DIA Journal, 1st Edition - April 2019 PDF

CONTENTS
Editorial, Dhruv Girdhar ..................................................... 2
Life is About Finding Fulfilling Work, Zack (Four Pillar

Freedom) ................................................................................. 4
10 Types of Investors in the Market, Vijay Pahwa

(Wealth Park) ......................................................................... 8
8 Key Takeaways from 2018 Berkshire Hathaway’s Letter

to Shareholders, Aditya Kondawar .................................. 10
Book Review – Master Class with Super Investors, Nitin

Rao (Alpha Ideas) ................................................................ 13
Theranos: A Bigger Culprit of Humanity, Rishabh .. ….16
Dude, Should I Cut My Equity Exposure, Arun (Eighty

Twenty Investor) ................................................................. 19
Magic of Dividends - The Real Return, Fundamental

Investor ................................................................................. 25
Little Investing Rules for Indian Stock Market,

Ravichand (Stock and Ladders) ........................................ 30
1
A Glimpse of Our DIA Meet, 2019 ................................... 34

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DIA Journal | April 2019

Editorial
Dhruv Girdhar, Delhi Investors Association
(DIA)
Dear Reader,
I would like to thank you for taking your time out to read the
first ever edition of DIA Magazine. The preliminary idea of
starting it was conceptualized while discussing the recent
fallouts in many of the big shot companies. The suggestion of
spreading awareness through a dedicated channel was so
exciting that we instantly said yes to the project.
With this edition, we bring to you the writings from the world-
class writers of the financial community who are guiding the
investing fraternity with their wisdom and experience.
“Investing is an arena
where the simplicity of
staying away from the Investing is a discipline where one needs
Wall Street makes more of a remarkable EQ than a high IQ
Warren Buffett build $80
Billion of wealth while It’s a field where the likes of Anne Scheiber
staying in a moderate
office with books and
manage to build a huge wealth despite starting
newspapers on desk and with an annual pension of just $4000 while the
a portrait of father likes of Richard Fuscone declare bankruptcy
hanging behind on the
wall”
despite being chaired as a Vice-Chairman at
Merrill Lynch.
It’s an arena where the simplicity of staying away from the Wall
Street makes Warren Buffett build $80 Billion of wealth while
staying in a moderate office with books and newspapers on
desk and a portrait of father hanging behind on the wall. On the
other hand, Lehman Brothers, files for Chapter 11 bankruptcy
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during 2008-Recession despite having all the computer screens

with the latest trading algorithms, top-notch financial thinkers
and analysts.
Through this project, we also aim to spread the awareness

among the investors and financial community when it comes to
investing their hard-earned money in the financial markets.
What you see of just a few pages is the result of hundreds of

hours spent in preparing the write-ups, content editing, graphic
and format designing.
Having said that, I would like to grab this opportunity to thank

all the contributors who worked behind the stage tirelessly to
make it worth reading and formulate the idea of DIA Magazine
into reality.
I request you to share your honest reviews regarding the

© Delhi Investors content and everything you like or dislike about this magazine.
Association, 2019 Your valuable feedback will surely help us in making this
project even more value adding as we continue publishing our
DIA Journal is owned by new editions in future.
Delhi Investors
Association You can reach us at:
Published By: Email: ghanisht.nagpal@hotmail.com

Delhi Investors Twitter: @Delhi_Investors
Association Website: www.diainvestors.org
Advertising Contact: Happy Reading. Happy Investing. ▪

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Total Pages:
38 including cover
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Life is About Finding
Fulfilling Work, Not Saving
Up Enough Money to Never
Work Again
Zack, Four Pillar Freedom
When I first discovered the concept of early retirement, I

thought it was the solution to lasting happiness and bliss.
The idea is simple: save up enough money over the course of 10

to 15 years so that you can live purely off investment
returns/dividends, and never need to work again.
I hated the idea of working 40 hours per week in a cube for 40

years doing work I found pointless, so stacking up enough
savings to never need a traditional office job again seemed like a
great idea.
“I hated the idea of
working 40 hours per The more I researched this idea, though, the
week in a cube for 40
years doing work I found
more surprising results I found. As I consumed
pointless, so stacking up books, articles, podcasts, and videos by people
enough savings to never who had actually quit the rat race at a young
need a traditional office
job again seemed like a
age, I noticed a trend: each of these people
great idea” experienced a void in their life.
The same pattern kept popping up: people would achieve the
financial means to quit their day job, then travel for a couple
weeks or months…then get bored.
The reason is because humans adapt quickly. The most obvious

example of this is hedonic adaptation: as one increases their
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income, they tend to inflate their lifestyle more and more, yet
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remain roughly at the same happiness level.

