Ten Things I’ve Learned Since Last Diwali

There is joy in sharing during Diwali. In conversations over the last year, a number of wise minds in the market have shared their learnings and offered insight on successful approaches to investing. Here are ten nuggets of knowledge from the Samvat gone by.

1. If you can’t handle me at my worst, you sure as hell don’t deserve me at my best. That’s just so true for investing as well. If we don’t have the gumption to take a tough market or a tough investment, we should just leave the market. — Nikhil Vora
2. More money can be lost in trying to anticipate market corrections, than in actual corrections themselves.
3. Always remember, you can’t shift portfolios from where you are to where you want to be, and where you want to be again, in a matter of six months to a year. What the volatility enables you to do, is correct the mistakes you have made. Going into 2020, your portfolio characteristic will be a determinant of not what you put together in 2017, but how much of that you corrected in 2018 (if it needed correction). Where you are right now is going to determine where you will be in 2020. — Kenneth Andrade
4. Being conscious of the price that one is paying is important, but if the space is a high-growth space, then the future years of growth can take care of an expensive purchase as well.
5. Value investing, for me, isn’t investing money in companies which are trading at sub 10x price-earnings. Value investing is buying a company which should trade at 30x PE at 25x PE. The company trading at sub 10x PE could even go bust. — Ashwath Damodaran
6. Earnings are understood as accounting profits, and these can be moved around, based on the management's discretion. As a result, free cash flows and ratios like -price/cash flow would serve investors better. Over a period of time, markets would disproportionately reward growing cash flows. — Nilesh Shah
7. Businesses are capital input-output model. If you remove your personal understanding, its all about the balance sheet and the profit and loss account. Results drive our understanding. We talk to the company, talk to competition, speak to current employees, ex-employees and try and see what is happening. But eventually, once I look at the numbers, I can say whether something is happening or not. — Raamdeo Agrawal
8. Investing in good companies is easy for me, because I am not a fund manager and not managing others money. Once I am invested in whatever stocks I am invested in, I have to learn to do nothing. Since I don’t have a constant flow of money, trying to hunt for more companies is not a problem I have to deal with. For me, five or ten companies are enough. — Vijay Kedia
9. What I’ve learned most from Warren and Charlie over the years is the beauty of what doesn’t change. When you learn something that doesn’t change, you can step off the treadmill of keeping up and start to compound your knowledge. While this compounding may slow you down at first, it offers exponential returns. — Shane Parrish
10. Plan your investing life. Don’t leave it for too late, for in investing, time is your friend. The more time you give to your investing career, the higher your chances of making it big.

May you make it big, this Samvat and the others to come. Festive greetings everyone.

Niraj Shah is Markets Editor at BloombergQuint.