How I Learned Investing in Equities and Why Everyone Should Learn Personal Finance
The COVID-19 pandemic has brought upon us a global economic slowdown, thousands have lost their jobs, the GDP Annual Growth Rate of India stands at -25.2% which is the biggest contraction on record. Majority of businesses and employees are experiencing massive cuts in their income/salaries, so in this time of economic slowdown, talking about personal finance becomes an absolute necessity. With this blog, my aim is to educate the readers about the excellent resources available and known to me which can help you become a better investor and manage your hard earned money the right way.
“Free education is abundant, all over the internet. It’s the desire to learn that’s scarce.”
-Naval Ravikant
How I started learning about stock market investing from scratch
Being a Mechanical Engineering student, we are not taught about personal finances, macro-economics or stock market (recently I have realized even most students with commerce background don’t have this in their curriculum), but all these factors have a huge impact once we are out of the college, we get ourselves a job but when it comes to managing spending of our hard earned salary, most of us have no clue.
ICICI Lombard conducted a multi-city survey across Mumbai, Delhi, Kolkata, Bangalore, Chandigarh, Lucknow, Hyderabad and Ahmedabad. The average age of the target group was sharpened to 25–35 years, so as to focus on individuals who are in the earning bracket. The survey has thrown up some interesting observations on the lifestyle and financials of the Indian Millennial. A confident, aspirational and alert generation, the Millennial are a high spending group who spend almost 69% (not nice) of their income every month. Interestingly, 50% of their income is spent on family and household items followed by EMIs and premiums. The Indian Millennial also spends considerably on leisure and entertainment. However, their overall expenditure on health and medical is just 5% of their monthly income which is very alarming, it is also observed that many millennials max out their credit cards taking on huge debts which further deteriorates their savings.
Stock market investments can make up a good part of your savings, and it can give you phenomenal returns if you make correct decisions. The most famous investor, Warren Buffet was able to make 30 % yearly returns on his savings which has ultimately made him 76 Billion $ rich .The stock market is rather infamous to most people for its scams and many still think its just another way of gambling, but the more I have started reading about equity investing I have realised that it is a gamble only when investments are made blindly, if the underlying businesses are studied in-depth and basics of market are studied before investing then the investors can surely get more than average returns than Fixed Deposits , bonds. In fact if you save just ₹2,000 per month, invest it in good stocks which yield about 21% return per year (difficult to do but not impossible) you will end up with whopping ₹ 6 Crores (₹60,965,998.42) after 30 years (investment adjusted with 8% average inflation, tax is not taken into account).
Here is a list of all the resources I have used to begin with equity investments, there are thousands of resources available so if you know good ones which are not listed here feel free to comment below.
My Father :
My Father has been a guiding light for me when it comes to learning about money, I have learned timeless lessons from my father on how to save money effectively, how not to be greedy, and why life is not all about money , my only aim is to become if not better then just as good as my father in earning managing and ethically earning money and above all a good human being just like him.
Books I have read :
1] Guide To Indian Stock Market by Jitendra Gala ,
ABCD of Stock market: Stock Market Beginners Guide
This is a very introductory book which I found while browsing my father’s bookshelf, it has explanations to basic stock market terms, such as what are depositories, IPOs , credit rating agencies, etc.
The book talks about basic mistakes which novice investors make and how to avoid them, it has good information for absolute beginners but I felt the basics were still not cleared because many terms are not explained to readers.
ABCD of stock market is also a similar book which covers the basics as well as the market lingo. An important lesson I have learnt from the book is to consider stock market as a long term investment (1 year+) and not a short term bet.