This is because everything becomes normal over time. The new
house, watch, phone, and car all become quite ordinary after a
while. Even constant travel and leisure becomes mundane
quicker than one might think.
The Solution
The solution, in nearly every case, was for these people to

pursue work they found fulfilling – starting a business, an
agency, a blog, a podcast, building a product, etc. – that used
their unique skillset to help others and ironically help them earn
income at the same time.
When you have something to work on, to build,

and to create, you suddenly kill the void. You
have a reason to get out of bed each morning
and do work that you find meaningful and that
makes a positive impact on other people.
“It turns out that work is
also correlated with
It turns out that work is also correlated with longevity. In a
longevity. In a
fascinating study on retirement, researchers found that retirees
fascinating study on
were 51% more likely to have died than their counterparts who
retirement, researchers
continued working, and a 5-year increase in the retirement age
found that retirees were
was linked with a 10% decrease in all-cause mortality.
51% more likely to have
died than their
As anecdotal evidence, just look at anyone in their 80s or 90s
counterparts who
who continues to work full-time like Warren Buffett, Charlie
continued working, and
Munger, or Jiro Ono – it’s not about the money for them, it’s
a 5-year increase in the
about doing work they love.
retirement age was
linked with a 10%
decrease in all-cause Doing Work on Your Terms
mortality”
The path to a good life doesn’t involve quitting work entirely,
but rather finding fulfilling work that you can do on your terms.
5
Personally I don’t hate the actual work I do as a data scientist at

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my day job. I do, however, hate the environment that this work

is wrapped in.
I don’t enjoy commuting, attending pointless

meetings, going through performance reviews,
dealing with office politics, or being expected to
sit in a certain spot in a certain building for
eight hours each day.
I believe many people share this sentiment. It’s not the work we
hate, it’s the environment that the work is wrapped in.
The Role of Financial Independence
Of course, the best way to obtain the freedom necessary to do

work you enjoy on your own terms is to attain some level of
financial independence.
“In the last few months, This is the path I’m currently on myself. I’ve managed to save
about $120k over the past 2.5 years.
these income streams
have covered 50-75% of
my monthly expenses, so My original goal when I first started was to save
I’m getting close to $1 million and never work again. Now, my goal
hitting this target”
is to save $250k – $350k and build up my
income streams outside of my day job to a point
where they consistently cover my monthly
expenses.
In the last few months, these income streams have covered 50-
75% of my monthly expenses, so I’m getting close to hitting this
target.
Finding Fulfilling Work

If you’re on the path to financial independence, I encourage you
6
to start thinking about finding fulfilling work rather than

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attempting to hit some net worth number and never work
again.
More than likely, once you start experimenting with different

types of work, you’ll find that you can earn at least some
income doing something you enjoy.
This means that you could actually quit your

day job before you’re completely financially
independent since you won’t rely completely on
investment returns and dividends to support
your lifestyle.
I’ll leave you with two quotes from three incredible thinkers
that emphasize the role that work plays in a meaningful life:
• “We act as though comfort and luxury are the chief

requirements of life, when all that we need to make us
happy is something to be enthusiastic about” – Albert
Einstein
• “What humans need and want isn’t a complete release of

tension and responsibility, but the pursuit of a
worthwhile goal that they chose freely” – Viktor Frankl ▪
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10 Types of Investors in the
Market
Vijay Pahwa, Wealth Park
The Gold Class (Silent on Social Media)

Age group: 38-55 years. 100-200 crores in stocks. Self-made
Billionaire. Created wealth by 10x-100x in a few stocks.
Investing since 2003 or earlier.
Honest Beginner Value Investor (Silent on Social

Media)
50-80% of assets in Stocks. Usually 28-35 years old. Made some
wealth (50L-2Cr) in last 3-5 years. Looking at building a
portfolio of 5-7 Cr in 3-4 years and quitting job. Subscribes to
“After Demonetization, multiple advisory services.
when market picks up,
re-tweets old tweets of
old stocks (but in reality, Typical Twitter Value Investor
could not buy them
again as they have run Diverse age group. Asset allocation: 99% in Real Estate (1-10
too far before he could Cr), 1% in Stocks (1-10 Lakh). Runs a WhatsApp group - Value
buy again)” Investing - and discusses Intra-day trades, Futures, Options,
Break-outs etc. Churns whole portfolio every week.
Smart Twitter Value Investor

30-40 years old with 50% asset allocation in Stocks. Sells all
portfolio during Demonetization time but keeps tweeting about
value investing. After Demonetization, when market picks up,
re-tweets old tweets of old stocks (but in reality, could not buy
them again as they have run too far before he could buy again)
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Beginner (Silent on Twitter and Social Media)
Age group: Usually 25 years old. Has no clue what stock market
is really about. Portfolio size is 1-5 Lakh. Joins some groups
with a primary motive of passing time and experiencing thrill.
The SIP Investor

30-55 years old. Invests through SIPs in mutual funds. Doesn’t
have a clue about stocks. Looks at stocks that go 10x in awe.
Planning to invest in direct stocks.
The F&O Trader

Primarily gives tips of Nifty, Bank Nifty, etc. Earns money
through brokerages. Hasn’t made a penny in profits yet but
portrays himself as a successful trader.
The Networked Value Investor

Has networks with good value investors. Doesn’t have a clue
“Has networks with about value investing. Gets stock picks from others and talks
good value investors. about them with everyone else.
Doesn’t have a clue
about value investing.
Gets stock picks from The Sleepy Value Investor
others and talks about A rare breed. Buys and holds 10-12 compounders for 3-5 years
them with everyone of time frame (ex: private banks)
else”
The Breakout Value Investor

The one who thinks that buying break-outs and value investing
is one and the same thing. A common breed.
What type of investor are you? ▪

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8 Key Takeaways from 2018
Berkshire Hathaway’s Letter to
Shareholders
Aditya Kondawar, Research Analyst
Warren Buffett is famously called the Oracle of Omaha, and

rightly so – $1,000 invested in Buffett’s Berkshire Hathaway
stock in 1964, when Buffett took over the company and shares
cost just $19, would be worth about $11.6 million dollars today.
The stock has returned 2,472,627% cumulatively since 1964

compared to 15,019% by S&P 500 with dividends included.
To put things into perspective the stock has given a CAGR of

