Tuesday, July 21, 2015

Invest, as you can't depend on a single source of income

I had a long chat with a relative a few months back at a wedding function, while waiting for the bride and groom to tie the knot. Apparently, he was keen on dabbling into stocks. With the intention of having another source of income. So that he could say 'goodbye' to the IT lifestyle eventually.
Here are some interesting parts of the discussion, and some suggestions in general to some of my old friends, teammates who wanted me to dish out some gyaan on the topic of stock markets.
His idea was clear, but the execution wasn't going to be easy in the timeframe that he had outlined. But possible, if one gets into short term trading. The time frame for each trade could be 2 days to a week. But in order to succeed in this, one must be extremely choosy in picking the right trade, and super disciplined. The golden rules here are, "Cut your losses, but let the winners run" and "If you can't take a small loss, then prepare to take the mother of all losses".
Anyway, this was something that I tried for over a year, succeeded somewhat. But when in a bad trade it kept me stressed out for days together, lack of sleep, fidgety, nervous. Moreover, this is not something that a software engineer should be doing while at work.

But with a longer view i.e. as a long term investor in the market one can achieve the financial goals as well.
A personal disclosure here. Till date, I have not sold a profit making stock, and I have not held onto a stock which has gone past my maximum loss point..

All it needs is 15 minutes of quick reading time everyday and about 30 minutes to an hour of research over the weekends.
For newcomers, I'd suggest what my cousin taught me and which worked very well for me. Apply in new upcoming IPOs. Just check for the various analysts' ratings before investing. If you are lucky and have some shares allotted to you, then consider partial listing gains and keep rest for long term. If not allotted, then move onto the next IPO.

One may want to invest upto 25% of monthly income into the stock market regularly. My only suggestion is not to expect magical returns overnight. It's not betting in a horse race. It's investing in a business, and good returns take good time. Fixed return instruments provide around 7-9%. If you get 15% from the stock market,  you've really done well. Keep investing in small quantities, and let the power of compounding do it's magic.

Once you are done with  a few IPOs, move onto putting your money in good quality large cap stocks. Large cap means large companies with established businesses. They are the most heavily traded stocks in the markets. The returns are average, but they are safe investments.
Once you start seeing good returns in these, move towards mid caps and small caps. This is where the real money is. But mind you, these are equally risky. You must both be patient and sensible at the same time. If some stock you've invested in, goes below your predefined price, take a loss and exit. You can always enter back in.

When to invest is an interesting question. From my experience I can say that the best time to invest in small quantities when the markets are going down. Be greedy when everyone is fearful, and be fearful when everyone is greedy. Think away from the crowd.
This is what large financial institutions and stock markets 'Mavericks'  do on a large scale.
Having said that I'd want to research the company that I want to put my money in. Management quality, and the nature of business are 2 most important things to focus on. Most successful investor billionaires like to invest in businesses which have a strong moat around them. They are both unique, and have have very few competitors.
And just to mitigate the risks, at any point of time, I invest only upto 20% of my total money on high risk investments.

Where to invest is another question that many people ask. We are in the middle of Acche din (read multi year bull run), the markets have run up considerably in the past 18 months or so. So very little money is left to be made in established large caps. Still, the good safe investments are in large private banks, infrastructure companies, capital goods and construction. Basically, the companies which are helping build India. Generally known as high beta, they move very fast in both directions.
IT, pharma are the defensives. They move slowly in either direction.
Every portfolio must be a good mix of large, mid and small caps. High beta and defensives. Suggest not to be heavy on any sector or theme.
There's one more group of stocks which provide good dividends. You may want to keep a couple of them in your portfolio.

Periodically track your investment in each stock, look for buying opportunities. And be prepared to take losses and exit. Taking a loss is like performing surgery on one hand with the other.

That's it for now. Happy investing.

Tuesday, October 28, 2014

Method in the madness

Twice previously I have posted about how things work in the software industry. One was about planning, and the other on how appraisals are done.

Those were written at a time when I was an individual contributor, and the helpless frustration was evident in the sardonic tone of the posts. Then, I was forced to do what I was told, and in a way in which I was told to do.

Times changed, and so did my role. Slowly I got to lead a small team which slowly scaled up to be a fairly large large team of 8 - 9 members. Which meant, I got to be on the other side, where I was expected to do the planning for the project assigned to me, and take care of the appraisals part.
Planning and execution were something that I was always good at, even from my school days.

But appraisals are something that I absolutely loathed. Anyway, more about force fitment in some other post perhaps.

When I joined this industry, a lot of organizations followed the waterfall model. But as times progressed, companies with a strong engineering background figured out that it was not the best way for product development and moved to various forms of agile software development. It works or not, is entirely another topic.

