rule of 72

Going through an article on stock investments and the risks involved I got through this handy rule :-

If you want to know how long it will take to double your money at any rate of return, simply apply the rule of 72, that is, divide 72 by the expected rate of return and the result is the number of years it will take to double your money.


What’s your net worth ?

The article that I just read discusses briefly about the calculation of net worth and why is it useful.

Net worth = (Total Assets) – (Total Liabilities)

Assets include –
* current account and savings
* capital in stocks and mutual funds
* debentures
* life insurance surrender cash value
* home, real estate investments
* cars/jewellery/furniture etc.

Liabilities include –
* mortgages
* car loan, home loan, college loan etc.
* credit card debts

That makes it simple to calculate the net worth and I think this is what is the accurate measure of a person’s financial success and not whether one rides a mercedes and goes for a vacation on an island.

Stocks: Harrisons Malayalam

I came to know about this growing plantations company in south india. Its a part of the reputed RPG group. Following are few good words by Roshan :-

It owns large plantations in South India, is part of the RPG group. South india is where I see property prices zooming in the future- it’s far safer and has a much better political environment as compared to the rest of India. The stock is trading at a P/E of 2.2 inspite of this being an asset heavy business. The entire business is worth about 150 crores. In my opinion based on land value itself it should touch 1000 crores in market cap soon and 3000-4000 crores in the not so distant future as the P/E rerates to take account of the underlying asset base.

Touch wood. Just bought a few stocks of the company. Website of the company is here. Details about Investors/Share holders is here.

don’t make your broker rich

soon going to enter the stock market and just did the first thing an investor should do – started reading the intelligent investor – the classic by Bejamin Graham.

stocks are popular in investments for high rewards they may get you. while CODs (certificates of deposits) get you 5% interest, stock market has given on an average ~10% and more returns.

If I ask you to invest your hard earned money in my company then probably you will ask me 1001 questions about me, my company, its background, business, net capital and what not and even after that you will require me to show you my balance sheet. BUT do you actually do even 50% of this analysis while trading ?

Its your money and you must research. Do not invest money only, invest time as well or you are destined to lose !

Benjamin Graham says that stock investing consists of three ‘must’ elements:

  • you must thoroughly  analyze the company and the soundness of its underlying business before you buy the stock.
  • you must deliberately protect yourself against serious losses.
  • you must aspire to adequate, not extraordinary performance.

Another important thing in alignment of the topic of this blog entry, is not to make your broker rich and yourself poor 😦 by speculating and not investing. Graham urges you to buy (after analysis) and hold. Do not speculate. So being a day trader is bogus from the point of view of investments.

So should I never day trade ?

You can. Every intelligent investor should keep a small amount of his portfolio as “mad money” (10% or so) which can be put to speculative risk.

makes sense ?