20.5% each year compared to S&P 500’s 9.7% CAGR. The
numbers itself show why Mr. Buffett has fans all over the World
who practice his Value-seeking and value investing strategies.
“Over time, Charlie and I
expect them to deliver Berkshire Hathaway has a huge equity portfolio which is valued
substantial gains, albeit at nearly $173 billion at the end of 2018.
with highly irregular
timing” Here are the 8 key takeaways from Warren Buffet’s 2018 letter
explained in detail:
Prime goal in the deployment of your capital is:

To buy ably-managed businesses, in whole or part, which
possess favorable and durable economic characteristics. We also
need to make these purchases at sensible prices.
Operating earnings is the true measure:

Focus on operating earnings, paying little attention to gains or
losses of any variety. My saying that in no way diminishes the
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importance of our investments to Berkshire. Over time, Charlie

and I expect them to deliver substantial gains, albeit with highly
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irregular timing.
Spending is essential:
In contrast, Berkshire’s $8.4 billion depreciation charge
understates our true economic cost. In fact, we need to spend
more than this sum annually to simply remain competitive in
our many operations.
Beyond those maintenance capital expenditures, we spend large

sums in pursuit of growth. Overall, Berkshire invested a record
$14.5 billion last year in the plant, equipment, and other fixed
assets with 89% of that spent in America.
Berkshire Hathaway’s Buyback:

Earlier I mentioned that Berkshire will from time to time be
repurchasing its own stock. Assuming that we buy at a discount
to Berkshire’s intrinsic value - which certainly will be our
intention - repurchases will benefit both those shareholders
leaving the company and those who stay.
True, the upside from repurchases is very slight for those who
are leaving. That’s because careful buying by us will minimize
“If Charlie and I think an
any impact on Berkshire’s stock price.
investee’s stock is
underpriced, we rejoice
when management Share buyback is a good indicator:
employs some of its All of our major holdings enjoy excellent economics, and most
earnings to increase use a portion of their retained earnings to repurchase their
Berkshire’s ownership shares. We very much like that: If Charlie and I think an
percentage” investee’s stock is underpriced, we rejoice when management
employs some of its earnings to increase Berkshire’s ownership
percentage.
Berkshire’s holdings of American Express have remained

unchanged over the past eight years. Meanwhile, our ownership
increased from 12.6% to 17.9% because of repurchases made by
the company.
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Last year, Berkshire’s portion of the $6.9 billion earned by

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American Express was $1.2 billion, about 96% of the $1.3 billion

we paid for our stake in the company. When earnings increase
and shares outstanding decrease, owners – over time – usually
do well.
It is always prudent to keep money tied up in liquid

assets:
Berkshire held $112 billion at year-end in U.S. Treasury bills and
other cash equivalents, and another $20 billion in miscellaneous
fixed-income instruments. We consider a portion of that stash to
be untouchable, having pledged to always hold at least $20
billion in cash equivalents to guard against external calamities.
The reason for parking money in liquid assets - “Berkshire will

forever remain a financial fortress. In managing, I will make
expensive mistakes of commission and will also miss many
opportunities, some of which should have been obvious to me.
At times, our stock will tumble as investors flee from equities.
But I will never risk getting caught short of cash”.
Focus on undervalued companies:

My expectation of more stock purchases is not a market call.
“Berkshire will forever Charlie and I have no idea as to how stocks will behave next
remain a financial week or next year. Predictions of that sort have never been a
fortress” part of our activities.
Our thinking, rather, is focused on calculating whether a

portion of an attractive business is worth more than its market
price. Blindly buying an overpriced stock is value destructive, a
fact lost on many promotional or ever-optimistic CEOs.
Paying a premium as a one-off is okay only if you are

confident on the management:
Late in 1995, after Tony had re-energized GEICO, Berkshire
made an offer to buy the remaining 50% of the company for $2.3
billion, about 50 times what we had paid for the first half (and
people say I never pay up!). Our offer was successful and
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brought Berkshire a wonderful, but an underdeveloped,

company and an equally wonderful CEO, who would move
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GEICO forward beyond my dreams. ▪

Book Review – Master Class
with Super Investors
Nitin Rao, Alpha Ideas
The Book ‘Master Class with Super Investors’ is written by

Vishal Mittal & Saurabh Basrar who run an investment firm
called Altais Advisors .
Similar to Jack Schwager and his legendary Market Wizard

series, the authors have interviewed some of the best investors
in the country and attempted to find out what made them tick.
The list of investors is found below here :
“What I find amazing is

the amount of wealth
they have been able to
build despite humble
beginnings”
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Each investor explains his investor journey in detail and walks

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thru his successes and misses.