I got introduced to agile development by my previous manager, but was able to learn the proper methods and techniques through a certification course.

What's it that you are reminded of when you read "Agile"? Cheetah ? Or an elephant?

Cheetah is undoubtedly the fastest animal on the ground, but what makes it agile is not just its speed, but its ability to quickly change directions even at that speed.

As with most other posts of mine, to connect to various different people with diverse backgrounds, I have taken general examples with intentional oversimplification.
Let me try to explain "Agile" for you. Mind you, this approach is applicable to people in many fields, even day to day life and not just software development. Whether it works for you or not, you need to try out and decide for yourself. But since this is a continuous evolving and self organizing process, which needs time and patience to perfect.

Let's say, you to go to a restaurant and order a thali. Most of the items are laid out on the plate at the beginning. Even though the variety and the quantity of food dished out overwhelms you, would you still gulp down all of it down your throat at once?
You slow start with the starters, proceed to the main course and then cap it all off with the dessert. The end result is that you have a nearly empty plate, assuming of course that the food is great.
This is really oversimplified version of agile for you.

Now, lets get back to the school/college/engineering days.
Most of the time we used to enjoy doing a lot of things which were not related to studies, sports, games, movies, mindless chatter, philately, ornithology and what not.
Come test/internals/exams time, then we would slog it away, burn the midnight oil, spend sleepless nights to cram in all the information at the nth moment. Finally, transfer all of this information into the answer booklet.
And this, is waterfall model oversimplified for you.

Well, in software development things get a lot more complex and the primary reason why the pundits junked waterfall model was that it didn't address change very well. And in the software industry, change is inevitable.

OK, now let's assume that you are a very diligent student, who also enjoys life to the fullest. There's always so much to do, and so little time. Say you adopt the simple "Plan the work, and work the plan" strategy well. Everyday you allocate some time for play, some for studies and some for everything else.
On a weekly basis you finish learning everything that was taught in college in that week. Without breaking a sweat. Say now something unexpected comes up, the plan needs to be flexible enough to accommodate this.
Come exam/internals time, you only need to revise everything once. And you are good to go.
No night out, no slogging, no last minute hustle. Plainly unemotional, isn't it?

So now let's extend this thinking to software development on a slightly larger scale with many team members. The complexity is much higher, but the idea is the same.
Break down the overall product development into smaller releases.
Have smaller more focused teams.
Make frequent and periodic releases to the stakeholders, with new features in every release. Make sure that each release is properly tested.
The final product release is just another day. No scene, no emotion, no scampering around, no night outs.

For all this to work in real projects, you need some help though. Support from managers, customer to try out, allow for failure. But most importantly, the unwavering support and faith of the team.
I was lucky to have them all.

I end this post with what a lecturer once told in class, "If you fail to plan, then you plan to fail"

Tuesday, November 17, 2009

Never Say Die!

A few days back, I read the book "Its Not About The Bike", the autobiography of Lance Armstrong.

For the uninitiated, Lance Armstrong is an American cyclist who won the Tour De France record 7 times in a row. When you consider that the race spans over the length and breadth of France, spanning more than 3000 grueling kilometers, in all kinds of weather and across all kinds of terrain, you'd feel that it's a great achievement indeed.
Now, just consider this.
Lance Armstrong achieved this feat after he had recovered a from a rare form of testicular cancer, where the doctors had given him just a 40% chance of survival(realistically speaking it was lesser than 2%).

The question that I had in my mind was, "What makes some people tick?"

It was the endless support given to him by his friends, coaches, agents, doctors and his sponsors during the times of his illness and recovery, that probably helped him rebuild his career.
Post tumor recovery, it was the much needed perspective about life that his wife gave him, otherwise he was well on course to a life of decadence to be just another person; forgotten forever.
His self belief was reinforced by his mother and nurse, who were always with him to give him confidence that he was capable of recovering from his illness.
I guess without them, he wouldn't have achieve all the glory that he did.

And since Tour De France is a team event, no victory would be possible without a great team effort. One interesting fact that I learnt from the book was about a typical team composition.
At the beginning of the race, one or two riders in a team would be designated as the lead riders, the ones who were most likely to win. And the rest, are chosen as workers around them. Together they form a peloton, shielding the lead riders from the wind and also from riders of the other teams.
So many riders perform a selfless job for the team, knowing fully well that they are not here for individual glory, but to win as a team.

In my opinion the biggest factor that made him tick was his Determination.
A lot of it came from his mother, who used to tell him, "You never ever Quit. You just go through it." even in the most adverse of situations.

I guess this was the biggest learning for me from the book.

