Opens profile photo
Follow
Groww
@_groww
Making finance simple for millions of Indians.
Mobile ApplicationIndiagroww.inJoined September 2015
29 Following
79.1K Followers

Groww’s Tweets

Groww
@_groww
There are many examples like this. The point remains. Investors should focus on the larger story – on what the number actually represents – not only on the numbers in isolation.
3
4
Show this thread
Groww
@_groww
Flawed logic. It’s the same mistake being repeated. Mutual fund investors obsess about the beta ratio, AUM, expense ratio – all of these mean nothing on their own.
1
5
Show this thread
Groww
@_groww
If the price of the stock is below Rs 50 or Rs 10 or Rs x, they invest in it. Again – wrong assumptions are being made here. Yet another one: watching the 52-week trend of a stock. If a stock has been climbing for 52 weeks, they’ll buy it.
1
5
Show this thread
Groww
@_groww
Likewise, there are many companies with high PE ratios. That doesn’t mean they are bad investments. Some very good stocks have had high PE ratios for years. Another common behavior: some investors buy stocks based solely on their price!
1
5
Show this thread
Groww
@_groww
There are many companies with low PE ratios. And they are low simply because those companies are performing poorly – nobody wants to invest in them. No matter how low and attractive their PE ratio looks, they’re bad investments.
1
4
Show this thread
Groww
@_groww
If the PE ratio is above a certain limit, they feel it is a bad investment. If it is below a certain limit, it is a good investment. This ‘limit’ is different for different people. But this singular obsession with the PE ratio of a stock harms investors more than it benefits.
1
4
Show this thread
Groww
@_groww
One common example: the PE ratio. Many investors are obsessed with the PE ratio of stocks. What is the PE ratio? In simple words, it is the ratio of the price of a stock to the earnings of the company.
1
4
Show this thread
Groww
@_groww
How do you measure this? That’s the tricky part. There is no single number or metric or ratio you can look at to judge an investment. Individual numbers don’t tell you enough.
1
2
Show this thread
Groww
@_groww
The lesson isn’t that you should understand which number is the most trendy one. Numbers alone never tell the entire story of a company. As an investor, which kind of a company do you want to invest in? A successful one.
1
3
Show this thread
Groww
@_groww
Some investors continued to not give it importance. Likewise, for very new companies, even revenue was low. But the size of the potential customer base became a crucial metric to judge future success. There’s a deeper lesson in all of this.
1
3
Show this thread
Groww
@_groww
Again, with time, the way some companies operate changed. Some companies were willing to delay earning profits to gain market share. In that case, revenue and revenue growth became important. Again, some investors caught this soon. Some investors were late to understand.
1
3
Show this thread
Groww
@_groww
A few newer companies didn’t pay a dividend – because they reinvested the profits back into the business. Some investors caught on to this. They stopped looking at the dividend and instead focused on the profits earned. Gradually, more investors paid attention to profits.
1
4
Show this thread
Groww
@_groww
There was a time when investors used to treat the dividend paid by a stock as the golden metric. If the dividend paid was high – good stock to invest in. Newer companies emerged. Trends shifted.
1
4
Show this thread
Groww
@_groww
Numbers Obsession in Investing The importance of various metrics changes from time to time. A common mistake we do is to treat certain numbers as the most important measure of something.
1
3
Show this thread
Groww
@_groww
The people submitted the tails and got the incentive. Later, it was discovered there were farms outside the city which would breed rats for their tails. Counting the number of rat tails was no longer a good way to measure how public hygiene was faring.
1
3
Show this thread
Groww
@_groww
French authorities started noticing rats in the city – rats without tails.Many local people realized that if they killed the rats, they’d run out of an income source. So, they would catch rats, cut their tails and release them. The rats continued to reproduce – making more rats.
1
3
Show this thread
Groww
@_groww
Long Term Effect This worked well. A large number of people started killing rats. The authorities were pleased with the number of tails being brought to them. Some time passed.