What I find amazing is the amount of wealth they have been
able to build despite humble beginnings.
One thing that struck me was that each investor, to paraphrase

Frank Sinatra, “did it my way”
So you have investors who pay a lot of attention

to meeting managements while others believe
that meeting management is purely a waste of
time.
Some of the investors are voracious readers-reading 2 books a

week, while some have not read a book in their life! Some
started their journey as stock brokers whereas many others
didn’t
I found the anecdotes of the various investors on their big

successes -Ramesh Damani on Infosys, CMC etc. Raamdeo
Agrawal on Hero Honda, Govind Parikh on South Companies -
extremely interesting.
“There are investors who
pay a lot of attention to The authors have done an excellent job in asking the investors
meeting managements their opinions on these often overlooked aspects of investing:
while others believe
meeting management is • Position sizing
purely a waste of time”
• Portfolio construction
• When to increase/decrease a position
• Selling
• Using leverage
• Using technical indicators even for fundamental

investing
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• Using F&O

• Asset allocation- many also ploughed profits into real
estate
While each investor had different experiences

and different styles of investing, there was one
common feature amongst all of them- they all
are super bullish on India and believe the next
30 years will create more wealth than the last
30.
I would strongly recommend this Book for those interested in

reading about the Super Investors of the Indian Stock Markets. ▪
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Theranos: A Bigger Culprit of
Humanity than Thanos?
Rishabh, DIA Member
Elizabeth Holmes, a 19 year old Stanford dropout started

Theranos in 2003. Business idea? A path breaking solution with
vastly advanced tech for blood tests wherein a small drop of
blood was enough to run all kinds of tests and help in early
diagnosis of a vast number of problems.
Initially they were able to arrange a $6 million

funding using Holmes’ father’s connections
(who was a vice president at Enron). They
developed a prototype and named it Theranos
1.0, which received mixed reviews.
“How was the FDA The plan was to license it to pharma companies to help them
approval received for detect the side effects pretty early during drug testing and
products based on a tech. clinical trials. Then came the breakthrough product, named the
which NEVER really Edison. The idea was to scale it up and run entire health clinics.
worked?” Theranos’ products were much more efficient than the
traditional syringes.
A noble cause wrapped in a platinum business

opportunity, right?
That’s what the VC world thought. A $700 million funding

followed, with big healthcare companies and funds running for
partnership alike. The startup boom of 2010 was already making
everything sound ridiculous, with Theranos leading the pack.
Tie ups with companies like Walgreens, Safeway etc. and

successful poaching of Apple’s designers meant that Theranos
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had sent a message to the entire industry.

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With Holmes’ charismatic personality largely compared to
Steve Jobs himself, Theranos was starting to be seen as a Mecca
of healthcare solutions. Questions had been raised about the
actual working of the Theranos technology. But everyone was
riding a wave of optimism (read: blindfold) and Theranos soon
ended up reaching a peak valuation of $10 billion and Holmes
becoming the richest self-made female billionaire at ~$5 billion.
Publicly shown support by the Clintons and several other

lobbyists, people like Rupert Murdoch (News Corp.) and The
Waltons (Walmart) were also invested. The company was
boasting whopping numbers. Huge jump in annual revenue to
almost $100 million. Bumper margins in an already competitive
industry.
Starting to sound too good to be true? Wish the

investors had thought so too.
Come February 2015. An investigative journalist named John

Carreyrou, working for Wall Street Journal, questioned the
validity of Theranos’ tech. based on a tip. He contacted a former
“Their technology was lab director, and he revealed the malpractices Theranos
inaccurate. Their indulged in! Ironically, the FDA approval for a product shortly
products were being followed.
shipped without
regulatory approval. Put to test, results based on Theranos’ tech. were vastly
Behind the Jobs-like incorrect. Their tech. was inaccurate. Their products were being
charisma and pure shipped without regulatory approval. Behind the Jobs-like
selling genius, was a charisma and pure selling genius, was a bundle of deceit. Then
bundle of deceit” followed the sanctions, lawsuits, commercial defamation etc.
Partners terminated agreements. Products and testing labs were

shut down. Major employee layoffs followed. Millions were
burnt in paying off damages, penalties etc. Later studies
revealed that Theranos falsely showed its revenues at 1000
times the actual. Absolute bonkers!
There was a period of slight resurgence when their application

to test on Zika virus was cleared. The Fortress Investment
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Group made a whopping $100 million debt investment to help

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Theranos stay afloat (More about this in a series called “10

things science can’t answer” or “10 times humans forgot they
had brains” or a book titled “How to lose 100 million in 90
days).
Fast forward today. Holmes has been charged on multiple

counts of wire fraud, mismanagement of funds,
misrepresentation of facts etc. by the SEC. The Zika research
failed. In September 2018, the company defaulted on the $100
million loan and got liquidated. Billions gone down the drain.
But the real damage Theranos and Holmes did

was not even financial.
Health of millions of people put at risk. People who had relied
on Theranos for diagnosis and probably had a fatal disease
overlooked in its faulty tech or taken pills for a disease they
never had!
My take: A check needs to be made into how big time investors

were fooled for a decade and nobody batted an eye. How the
financials were never verified by Murdoch and Waltons and
“While it may be a others? How did the Centers for Medicare and Medicaid
financial fraud on the Services not look into it for 10 years? How WSJ had to come up
face of it, deep down it’s with such a study instead of the government agencies with
a mockery of the medical billions of dollars of budget?
system, levels of checks
and the quality of While it may be a financial fraud on the face of it, deep down
diligence, which is it’s a mockery of the medical system, levels of checks and the
obviously lagging 15 quality of diligence, which is obviously lagging 15 years behind
years behind the times” the times.
Healthcare costs are at an all-time high, leading to capping in a

lot of products and services. Obamacare is no longer there.
People are on their own. And in the midst of all that, companies
like Theranos continue to exist and feed their belly of greed with
deceitful means to make money.
My most important question. How was the FDA approval