In life, how many times do we give up on our dreams and our aspirations even before we have made an honest attempt?
How many times we choose to settle for something that we don't deserve just because we are not determined enough to get what we want?
How many times we run away from taking up a challenge, just because we fear the ghosts that haunt us if we fail?

How many times do we take a safer option, just because we are not prepared to endure the pain and difficulties that might arise in overcoming our challenges?

Once I read this, "If you think you can, then you can. If you think you can't,then you probably are right."

Most of the time, its the boundary that we set in our minds that makes us think we are not capable of doing something that we consider difficult.
There's no better satisfaction that proving everyone wrong about one's own capabilities. Somewhere in some corner of our mind, there's that cynic who creates that doubt about our own self belief. Why not start off with proving him wrong?
And once we've done that, the naysayers around us are automatically taken care of.

In essence, we should never forget that old proverb that we learnt in school, "Where there is a will, there is a way."

This was the first book that I have read in the last 10 years or so. There was this compelling urge to buy this book when I saw it on the shelf of a book store. A totally unintended buy, but it was more than worth it.
And if you wanted to know if I liked the book, and if it made a difference, I'd say that I am planning to buy the book, "Every Second Counts", an extension to this autobiography.

Friday, October 23, 2009

How things Work(Part II)

This is a story that I happened to read somewhere a few years ago. After seeing a lot of things happening around, I thought of sharing this story with all of you.
And in the process, I wanted to have some fun. So I modified the story accordingly.
So, here it goes.

Eight monkeys working in a large company were sent a mail and asked to go and assemble in the big board room. They were told to sit around a big circular table.
All of these monkeys were waiting in eager anticipation and wondering, "Next is What?"

All of a sudden, the light bulbs dimmed. A frenzy of laser lights flashed all over the room, giving the idea of a major product launch.
Just after that, a spotlight focused on the ceiling, right in the center of the room. There was this big bunch of ripe bananas suspended from the ceiling.
Monkeys, being monkeys were very keen to eat them. But they were clueless about how to reach the top and get them.

One of the monkeys was bold enough to climb up the table. It jumped as hard as it could, but only managed to touch the bunch with its fingertip. It tried again, and this time it caught one banana with its hand. And just when it was about to pull it down, a shower popped down from the ceiling and sprayed ice cold water on its face.
It quickly retreated back to its seat.

A second monkey took a few chairs from the room, stacked them one above the other on the table and climbed up. Now the bunch of bananas was within this monkey's arm reach. No sooner did the monkey draw out its hand towards the bananas, there was a loud thud. It turned out that this monkey was on the floor, apparently taken down by a football which was thrown from some dark corner of the room.
This second monkey also was smart enough to quietly get back to its seat.

A third one, which was a quiet spectator all the while, tried to play it smart. It found a thin wire in the corner of the room, from which it made a lasso. It threw the lasso around the bunch of bananas and tightened the noose around. The moment it gave the wire a tug, it was zapped by an electric shock.
It quickly gave up, after having such a hair raising experience.

Each of the monkeys tried to get to the bunch of bananas. Some tried it individually, and some tried it as a team. But all their attempts failed miserably. In doing so, one of them had its face sprayed with ice water, while one had its tail burnt.
Soon, all the monkeys realized that the bananas were not meant to be eaten.
And they all stopped trying.

Well, that was the story. And now if you were wondering what's the big deal about it, just give this a thought.

"Isn't this how Company Policy evolves?"

Aren't we all like monkeys who are shown bananas which are tied up in an unreachable place?
There's so much hype built up around it that we actually look forward to get them.
And when we try to get them in any way which we can, we are thrown more and more bizarre policies at us.
And ultimately, most of us just give up.

"Don't you think so?"

Friday, February 20, 2009

Home Box Office

Its been quite a while since I posted something. No, I didn't join the Slow Blog Movement. I was just busy with a lot of other things. And sometimes I was busy doing nothing. But to be honest, I didn't have much to write as well.
Most weekends were spent doing some household chores, playing badminton and of course, catching up with some good movies. And I like to watch movies at home itself, avoiding all the hassle of going to some movie theater.
There were a couple of them I watched on TV some weekend which really inspired me to write this post.

The first one that I wanted to mention was 'Remember the Titans'. The hero's part was played by Denzel Washington, a brilliant actor, who co-incidentally looks a bit like Barrack Obama.
The movie's setting is in the 1960-1970's when USA had this equal rights movement, the Black-White divide, the fight for equality, justice, internal peace, harmony and so on.
Most of the movie is about Coach Boone (Denzel Washington) who transforms a bunch of young men who have their racial and social differences, into a team that creates history.