1
3
Show this thread
Groww
@_groww
This was their window into how the spread of diseases was managed in Hanoi city. If the number of rat tails collected was low, it indicated a potential increase in illnesses. If the number of rat tails collected was high, all things were going according to plan.
1
3
Show this thread
Groww
@_groww
To make it easier, they asked people to instead get just the rats’ tails and not the entire dead rat. The authorities monitored this number closely: the number of rat tails collected.
1
3
Show this thread
Groww
@_groww
Any person could kill rats and collect the prize money (1 cent per rat). Because the number of people involved in this operation was so high, the authorities feared the municipal offices would be overflowing with dead rats.
1
3
Show this thread
Groww
@_groww
While this showed some success, it was no match for the rats’ capabilities. They reproduce incredibly fast. So the French authorities came up with another idea: they incentivized everybody for killing rats.
1
3
Show this thread
Groww
@_groww
The rat catchers were incentivized to kill more and more rats. Towards the end of April, they killed almost 8,000 rats. The effect of this move was visible. The number of people dying from illnesses: more rats killed, fewer people died.
1
3
Show this thread
Groww
@_groww
The rats discovered the vast sewage drainage system underneath Hanoi and made it their home. The French authorities noticed this and decided to fight. In April 1902, they hired Vietnamese rat catchers. The rat catchers would go down into the dirty sewage drains and kill rats.
1
3
Show this thread
Groww
@_groww
It spread to many parts of the world carried by traders moving across borders. Traveling soldiers were another reason. Awareness about the threat from rats spread. Some infected rats reached Hanoi on trading ships.
1
3
Show this thread
Groww
@_groww
Rats vs the Authorities Around the same time, a pandemic was spreading throughout the world – bubonic plague. One of the worst-known pandemics in history. This disease would spread from rats to humans.
1
2
Show this thread
Groww
@_groww
So they started demolishing and rebuilding. They built massive structures – palaces, churches, and so on. The French also wanted to keep the city clean. They built a vast sewage drainage system underground.
1
2
Show this thread
Groww
@_groww
In the 1800s, the French were in a peculiar situation – with rats. The French had colonized parts of southeast Asia. They controlled the Indochina region (modern-day Vietnam). The French found Hanoi city to be small and dirty – unlike French cities.
1
4
Show this thread
Groww
@_groww
To become an expert in these skills you have to have some behavioural attributes. The two most important are having an independent mindset and focusing on your own game. The second is an extreme conviction that is rooted in the business.
1
5
Show this thread
Groww
@_groww
And finally, what does it take to become a great investor? Ian essentially breaks down investing as 4 skills: Identifying opportunities Buying Holding Selling For someone to become a great investor they have to excel in at least one or two of these skills.
1
2
Show this thread
Groww
@_groww
According to Ian, there are 4 major reasons to sell a stock. Firstly when the business starts tracking away from its vision. Second, if the management lacks integrity. Third, if he finds a better stock than the one he owns and fourth if something goes up too much too soon.
1
2
Show this thread
Groww
@_groww
In terms of position sizing, Ian says that he lets the market determine his position size. As the stocks gain he lets them become a bigger part of his portfolio by averaging up while he lets the losers become a smaller part of the portfolio.
1
2
Show this thread
Groww
@_groww
Ian described his philosophy of investing as top down and bottom up. The top down part is to find stocks that have tailwinds while the bottom up part is to identify businesses that supply goods or services that are scarce.
1
2
Show this thread
Groww
@_groww
Microcap investing is not for the faint-hearted. It is full of risk and the chances of success are extremely low. The idea is to create a portfolio of unrecognized gems and hope that one or two out of 10 succeed to make up for the ones that don’t.
1
2
Show this thread
Groww
@_groww
While the quality of management is extremely important in any business, it is especially true for microcap companies. Ian says that he looks for management who are intelligent fanatics meaning they build companies that stand the test of time.
1
3
Show this thread
Groww
@_groww
Firstly, microcap investing is when investors invest in stocks with a very low market cap. These are even smaller than small caps. They are not tracked by analysts and hence very difficult to get any information about.
1
3
Show this thread