received for products based on a tech. which NEVER really
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worked? ▪
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Dude, Shall I Cut My Equity
Exposure?
Arun Kumar, Eighty Twenty Investor
Last week a friend of mine, who had read my recent rants on

the need to focus on risks over returns at the current juncture
called me up.
“Dude, shall I cut my equity exposure? Looks like the markets

are correcting and as you mentioned valuations are also
expensive!”
I am sure most of us are grappling through the same issue. Let

us see if we can find an answer to this million dollar question.
I personally think the markets are slightly expensive and the

global interest rate scene is extremely uncomfortable for me. So
“I personally think the there is an inherent itch in me to play it “cute” – Should I take
markets are slightly out some money and park it into safe assets such as debt funds
expensive and the global and get back in post a correction.
interest rate scene is
extremely uncomfortable for
me. So there is an inherent
My first investment mistake
itch in me to play it “cute” –
Thankfully, I have already gone through this question 5 years
Should I take out some
back during the 2013 crash due to taper tantrum. And this is
money and park it into safe
also when I made my first it-can’t-get-dumber than this mistake.
assets such as debt funds and
get back in post a correction.”
In 2013, around May the US Fed had announced that they were
planning to gradually reverse their quantitative easing
programme (read as no more money printing).
The Indian equity markets were down by 10% and the Indian
currency had moved from 53 to 66 levels! India was classified as
fragile 5.
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It was the “shit-hit-the-ceiling moment” for me.

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Being the dumb me, I poured over various brokerage reports
and not to be surprised, all of them scared the daylights out of
me.
And if you haven’t guessed it till now – yours

faithfully panicked!
Yep, despite all the support system I had in terms of a great
organization, access to best fund managers, intelligent
colleagues, sophisticated market data and analysis subscriptions
which cost a bomb, still I panicked!
“I sold of 30% of my equity I sold of 30% of my equity allocation and stayed in cash. And
allocation and stayed in cash. you know what happened next.
And you know what
happened next?” The markets recovered!
And thankfully, I did enter back. But by the time I entered back
all my stocks were above my selling price.
What was the learning?
Look out for a better market timing model and figure out
various factors which impact the equity markets..blah..blah.
Grr..not again..but thankfully, common sense prevailed over my

intellectual enthusiasm.
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The solution was not a better timing model. It was far simpler as
a how-did-it-not-strike-me-earlier-kinda insight stuck me.
I realized that I was still in my 30’s and had a hell a lot more years of
earnings and savings to be invested! This meant that my current
corpus was a paltry amount compared to the expected corpus
15-20 years down the line. So the real question was – why all
this market timing drama at this stage?
Understanding Human Capital vs Financial

Capital
To help you appreciate the true dumbness of my blunder, let me
introduce you the concept of – Human Capital vs Financial
Capital
Human Capital is simply the amount of money you are yet to

earn using skills, knowledge and experience, over the course
of the rest of our lives. The more skills/knowledge/experience
you have, the higher your human capital.
“If I had framed my portfolio In Indian context, assuming most of us retire at

value taking into account my
overall potential future
around 60 to 65, human capital is what we are
portfolio (taking into account yet to earn till we are 60 to 65. So your human
my future earnings), my capital is at the maximum when we start
current portfolio size would
have been minuscule
working and diminishes as we near our
compared to the 30 years of retirement.
earnings and savings left”
On the other hand, financial capital is basically the sum of all
of your assets minus your debts – i.e. your net worth. In my case
since I don’t have debt or real estate, my financial capital is in
effect my entire investment portfolio value.
Financial capital is the inverse of human capital where usually,

it’s lower when you’re younger and gradually grows till you
reach retirement.
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Now you can clearly see that, my real blunder
was that, I had completely ignored the invisible
part of my portfolio – my human capital – i.e.
the savings from my earnings over the next 20-
30 years!
If I had framed my portfolio value taking into account my
overall potential future portfolio (taking into account my future
earnings), my current portfolio size would have been minuscule
compared to the 30 years of earnings and savings left.
Suddenly I would have realized that, all I needed to do was to

stay silent, focus on saving and investing regularly in the initial
stages.
“My real blunder was that, I

had completely ignored the
invisible part of my
portfolio – my human
capital – i.e. the savings from
my earnings over the next 20-
30 years!”
This would have allowed me to keep it simple and stick to a
100% equity portfolio – instead of trying to time the market.
Re-frame your portfolio

The below table tells us how an investment of Rs.10000 every
month which is increased by 5% every year and provides a
return of 15% will fare over different time periods.
The first thing for you to do if you are young is to roughly

approximate your portfolio value 15-20 years down the line.
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(Assuming you want to become financially independent a lot
earlier than your 60s)
If you do a monthly investment of Rs.10,000 and assuming that

you increase it by at least 5% in every year at 15% expected
returns (from equities), you will end up with Rs.80 lakhs in the
next 15 years and Rs.1.8 Cr after 20 years.
So based on your monthly savings that you currently do, you

can have a rough estimate of the portfolio value after say 15-20
years.
This would put in perspective your current portfolio and will

help you put possible market corrections in the right
perspective.
“Let us not act cute. We shall

just stay put and ride the
volatility out, however
painful it may be”
For ex: The moment I put my current entire 100% equity
portfolio as a % of the final value after 15 years it works out to
be just around 6%.
With this sudden shift in frame, the answer