Right from the moment he is appointed as team coach, he invites controversy. More so because he's of African American origin. Something that people in the white dominated high school couldn't tolerate. He also has an assistant coach, who is supposed to be a better coach than him. Time and again they disagree on their strategies and the coaching itself.But in the end, they decide to set aside their differences and come up with the winning formula for the all winning team

Right through the movie Coach Boone uses all tactics of Saama, Daana, Bedha, Dhanda to inculcate the needed qualities in his team. Sometimes he even goes overboard in imposing himself on the team and says things like, "This is not a democracy. This is a dictatorship."
But then in the end he proves to everyone that he is a self believer, and a winner. He makes the team proud of their name, "The Titans".

There are many scenes in the movie that I would want to write about, but then it would get boring to read it. The point that I wanted to make was that a country like ours could do with a few strong minded men who could unite us and makes ours a very successful nation.
As of now, we have leaders who thrive by creating fear in the minds of the people.Leaders who instigate attacks, leaders who do a lot of questionable things in the name of judicial activism. And yet, we get to see such leaders going scot free and hogging the bandwidth on national television at prime time.

As common people also, I think we can learn a few things from the movie.We can start off with setting aside our differences - be it difference in language, religion, caste, creed or whatever.An even bigger achievement would be when we agree to set aside our big egos to come together to work towards a bigger cause. A cause for the nation.

Do we really need an incident like 26/11 to come together and show that we don't tolerate this kind of timid leadership anymore? I believe that the greatest threat to us is from the enemy within. Why do we need more Kasabs when we have our own leaders to kill the country slowly and steadily?

If this movie was about inspiration, role models and things like that, the next movie is all about love, understanding and relationships.
The movie that I wanted to talk about is "The Raincoat". I liked the movie for its simplicity, and yet how it passes on an important message in a subtle manner. At the outset, this seems
like most other Indian movies, i.e. a typical love story. Oh! by the way, its one of the very few movies that I've seen Aishwarya Rai playing the humble role of a housewife in tatters.

I'm always very bad at remembering names and numbers. I cant really remember the names of the characters in the movie.So let me proceed with their real names
i.e Ajay (Devgan) and Aish(warya Rai).

Ajay and Aish are childhood friends living in the same mohalla. And both of them know that they love one another, but they don't confess that. And on his part Ajay is shy and reluctant to take the initiative.
But that's not the same with Aish. Be it going to watch an adult movie with him, or taunting him to help her wear her dress, Aish yearns for some amount of intimacy with Ajay. But there's not much of a response from his side. Unwilling to wait, and also to relieve her parents' burdens, she decides to marry a "rich" man from Calcutta.

Six years pass by, and Ajay finds his way to Calcutta in search of money to start a new business. He takes the help of his close friend for this, and in the process he also finds a confidante in his friend's wife. Ajay expresses his desire to go and meet his long lost love, and find out how life's been treating her. And since its raining very heavily, she gives him a raincoat.

Right from the time that he finds his way into her house, till the time that he returns from there is a brilliant showcase about feelings of love, understanding, mutual care and so on. Its also a well orchestrated drama that both of them enact.All this in order to hide their failures in life and at the same time convince the other person that they are more than happy with their lives
Only when Aish goes out to get something to eat, that Ajay comes to know Aish's real plight, her penury and the kind of baneful existence that she's living through. And to help her without hurting her pride, he writes a letter that goes something like this...
"It's good that I met your landlord while you were away. If you were so deep in trouble, you could have always asked me for help. After all, if I were your husband wouldn't all your troubles me mine too?" It turns out that he has given the money that he had arranged for his business to the landlord of the house that Aish stays in.

And only when Ajay goes back home and checks his raincoat, he finds a letter from Aish that goes something like this...
"It's good that I wore your raincoat today and found this letter in the pocket. If you didn't have any money, you could have asked me for help. After all, if I were your wife, wouldn't all your troubles be mine too?"
And this time it turns out that she had kept a lot of her jewelery in the raincoat, so that Ajay could make use of it.

After this, the movie comes to a seemingly abrupt end. But then, that's the most fitting ending to a movie like this.

For some reason, I'm a big fan of movies where, in the end the lovers don't come together. Probably because that's what happens to many a real life love stories. And probably because such movies makes us realize the importance of the people who love us. Some people might be shy to express their feelings, while some might take the other person for granted. Maybe the true value of a loved one is felt only when that person is no longer with him/her. And maybe when someone wants to acknowledge the other person's feelings, its already too late. What's the point in securing the stables after the horse has bolted??

Most movies have this disclaimer, "All characters depicted in this movie are purely fictional. Any resemblance to any real life characters is purely unintentional."
But if one analyzes a bit more profoundly, we might just find ourselves in some of these fictional characters.

Don't you think so?