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A Little-Known Japanese Secret for Compounding Wealth

Sep 22, 2017

Rahul Shah, Editor, Smart Contrarian

Ikigai is a Japanese concept that means 'a reason for being'.

The Japanese believe everyone has an ikigai, the reason they get up in the morning feeling all charged up.

This is what ikigai looks like...

The small brown region right there at the centre - where all the circles come together - that's the ikigai for a fulfilling career. That's where four overlapping qualities - what you love, what you are good at, what the world needs, and what you can be paid for - come together in perfect harmony to create a perfect career.

But ikigai doesn't have to be about work or income. It can be about any facet of life that you consider important.

To achieve ikigai for anything, all you need is to find that magical overlap that comes when you break things down into its constituent parts.

Some experts think that the Japanese live so long because of ikigai - the Japanese have some of the longest life expectancy rates in the world.

It does make sense - finding your ikigai can be tough, and probably takes a lot of time and patience... But once found, it could arguably be the best antidote to stress and anxiety.

Like with everything, I began to think about what ikigai could mean for investing in stocks...

Messrs. Buffett and Munger certainly seem to know. You'll often find Buffett talking about it in his annual letters to shareholders.

  • When buying companies or common stocks, we look for understandable first-class businesses, with enduring competitive advantages, accompanied by first-class managements, available at a bargain price.

The four parameters Buffett highlights fit the ikigai template perfectly.

That's the secret to Warren Buffett's stupendous returns from the stock market. Buffett's own Investing ikigai. For him to invest in a stock, all the four elements should come together in perfect harmony.

If he finds even one of these missing, he will simply give the stock a pass.

Most of us can't do that. A lot of investors would not hesitate to buy into stocks where only two or three of these circles overlap.

For example, if the business model of a company is not easy to understand, we might still go ahead and make an investment; and hope that strength in the other three attributes can cover up for the weakness in one.

Or if we find the business to be good on all parameters, but the management has a dubious track record, we might turn a blind eye.

But as the investing ikigai of Warren Buffett shows, this approach is not the best...could even lead to disastrous results.

Superiority in one attribute can't compensate for inferiority in the other. A great stock should have all four elements in place. That's when magic happens. That's when wealth compounds at a phenomenal rate for a long time to come.

There's another Ikigai if you are looking at investing in micro caps. And it is inspired by none other than Benjamin Graham himself.

All you need for micro-cap investing success is to ensure that all four conditions are satisfied so that there's an overlap. And once again, there will be magic.

Thanks to this system, our Microcap Millionaires subscribers have gained 161% by adhering to these four attributes as opposed to 56% returns achieved by the Sensex.

There could be many other ikigais in investing. You just need to do find yours and see that it is supported by sound logic and a proven track record.

Once you find your investing ikigai, stick to it faithfully, and you will never have to worry again. The ikigai will bring you long term magically compounding wealth.

Good Investing,

Rahul Shah
Editor, Smart Contrarian

PS: I just want to remind readers of Smart Contrarian to claim your free gift if you haven't yet. My new Zero to Millions guide outlines the strategy I used to beat the Sensex three-fold. You will be blown by its brilliant simplicity. Just click here and you will receive it directly.

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5 Responses to "A Little-Known Japanese Secret for Compounding Wealth"

Sunil Doshi

Sep 25, 2017

Dear Rahul Shah,
Excellent Article. Very Fresh and deep thought, presented in simplicity.
Congrats !!


Nirmalendu Dattachhowdhury

Sep 22, 2017

I am extremely eager to know Concept want to have a copy, wi
th Best wishes.
No D Chowdhury

Like (1)

Ramesh R Chandra

Sep 22, 2017

It's well past 5pm. When is the conference call starting ?

Like (1)

Vasant Kelkar

Sep 22, 2017

This was a fabulous article and I learnt a lot. I remain indebted and value this learning a lot.

Thanks and Regards

Vasant Kelkar

Like (1)

Dr Vinay Bhaskar

Sep 22, 2017

What does the research data on ikigai tell us when stock market drops?

Like (1)
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