to “Should I act cute and try asset allocation
strategies with just 6% of my targeted
corpus” becomes obviously simple.
A lot of us (I am no exception) end up doing this mistake of
overthinking, analyzing and trying to act extra cute during the
initial years of wealth building where in reality, it’s
23
Page

predominantly our ability to earn and save which really matters
initially.
Keep it simple
Since my friend is in the same boat as me, our solution became a
lot simpler.
Let us not act cute. We shall just stay put and ride the volatility
out (however painful it may be).
Also if we don’t test and understand our behavior (ability to

withstand declines) now at a smaller corpus, then at a larger
corpus it may become too late.
But obviously as our portfolio grows in size, we will reach a

point in time, where the returns from our portfolio is much
larger than the incremental savings. This is the point where an
SIP or monthly investing does little to address overall portfolio
volatility (as the 100% equity portfolio has significantly grown
in size and a 50% temporary decline like that in 2008 can
emotionally derail us from equities forever)
“If we don’t test and
understand our behavior
(ability to withstand declines) So I have a simple thumb rule – only when my
now at a smaller corpus, then portfolio size crosses 5 times my yearly salary
at a larger corpus it may will I start attempting to be cute and
become too late”
implement an asset allocation strategy.
(You can fix your own cut-off no based on the no of years of
salary you won’t mind seeing in red during a temporary
(hopefully) market decline). Logic being at a larger size,
protecting my existing portfolio becomes as important as
making it grow!
Till then, let the people with large corpus of money worry about
asset allocation, market timing etc. while we relax, and focus on
our careers and continue investing regularly. ▪
24
Page

Magic of Dividends – The Real
Return!
FI, Fundamental Investor
What are Dividends? Are Dividends Useful? Are Dividends

Significant? What Impact do they have? Can they, over a
period of time, cover Basic Expenses? Can Dividends
Compound?
When I put this thought on Twitter, there were many who

couldn't relate to it. Yes, it's extremely difficult to relate to this
idea, unless we experience it. There were many questions asked.
In this article, I’ll try to throw light on as many aspects as
possible.
“There are many companies
where as business grows, Let's first understand some basic concepts.
Dividend also grows. In this
case, what happens is, over a Dividend - A part of the Profits or Reserves paid regularly
period of time, Share price (typically Annually/Quarterly) by a company to its
slowly & steadily moves up. Shareholders
Dividends also slowly inch
up” Let's assume "Growth_Dividend Limited" is a Company which
is trading at 1200 per share. Its Face Value is 2 per share. Its
dividend is 40 per share annually.
Some more definitions:
Dividend Percentage - (Dividend/FV) x 100 = (40/2) x 100 =

2000%
Dividend Yield - (Dividend/Share Price) x 100 = (40/1200) x 100

= 3.3%
25
We all know that in a Business, Earnings & Cash flow defines its
Page
Strength. No matter how good the Product/Service is, unless

business grows Earnings over a period of time, we Shareholders
do not make any money.
Share price of a Business keeps fluctuating based on Market

Conditions, Emotions, Sentiments, News, Analyst Reports,
Demand, Supply etc. Hence Returns keep fluctuating. If we
observe carefully, at any point of time, our notional Profit or
Loss will exist.
But, if we are invested in a Consistent Dividend

paying company, the Quarterly/Annual
dividend is Real Money for us. It comes to our
Account - Tax Free (below 10 Lakh annually).
Over a period of time, it can be used for our
Expenses or can be Reinvested.
Many businesses have a Dividend Policy. I am personally
invested in a Business where 50% of Earnings Per Share is given
back to us shareholders in the form of Dividends.
There are many companies where as business grows, Dividend

“In 2018, Maruti was also grows. In this case, what happens is, over a period of time,
trading at 8900 per share. Share price slowly & steadily moves up. Dividends also slowly
Dividend is 75 rupees inch up.
(moved up steadily from 6
rupees to 75 rupees)” Let's take the example of Maruti Suzuki from
the below list. It has been a fantastic business
over decades.
In April 2010, Maruti was trading at 1400 per share. Kiran
bought 100 shares of Maruti (1.4 Lakh rupees) in 2010. Dividend
was 6 rupees. So, the Dividend Yield in 2010-11 was a mere
0.4% (600/140000).
In 2018, Maruti was trading at 8900 per share. Dividend is 75

rupees (moved up steadily from 6 rupees to 75 rupees). Kiran is
26
still holding her 100 shares.

Page

In 2018, she got 7500 as dividend. On her invested capital of 1.4
Lakh rupees, dividend is a whopping 5.4% (7500/140000).
Today, since Maruti is at 8900 per share, her share value is 8.9
Lakh rupees (The above data sheet was prepared in 2018.
“Majority of companies Kindly refer to the latest prices on the BSE website)
owned by legendary
Warren Buffet, are Over a period of time, if Maruti continues to gain market share
dividend paying. The and progressively earns, the dividend also will keep moving up.
beauty of growing Let's pause and re-read the above example. Please give some
dividends comes into play, time to digest above thought.
as we hold the business for
decades” In the above list, I have tried to collate this information for some
more businesses. I used to own few of them at some period of
time in my investment journey.
Majority of companies owned by legendary Warren Buffet, are

dividend paying. The beauty of growing dividends comes into
play, as we hold the business for decades.
Consistent and growing dividends also, to a certain extent, give

