Best advice you can ever get - The 5 Minute WrapUp by Equitymaster
Investing in India - 5 Minute WrapUp by Equitymaster

Best advice you can ever get 

A  A  A
In this issue:
» You can't go wrong with this advice
» Gold is set to's why
» Can Nilekani bring about the much-desired change?
» India's water woes
» ...and more!!

Have you ever wondered why some people are so successful in life? Or what are the traits that make people successful, some more so than others? Successful people might be intelligent. Or have had a socially well connected upbringing. Or be naturally energetic and open and positive. But a lot of the factors that make some people more successful at almost anything in life are very much under their control. Much can be improved in anyone's life by learning from the people that have gone before us.

So, how about learning from the success of investors who have raked it big? While we've read or heard about several successful investors around us, one common trait we have found in them is the hard work and discipline with which they have unearthed investment ideas. Jim Rogers is one of them. Rogers is one of the most successful commodities investors the world has ever seen. And he now has a very valuable advice to share with you that can make you a better investor.

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"Read everything," Rogers says. This is the advice he had got when he was starting out in his career. And the advice was - "If you simply read the annual report of a company, you're ahead of 98% of the people on Wall Street. If you read the footnotes, you're ahead of 100% of them." Rogers has held the advice dear to this day, though he tends to read a few things in addition to annual reports (like competitors' annual reports, trade journals, and everything that one can get his hands on).

Even Warren Buffett echoes Rogers' emphasis on reading. Charlie Munger, Buffett's long-time partner at Berkshire Hathaway, once told a gathering, "Warren was so successful because he sits on his ass and reads."

We are sure you can't go wrong on Rogers' and Buffett's advice to read everything you can get your hands on to - before making an investing decision or even otherwise. And if you are yet to make a start, read 'The Intelligent Investor' written by the father of value investing, Benjamin Graham. If you have read it already, re-read it!

Buffett started his highly successful investing career with this book. Why can't you?

Investors would perform much better if they took emotion out of the equation, advises legendary investor Warren Buffett. "The best advice I've received on investing I received in chapters eight and 20 of 'The Intelligent Investor," he recently told the Fortune magazine. "That's the framework for what I do in investing," he added.

And what's that framework? As Buffett says - "Take the emotion out of it (investing) and just simply stick with good businesses." We can't agree more!

You would be forgiven to assume that the chart below is a crude representation of a downtown road leading to the Empire State Building in New York! Joke apart, the chart is perhaps the most compelling reason to seek safety in commodities such as gold. The humungous jump in money supply, of the order that we have not quite seen before, is most likely to result in runaway inflation down the road. Although it may not be a threat right now as people are still scared to spend and banks are hoarding cash, once the confidence or what are known as 'animal spirits' make a comeback on the global economic landscape, it is hard not to imagine a potential inflation threat.

Annual percentage change in monetary base
Image Source: DailyWealth

Don't believe us? Art Laffer, the economist behind the creation of this chart, has this to say, "The percentage increase in the monetary base is the largest increase in the past 50 years by a factor of 10. It is so far outside the realm of our prior experiential base that historical comparisons are rendered difficult if not meaningless." He further adds, "To date what's happened is potentially far more inflationary than were the monetary policies of the 1970s, when the prime interest rate peaked at 21.5%."

We cannot help but agree. The way the events fold out may not be under our control, we can indeed seek protection from it by keeping some part of our portfolio in gold, a metal that is widely believed to be the perfect hedge against inflation.

Change is coming to India, or so we can hope, with one of India's most revered corporate citizens getting down to a new role in the country's governance. Nandan Nilekani, the co-Chairman of India's second largest and among the most respected companies, Infosys has quit from the company's board after being appointed the chairperson of the Unique Identification Authority of India, an estimated Rs 20 bn national project to build India's database of her billion-plus population.

In a country where corporate chieftains have never played any key role in governance (despite many being part of the government), Nilekani's appointment is like a breath of fresh air. It also is a hope that the country's governance will see a change for the better. As for Infosys, we need to hear what they have to say when they come in front of investors with their quarterly results in the second week of July.

Tata Steel, India's largest steel producer held its analyst meet today morning to discuss its FY09 performance. Although the expectations from the company were already muted what with recession gripping Corus, its overseas subsidiary, the way the stock markets have reacted to the news indicates that the company has not been able to meet 'market expectations'!

Although it is not going through the best of times, we came away with the feeling that the management is leaving no stone unturned in trying to ensure quick recovery. A large part of it will of course depend on how the European economy shapes up. We are not unduly worried though. The company has enough firepower to ride out the current patch of turbulence. Over the long term, we might have a potential winner on our hands.

While it rains in the western part of India, the north is reeling under severe water shortage due to weak monsoons. And now it faces a double whammy. Depleting water level has compelled Bhakra Nangal dam to decrease the water supply for irrigation to Punjab, Haryana, Himachal Pradesh and Rajasthan. Due to delayed monsoon, the water level currently stands at 1,505 feet as against 1,596 feet recorded last year. Hence, in order to stock enough water, the dam has decided to cut the water supply to 22,000 cusecs from present levels of 28,000 cusecs till 10th July. The dam authorities have in fact alerted the states that there might be a further cut in supply or even a temporary closure if the 'Rain God' doesn't show up soon. Bad news for now!

Stocks in India closed strong today, led by gains in sectors like capital goods and banking. The Sensex closed with gains of around 420 points (2.9%), closely followed by BSE's midcap (2.4%) and smallcap (1.9%) indices. India, in fact, led the Asian markets while others like Hong Kong (up 1.8%) and Japan (up 0.8%) followed. European markets have also opened the day in the positive.

04:46  Today's investing mantra
"Investing is simple but it's not easy. Because emotions get in people's way or greed and that sort of thing. They get all excited about stocks when they've gone up recently, and they get depressed when they've gone down." - Warren Buffett

P.S. We have initiated a new series directed to women investors. The series is titled - Women's Weekly - and will be a conduit through which we will provide our views and recommendations on how should women go about managing their finances and invest for a better financial future. Do share it with your friends and family members! Click here to read the second article of this series.

Women readers, you can also take our poll, the Money Mojo, to gauge your economic insight and share your experiences with us!
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7 Responses to "Best advice you can ever get"

Sarath Chandra Nimmagadda

Jun 28, 2009

420 points' rise on Sensex on Friday! The number is somewhat interesting :) :D


Manoj Singhal

Jun 27, 2009

pls send the document


S K Goel

Jun 27, 2009




Jun 26, 2009

your news mails are great,but you can improve it lot more,and sometimes good levels of hidden inside story is given that benefits and educates investors,keep up thumbs up to you team.


Kanu Warriar

Jun 26, 2009

Most compelling reason to seek safety in commodities such as gold:

A footnote to be added here would be that the monetary base expansion figuring here is USD would be interesting hear views on how gold would move relative to currencies that were'nt debased to this exent.



Jun 26, 2009

Why create a gender bias where none is required. your "Women's Weekly" is the point in question.

Investment advice & wisedom is applicable equally to all. Infact more often than not, women are more savvy investors than men.



Jun 26, 2009

Is investing any different for women?? It would have been more sensible to term it as "investing for the novice investor"

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