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InvestorInsights: Gautam Baid

October 20, 2017

Gautam Baid, CFA, is Portfolio Manager, Global Equities at Summit Global Investments, an SEC-registered investment advisor based out of Utah, USA. Prior to his current role, he served at the Mumbai, London and Hong Kong offices of Citigroup and Deutsche Bank as Senior Analyst in their healthcare investment banking teams. Gautam is a CFA Charter holder from CFA Institute, an MBA in Finance from Nirma University, Ahmedabad, India and an MS in Finance from ICFAI University, Hyderabad, India. He is a strong believer in the virtues of lifelong learning and is an ardent student of the value investing philosophies of Benjamin Graham, Warren Buffett and Charlie Munger.

Safal Niveshak (SN): Gautam, could you tell us a little about your background and journey, how you got into value investing?

[Read more…] about InvestorInsights: Gautam Baid

BookWorm: Outliers

October 15, 2017

We, as a society, love the idea that runaway success stories are a simple function of individual merit. This is especially true when people try to explain the cases of extreme successes like billionaires and the world-class performers. Work ethic, talent, and attitude are only part of the success puzzle. The other pieces like circumstantial factors are either frowned upon or ignored.

“I started investing at the age of 11,” says Warren Buffett, “I was wasting my life until then.” With that kind of early start, today 87 years old Buffett has accumulated a whopping 76 years of investing experience. Who in the world can match that? No wonder Buffett has held the spot of second richest man in the world since last twenty-five years.

So, does it mean that anyone who, with Buffett’s level of intelligence, spends three-quarters of a century analyzing businesses and studying annual report can become as successful as Warren Buffett?

We like to think that most wildly successful people have earned their success only through talent and hard work. It’s quite rare to find a biography of a successful person which credits his or her success to pure dumb luck. Dig deeper into their stories, and you’d discover that many unseen factors influenced the outcome. Interestingly, most of those elements lie beyond an individual’s control.

[Read more…] about BookWorm: Outliers

Behaviouronomics: Peltzman Effect

October 10, 2017

As human activities are made safer, it tends to make us overconfident and take higher risks. This unintended consequence of increased safety has vast implications including, but not limited to, adventure sports, road safety, and stock markets.

Question for you. How many parachutes does one need to try skydiving? One, two?

Technically, none. That is if you want to jump only once. To do it more than once you need the parachute. Don’t you?

Well, I agree this was a weak attempt of starting this post with humour. But on a serious note, I am sure you know that every skydiver jumps with a reserve parachute. And what if the both the chutes don’t open? Well…so much for skydiving!

Instead of wondering about the number of parachutes, a more interesting question to ask here is this: does an additional chute make skydiving safer? “Of course! It should,” most people will argue, “When a skydiver knows that there’s a backup for the emergency, wouldn’t he feel safer? Isn’t that the reason skydiving, as a sport, has become so popular that hundreds of thousands of people indulge in it every year?”

But if you dig deeper into above statement, you’d realise that there lies the paradox of safety. Statistics reveal that even though skydiving equipment has made huge leaps forward for improving reliability, the fatality rate has stayed roughly constant when adjusted for the increasing number of participants.

The backup parachute and other safety measures seem to reduce the risk only for a short while until the skydivers start feeling safer and, unfortunately, overconfident. This overconfidence promotes the skydivers to attempt even riskier manoeuvres which defeats the purpose of having the additional safety.

Skydiving pioneer Bill Booth observed – “The safer skydiving gear becomes, the more chances skydivers will take, in order to keep the fatality rate constant.”

This phenomenon isn’t limited to skydiving alone. Take skiing for example. Recent studies indicate that skiers wearing helmets go faster on average than non-helmeted skiers, and that overall risk index is higher in helmeted skiers than non-helmeted skiers. Moreover, while helmets may help prevent minor head injuries, increased usage of safety headgear has not reduced the overall fatality rate.

So, am I arguing that people should stop wearing helmets and jump with a single chute only? No. That would be a defeatist view. My intention is to draw your attention to a less known behavioural bias called Peltzman Effect.
[Read more…] about Behaviouronomics: Peltzman Effect

Life 2.0: Experiment of a Reluctant Walker

September 30, 2017

I recently bumped into a college friend at the supermarket who told me how frustrated he was with his “fat body”. My interest was sparked when he told me how he has “tried everything” over the years but nothing worked. Curious, I wanted to know what “everything” was. Here’s the list as I remember it: several gym memberships, expensive personal trainers, exercise bike for home, tennis lessons, health retreats, and big weight loss targets.

Well, it didn’t take me long to discover that my friend –

• Liked the idea of physical change more than the practical reality of creating it;
• Had an aversion to discomfort;
• Was awesome at excuses and denial; and
• Didn’t persevere with anything for longer than four weeks.

I also learned that he had used his two-year-old exercise bike once (it’s uncomfortable), never went back for a second tennis lesson (his back hurt) and didn’t really enjoy the gym.

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InvestorInsights: Naresh Katariya

September 20, 2017

Naresh is a Bachelor of Engineering and a Certified Risk Manager. He has a global consulting experience in Investment Banking, Risk Management, Trading, and Compliance. He also has Consulting experience in global Capital Markets. Prior to starting off as a full-time investor in 2014, Naresh headed the Global Risk and Compliance Consulting unit at the Indian IT major, TCS.

Safal Niveshak (SN): Naresh, could you tell us a little about your background and journey, how you got into value investing?

Naresh Katariya (NK): While I qualified as an engineer, I realized early that my interest was in equity markets. I was working in the broking industry for a few years. But my primary interest in equities arose while I travelled globally and worked on consulting projects for stock exchanges, depositories and investment banks. My fifteen years in TCS, in fact, provided me the perfect platform to observe how capital markets worked across the globe. I used to be filled with amazement working at exchanges/depositories in New York, Zurich, Singapore, Frankfurt, London etc. I was an equity investor in Indian markets throughout this period, building capital as well as honing my investment skills. In 2014, encouraged by a very smart investor from Hyderabad (who was my client during my broking days and now a family friend), I took the plunge into full-time value investing.

[Read more…] about InvestorInsights: Naresh Katariya

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