27
us confidence on the Financials of the Business. There might be

Page

exceptions to the rule, but I like investing in businesses which
have a good dividend paying policy and adhere to it.
Dividend Compounding
We have all heard about Compounding in Stock Market. But,
have you heard about Dividend Compounding? I get
goosebumps even by thinking about it.
Look at the graphic below:
“If we continue to buy As you can see, the difference in returns is enormous between
more shares with the Dividend Reinvested & Dividend Withdrawn.
dividends which we
received, the dividends also If we continue to buy more shares with the dividends which we
will compound along with received, the dividends also will compound along with the
the business share price” business share price (assuming that company continues to grow
steadily over decades).
Now, a few pointers while identifying Dividend Paying

Companies (In screener etc.)
• Business has to keep growing (earnings has to be steadily

progressive). Else, dividends won't grow.
• Check Dividend Payout history. Is it regular? Consistent?
28
Growing? Flat? (You can find it in Corporate Actions

Page
page in Exchange website)

• Find out Dividend Paying Policy (in Annual Report) and
see if they have adhered to it religiously
• Avoid cyclical companies while looking for consistent
dividends (where dividends also will be cyclical)
Never ever underestimate the Power of Dividends. It's so Real.

So Amazing. In the Longer Run, it can work magic. Yield might
be low today. Might look ridiculous. Laughable.
But, if business compounds over a long time, yield will be

awesome.
“Avoid cyclical companies

while looking for consistent
dividends (where
dividends also will be
cyclical)”
Imagine - A day might actually come, when the Annual

dividend would be the Initial capital deployed. Imagine a day,
after 12- 15 years, when Monthly expenses can be taken care by
Dividends alone.
To Start, we need to Believe. I want everyone to experience,

what I experience. It's a long road. But, 100% Worth.
I wish you all the very best. ▪

29
Page

Little Investing Rules for
Indian Stock Market
Ravichand, Stock and Ladders
By Three methods we may learn wisdom: First, by reflection,

which is noblest; Second, by imitation, which is easiest; and
third, by experience, which is the bitterest. “ – Confucius
Having spent a good time in the Indian Stock Market, I have

come up with a version of short rules for the common man to
invest in Indian stock market.
By no way are these rules gospels of truth nor have they been
validated for their accuracy. These are based solely on my
observations, learnings and experiences of investing in the
Indian stock market over the last two decades.
“Investing in the Indian
markets solely based A. Do not follow Warren Buffett blindly. It is equivalent to
on bookish knowledge or driving on the Indian streets by blindly following the
the wisdom shared by road signs.
foreign investing Guru’s is
equivalent to appearing for B. Put yourself in the role of a Sherlock Holmes or a Hercule
a mathematics exam by Poirot investigating a financial mystery when you are
reading the science studying the annual reports of some of the Indian
textbooks” companies.
C. Like the Kurunji flower (Strobilanthes kunthianus) which

blooms once in twelve years, finding a truly outstanding
company run by an honest and competent management
is also a rare event. If you happen to find one such
company then bet your house on it.
D. Investing in the Indian markets solely based on bookish

knowledge or the wisdom shared by foreign investing
Guru’s is equivalent to appearing for a mathematics
30
exam by reading the science textbooks.

Page

E. Stock market is like a giant financial Chakravyūha.
Easy to enter but difficult to exit. If you enter the markets
without adequate investing skills and knowledge then
you may end up being a “financial Abhimanyu”.
F. “Minimum Government, Maximum Governance” is a

popular political slogan which is equally applicable for
the individual investor. Seek to invest in companies
which have minimum Government holding, interference
and regulatory oversight.
G. When you find that the promoters (or their family

members) love hobnobbing with Bollywood film
stars and celebrities then double up on your normal due
diligence before investing in such companies.
H. Asking stock brokers financial tips for long term

investing is equivalent to a sheep asking the butcher
health tips for a long life.
I. Do not blindly join the passive investing index

bandwagon; Fund managers in India have routinely
outperformed the broader markets and over a fairly long
“Asking stock brokers period of time.
financial tips for long term
J. If there is a sudden action in a particular stock counter
investing is equivalent to a
for no apparent reason and you suspect that some trades
sheep asking the butcher
are being done based on non-publicly available
health tips for a long life”
information then probably you are right.
K. When a market expert or a pundit appears on media and

recommends a particular scrip as a “Strong buy” then
shorting or even selling that scrip may not be a bad idea.
L. Just as you would not attempt to do a surgery at home,

you should also not attempt to do a financial surgery at
home (if you are not professionally qualified). Half
knowledge is a dangerous thing and it’s more rewarding
in the long run to pay a certified financial adviser for
professional advice.
31
Page

M. Never discuss your portfolio or your trades publicly
even if you don’t believe in the “Nazar lagna” (evil eye)
concept.
N. Seek for a mentor or a true friend (not one with vested

interests) to bounce off your investing ideas.
O. Stronger the connection of a business with a single

political party then greater should be the caution you
must observe before investing in that stock.
P. The crowd is mostly right. If you still want to bet against

them then better check your facts and reasoning a dozen
times before you go contrarian.
Q. If you go contrarian then Mr. Market is more likely to

turn around and veer towards your contrarian position
as a large cruise ship than like a small speed boat. Be
patient.
R. While analyzing a business let us say you have come up

with 5 positive scenarios and 1 negative scenario that
might possibly happen; Be ready to welcome the
negative scenario as invariably it will be the first to
arrive.
“The price of a stock will
continue rising while you S. If you have analyzed a stock and then decided to give it a
are still contemplating to pass, be also mentally prepared to face the scenario of
buy it. And the price may your rejected stock idea doing spectacularly well in the
promptly start falling post short term. Avoid any feelings of regret and move on.
your actual purchase. Do T. The price of a stock will continue rising while you are
not be interested in a stock still contemplating to buy it. And the price may promptly
when everyone else also start falling post your actual purchase. Do not be
seem to be interested in it” interested in a stock when everyone else also seem to be
interested in it.
U. There is nothing called as “Free Lunch” across the whole

of the financial industry and it’s for you to figure out the
hidden and implicit price for things given to you free.
V. Use television more as a source of entertainment and

32
less as a source for your investing ideas.

