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Saturday 21 July 2018

Let's re-learn!

A long time ago in a place far, far away, I used to have an interesting friend. One Friday evening, like any other Friday evening, we were chilling at our regular Theka, when suddenly he made an interesting proposition. Though in a very businesslike but suspiciously hushed tone. Only because I was his close friend, he wanted to introduce me to a business idea, where I just need to invest a small amount. The good part about his plan was that the returns would start flowing in in less than a month. The even better part about his idea was that soon after, I will have to do nothing and the so-called business will run on auto-pilot mode and I would be a sit-at-home millionaire!

investing 101
Photo by Jimi Filipovski on Unsplash
I am very sure that the audience of this blog is smart enough to understand that his business-idea was the infamous Multi-Level Marketing scheme, and of-course that conversation is one of the key reason why the first line of this blog says, ‘I used to have an interesting friend.”

But this post is neither to discuss MLM schemes, nor about old friends. This post is about a simple question that I usually ask anyone giving me an investment idea or as it is better known as 'tip' – if your idea is so commercially viable, why do you want to share your riches with me? Why don’t you mortgage your house and invest in the business? If everything goes well, soon after, by just sitting in your mortgaged house, you will be the proud owner of 100 such (mortgaged?) houses! 

This is probably just one example, and that too a very crude one. But the deeper you dive into the field of investing the more examples you will find of people and even companies misselling and promising (mostly?) unachievable returns. And that’s where my friends, this line of thinking is helpful. If the cost of capital (plus transaction charges) is less than the promised(!) returns, it is probably time to ask some hard questions.

Although, I must warn you, that probably I am from the older generation where people thought about businesses which were profitable or had a break-even point, and did not plan to run on ‘funding’ till someone bought them over. But I digress…


A new Journey

In not so distant past, till I decided to quit my full-time job and pursue my MBA, I was quite engaged in investing as well as trading. However, to fund my education, I liquidated almost all my investments, and even spent a couple of years under heavy debt! Yep, the infamous student-loan!

As the loan was paid-off and closed recently, I am re-learning the process of investing, while getting acclimatized with the new realities of the trading world. As I learn, digest, think and process, I will try to jot down some of my thoughts here on this page.

May the bulls (& bears) be always with you... ! 

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