Coffee Can Investing
Module Units
- 1. Introduction
- 2. Mr. Talwar’s Uncertain Future
- 3. Mistakes While Equity Investing By Mr. Talwar
- 4. Seven Common Mistakes Of Investment
- 5. Coffee Can Investing
- 6. Robust Returns With A Low Degree Of Uncertainty
- 7. The Coffee Can Portfolio Comes To India Through Ambit
- 8. Characteristics Of Coffee Can Portfolio
- 9. Why Does Coffee Can Portfolio Perform Well?
- 10. Case Study: Page Industries
- 11. Importance Of Long Term Holding
- 12. Value Investing In India
- 13. Buy And Hold Vs Valuations
- 14. Three Common Characteristics
- 15. Expenses Matter
- 16. Active Versus Passive Funds
- 17. The Real Estate Trap
- 18. Small Is Beautiful
- 19. Small Caps Outperform Large Caps
- 20. How Patience And Quality Intervene?
- 21. Putting It All Together
- 22. The Good And Clean Framework
- 23. Debt Allocation
- 24. Designing Your Own Financial Plan
- 25. Case Study Of Real Coffee Can Portfolios In The Indian Context
Mr. Talwar’s Uncertain Future
In this chapter, we see 2 people, Mr. Talwar and Mr. Sanghvi, who had pretty successful careers, but their financial situation was almost the same when they had started their careers. They have bad spending habits and are coming close to their retirements.
They meet Nikhil, a financial advisor, who suggested that they should invest in equity for long periods of time. To show the benefits of investing in equity, Nikhil says that if someone had invested ₹1 lakh in equity in 1990, it would have been valued at ₹34.2 lakhs in 2017.
A typical senior executive’s (Mr.T's) lifeline:
A typical manufacturing businessman’s (Mr.S’s) lifeline:
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As Nikhil continues to talk to Mr. Talwar and Mr. Sanghvi, he offers some advice which if we can follow, can help us to make better decisions:
- Quantify everything since reality is different from perception and hard numbers help to differentiate one from the other.
- Quantify your net worth.
- Check your current portfolio returns. (Mr. Talwar, on a weighted average basis, earned a return of only 4% per annum over 17 years).
- Write down your financial goals with the current equivalent goals, inflation-adjusted. At 8% inflation and 4% growth, the standard of living will come down drastically, and ultimately, you will have to compromise on the quality of your life.
- To fulfill all the financial goals of Mr. Talwar, the portfolio needed a 21% return on a post-tax basis.
- The need was to revise the goals to pragmatic levels, reduce the frequency of vacations, etc. The new required rate of return was 16% per annum.
- After his blunders in real estate and speculation, the only solution for Mr. Talwar was to ‘use the power of equity’.
- Mr. Talwar conducted some Classic Mistakes while dealing with equity.
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Etee Bajaj
This document is curated by Etee Bajaj. A BBA (HNRS) Graduate from St. Xaviers College, she has also completed her M.Sc.(Finance) and CFA from ICFAI University, Hyderabad. She takes keen interest in stock markets and believes in Value Investing and Fundamental research and considers the storyline of a company a crucial factor in investment. Reading autobiographies of renowned people is her hobby.
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