Page

W. Sometimes the accuracy or completeness of your analysis
has no bearing on the money you eventually make or
lose on a stock. Good luck and prayers do matter.
X. Whenever someone offers you a scheme for doubling or

tripling the money in a short time; remind yourself that
they are talking about their money and not yours.
Y. Only a handful of people will really want you to

succeed in life and in investing. Find your real well-
wishers early.
Z. Karma now works in a much shorter cycle time than

before , more like T+1 or T+2. Bad things done in the
market will come back to bite you pretty quickly. See
Good, Be Good and Do Good.
The unwritten rule and the one which has not been mentioned
above is that for success in any field including investing “Hard
work” is mandatory. All the midnight oil burnt and the early
morning lost sleep will eventually pay off.
Hard work + Humility = Success
“Do not blindly join the John C Bogle famously quipped “Learn every day, but especially
passive investing index from the experiences of others. It’s cheaper.”
bandwagon; Fund
managers in India have Happy Investing. ▪
routinely outperformed the
broader markets and over a
fairly long period of time”
33
Page

A Glimpse of Our DIA Meet,
2019
Connaught Place, New Delhi
Top: NDMC Convention

Centre, Connaught Place,
where the DIA Meet of 2019
was organized
Bottom: Audience inside

the auditorium
34
Page

Top: DIA Conveners,
Utkarsh Pandey (left) and
Ghanisht Nagpal (right)
Middle: Alok Jain

presenting his ideas on
Momentum Investing
Bottom: Safir Anand

talking about how our own
behavior impacts our
returns in the stock market
35
Page

Top: Dr. Vijay Pahwa
addressing the audience
with his views on how
theory in Investment Books
differs from the market
scenarios in reality
Bottom: Alok Jain (left),

Rajeev Mehta (middle), and
Haresh Nagpal (right)
36
Page

Top: Gaurav Sud talking
about his thesis on Special
Situations
Bottom: Ravi Jain sharing

his Wealth Creation Mantra
with the audience
37
Page

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CONTENTS

Editorial, Dhruv Girdhar ..................................................... 2

Life is About Finding Fulfilling Work, Zack (Four Pillar

10 Types of Investors in the Market, Vijay Pahwa

8 Key Takeaways from 2018 Berkshire Hathaway’s Letter

Book Review – Master Class with Super Investors, Nitin

Theranos: A Bigger Culprit of Humanity, Rishabh .. ….16

Dude, Should I Cut My Equity Exposure, Arun (Eighty

Magic of Dividends - The Real Return, Fundamental

Little Investing Rules for Indian Stock Market,

A Glimpse of Our DIA Meet, 2019 ................................... 34

DIA Journal | April 2019

during 2008-Recession despite having all the computer screens

DIA Journal | April 2019

Through this project, we also aim to spread the awareness

What you see of just a few pages is the result of hundreds of

Having said that, I would like to grab this opportunity to thank

I request you to share your honest reviews regarding the

Published By: Email: ghanisht.nagpal@hotmail.com

Advertising Contact: Happy Reading. Happy Investing. ▪

DIA Journal | April 2019

When I first discovered the concept of early retirement, I

The idea is simple: save up enough money over the course of 10

I hated the idea of working 40 hours per week in a cube for 40

The reason is because humans adapt quickly. The most obvious

remain roughly at the same happiness level.

DIA Journal | April 2019

The solution, in nearly every case, was for these people to

When you have something to work on, to build,

Personally I don’t hate the actual work I do as a data scientist at

DIA Journal | April 2019

I don’t enjoy commuting, attending pointless

The Role of Financial Independence

Of course, the best way to obtain the freedom necessary to do

Finding Fulfilling Work

to start thinking about finding fulfilling work rather than

DIA Journal | April 2019

More than likely, once you start experimenting with different

This means that you could actually quit your

• “We act as though comfort and luxury are the chief

• “What humans need and want isn’t a complete release of

DIA Journal | April 2019

The Gold Class (Silent on Social Media)

Honest Beginner Value Investor (Silent on Social

Smart Twitter Value Investor

DIA Journal | April 2019

The SIP Investor

The F&O Trader

The Networked Value Investor

The Breakout Value Investor

What type of investor are you? ▪

DIA Journal | April 2019

Warren Buffett is famously called the Oracle of Omaha, and

The stock has returned 2,472,627% cumulatively since 1964

To put things into perspective the stock has given a CAGR of

Prime goal in the deployment of your capital is:

Operating earnings is the true measure:

importance of our investments to Berkshire. Over time, Charlie

DIA Journal | April 2019

Beyond those maintenance capital expenditures, we spend large

Berkshire Hathaway’s Buyback:

Berkshire’s holdings of American Express have remained

Last year, Berkshire’s portion of the $6.9 billion earned by