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The $100 Startup


wealthymattersBusiness interests me and big business,should I be the founder or promoter, I suspect would interest me more.However I understand the need to start as a solopreneur or to start a micro-business, if for no other reason  than that my risk capital might be small or that I might not be sure enough of my skills to pull the venture off or that I might wish to test a business model or its component systems or that I need to limit the risks of launching an untried product or service.This sort of inclination naturally draws me to bootstrapping.I guess at heart I am a Dhandho Investor (https://wealthymatters.com/2011/03/06/the-dhandho-investor/).I find venture fund driven start-ups wasteful of capital and think they unnecessarily increase the chances of a business failing by  trying to do to much too soon, before systems and products are fully tested.My personal take is that venture funds are the product of a society with not many good investment opportunities and  a lot of excess financial capital hoping to turn some returns any which way. Read more of this post

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Why it’s better to invest in stocks rather than buy a business


wealthymatters.comThe following is a repetition of material found here https://wealthymatters.com/2011/03/06/the-dhandho-investor/ . But I think the material is significant enough to bear repetition.This is a list of reasons why a Dhandho Investor who wants High Returns but Low Risk should prefer to buy stocks rather than businesses.

I am rather indiscriminate when it comes to businesses.I would rather make money from a whole bunch of businesses rather than content myself with one source.And as the Indian economy explodes and money is made in so many different ways  it’s so hard to pick just a few businesses to focus on or to put money in.The list below is my way of consoling myself  for all the businesses I will never own.

  1. With an entire business, you have to run it, or find someone who can. To be successful, this requires an enormous amount of dedication.
  2. In the stock market, you’re buying a business that is already staffed, yet you still get to share in the earnings.
  3. With whole businesses, often the sellers know a lot more about the business than the buyers, and furthermore the prices offered are not usually as attractive as they can be in the stock market. Read more of this post

Confusing Uncertainity With Risk


wealthymatters.comHere is an extract  from the article ‘ Investors will miss out if they confuse uncertainity with risk ‘ by Whitney Tilson published in the Financial Times on 16 Feb 2008.I think confusing uncertainity with risk is precisely what happened pre-budget in India this year. And this confusion is something that happens to a greater or lesser extent every year before the budget.The same thing happens before the final decision is taken on any government policy. So if a  stock investor remembers that there is a difference between uncertainity and risk he/she can sometimes buy shares cheap.Risk means the chance of a loss of capital. Uncertainty is the range of different outcomes. So a stock may have high uncertainty but may not be risky, if no one knows what will happen but the worst case scenario would not results in a huge loss.

“Dealing with uncertainty is always a key challenge for investors. But dealing with uncertainty doesn’t mean avoiding it – on the contrary, it is often fuzziness about a company’s future that creates the type of opportunity bargain-hunting investors cherish.Wall Street in the main hates uncertainty, which manifests itself in depressed share prices of companies whose prospects lack “visibility.” But where the market can err is in confusing uncertainty with risk. Just because a company’s future is highly uncertain doesn’t mean an investment in it is risky. In fact, some of the best potential investments are highly uncertain, but have little risk of permanent capital loss. As hedge-fund manager Mohnish Pabrai describes it in his book, The Dhandho Investor: “Heads, I win; tails, I don’t lose much.” Read more of this post
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