2]Stock Investing for Dummies by Paul Mladjenovic
This is an excellent book from the ‘for dummies’ series. It is one of my absolute favorites as it teaches you not only stock market investing but also personal finances. The only drawback for me was that the book has been written for American investors therefore some of the terms related to American stock market were unknown to me, but I would still recommend it to everyone who wants to learn about investing, the topics covered by the author are :
1)The best approaches for investing in stocks
2)How to successfully invest in stocks with less than $100
3)How to make your stock portfolio a “cash flow machine” for retirement 4)Learn how to minimize losses and maximize gains
5)The 10 features of a great stock to buy for long-term success
6)10 ways to successful invest when the market is down, etc
3] How to Avoid Loss and Earn Consistently in the Stock Market: An Easy-To-Understand and Practical Guide for Every Investor
by Prasenjit Paul
Having recently finished this book, I can testify that this was one of the best book I have read as a beginner in the field of stock market.The book is written for retail (small investors) who cannot put all their time or money in stocks but still would like to make good returns on their investments. Author points out the mistakes beginners do and how to avoid them and gives a strong strategy to identify good companies. The author does not make any false claims of making readers rich overnight but rather gives time tested strategies which have high probability of succeeding . It is a great book which I would recommend to everyone who is just starting out in the stock market.
Currently reading
1)Masterclass with Super-Investors
I have recently started reading this book, Masterclass with Super Investors is a curated compilation of in-depth interviews with some of India’s most accomplished stock market investors. Each of these investors has at least a few decades of experience investing in the Indian stock markets, and have successfully navigated the highs and lows of the market. They bring together different investment styles, thus giving us a variety of perspectives and tools to use in the market. The areas covered in the book are:
- their background and how they started in the stock markets
- evolution of the investment framework
- case studies of their past investment successes
- case studies of their mistakes (both omission and commission)
- the process of idea generation and portfolio construction
- views of investing in cyclicals, taking leverage, going short, timing the markets at the extremes
- views on macros
- developing the right temperament and habits
- the process of wealth creation with capital milestones
- advise to new investors
2) The Intelligent Investor by Benjamin Graham
It is a widely acclaimed book by Benjamin Graham on value investing. Written by one of the greatest investment advisers of twentieth century, the book aims at preventing potential investors from substantial errors and also teaches them strategies to achieve long-term investment goals.
Over the years, investment market has been following teachings and strategies of Graham for growth and development. In the book, Graham has explained various principles and strategies for investing safely and successfully without taking bigger risks. Modern-day investors still continue to use his proven and well-executed techniques for value investment. An excellent book but very difficult to understand if you’re an absolute beginner.
3.The Psychology of Money
Timeless lessons on wealth, greed, and happiness doing well with money isn’t necessarily about what you know. It’s about how you behave. And behavior is hard to teach, even to really smart people. How to manage money, invest it, and make business decisions are typically considered to involve a lot of mathematical calculations, where data and formulae tell us exactly what to do. But in the real world, people don’t make financial decisions on a spreadsheet. They make them at the dinner table, or in a meeting room, where personal history, your unique view of the world, ego, pride, marketing, and odd incentives are scrambled together. In the psychology of money, the author shares 19 short stories exploring the strange ways people think about money and teaches you how to make better sense of one of life’s most important matters.
Websites I have used which have helped me a lot :
- https://www.investopedia.com/ : Very helpful for understanding the basics, news and everything related to stock market. A very clean website and perhaps the best website made for American markets.
- https://zerodha.com/varsity/ : Varsity by Zerodha is an extensive and in-depth collection of stock market and financial lessons created by Karthik Rangappa at Zerodha. It is openly accessible to everyone and is one of the largest financial education resources on the web. Varsity is one of the best resources available to learn about the Indian Stock Market, it covers every aspect of markets.
- https://www.moneycontrol.com/ : Money control is the regular go to website to read about daily stock market news and to track stock prices, it has the all the information necessary to fundamentally study the stocks
In the coming days, I will try to write in-depth learning from the books I have mentioned , which will help beginners decide which resource will be helpful for them.
Personal Finance and Other Interesting books :
- Let’s Talk Money: You’ve Worked Hard for It, Now Make It Work for you
2. 13 Steps to Bloody Good Wealth
About Rohan Sanghai :
I am a 3rd year Mechanical Engineering Student with deep interest in learning Rocket Propulsion, Observational Astronomy, and learning to code and studying paintings.
I have recently started enjoying reading about finance and climate change, a challenge for all of us to be solved in this decade. I also like learning about making sustainable changes and reducing our carbon footprint.
If you have any suggestions or comments please write to me at
rohan.sanghai@mitwpu.edu.in
