such theories the greater the chance of failure. No comments.

4. Stay away from this popular stock category: tech and biotech (with few exceptions). “Most technology stocks have greatly under performed the market.” The few winners (such as Microsoft or Merck) can’t make up for the huge number of losers. Siegel calls this “The Growth Trap.” Cannot agree more. Look at Biotech, Mindtree, ..you have a graveyard out there. Keep it simple – do an SIP in a index fund.

5. Avoid most, but not all, IPOs. According to a study by Siegel of IPOs between 1968 and 2001, nearly 80% of new stock issues under-performed the stock market index. Ha ha ha…Indian markets have not been researched but there are a few stocks available at 40% discount to the issue price.

6. Dividends are a better indicator of future stock performance than earnings. Earnings can be manipulated by depreciation schedules, sales of assets, and other hidden factors. But dividends don’t lie. According to Siegel’s studies, the best way to beat the market is to invest in high-dividend “value” stocks with low P/E ratios. “These high-dividend strategies have provided investors with higher returns and lower volatility over the past five decades.” Sorry I do not know how to find such stocks in the Indian market. Surely it is not a “value” market it is a “growth” market. Surely not a dividend yield market.

7. Use Exchange Traded Funds (ETFs) to increase and protect your profits. Siegel calls ETFs “the most innovative and successful new financial instruments” since stock options and commodity futures were created in the 1970s.