On 17 Sep and 18 Sep 2021, I wrote two consecutive articles titled “Can Retail Investors Still Make Outsized Returns?” (Read Part 1 and Part 2, if you haven’t already). Today’s article is Part 3.
Without stating the obvious retail investors do not have much money to invest. So my whole idea is to find those instruments which are low priced but will have a global impact, value, and influence.
Apart from the right information, the retail investors’ lack of ability to make outsized wealth is rooted in their psychology. Mostly when more money comes to you than what you have handled before, it plays all sorts of games with your mind. Especially if the realization of that money is possible with the click of a button, your temptation to book that profit will be so much that you don’t give yourself a fair chance to become rich.
I personally think in my almost 50 years of being in the markets there is no better opportunity than now to become rich for a retail investor - the small guy. The question is will you allow that to happen? There are only two things you need to do. Get access to the right information and work on your tempering your psychology. You need to have enough conviction and knowledge developed from your own as well as others’ research. You can also ride on the coattails of other successful investors in the markets but there is nothing more satisfying than developing your own convictions in your investment decision-making.
While I may point you to instruments that I am not invested in but are legitimate illustrations, my discussions will mostly centre on projects that I am invested in. Let me go back to my father’s sole investment in a stock equivalent to US$ 50 which grew to 250,000 dollars without counting dividends. It was probably the best dividend a company could pay in India. The returns were achieved and realized over a period of 40 years. In the wider scheme of things, 250,000 dollars is not a lot of money but the return on the principal investment is huge. All those who invested along with him realized their profits much earlier but with a series of luck and guidance, the family was able to take maximum advantage of that investment.
What about my investment in Tanla? It happened at a very low point in my life. My regret was only that I didn’t have more money to invest. But then perhaps you get what you deserve. I have written so much about Tanla that there is nothing much to write and I am sure my writings have helped many to get wealthy off it as well.
Sometimes things are so obvious that you don’t act effectively and simplistically without much analysis. I will give you an example. When Tanla announced that they are buying Karix at a price of Rs 56.79 in Aug 2018, Tanla prices still continued to trade much below that for a long time. I was buying in the region of Rs 45 and 35.
For trading and investing in India, I have always used the same voice broker for the last 23 years. One day I told him, look I am interested in buying Tanla only if I can get it below 30. He cautioned me that the volume is very thin but put a bid at 29.75. The total volume traded that day was only 75,000 but 25,000 of that came from my purchase at 29.75. Since then Tanla never traded below that price.
While most analysts are very focused on the price via technical and quantitative analysis, it is the qualitative dimension and many other nuances that have helped me build my conviction in my investments. It is a combination and confluence of factors that will finally give you that extra edge.
I am still invested in Tanla but have divested partly to clear my debts and make some unlisted private equity investments. As a listed company, I still think Tanla is the best investment for me in India and I will still continue to hold it. I still see a great future for the company in India and abroad.
So the next series of writings will be on cryptocurrencies. Currently, there are about 19,500 cryptocurrencies. When regulations come into existence that will not be that far off, perhaps 99% of existing cryptos might disappear.
There is an international standard called ISO 20022. It comes into play in November this year. What it means is that banks will become more standardized by adopting regulations that allow them to talk to each other by using the same digital formatting. That way a computer in Japan will understand the banking instructions from a computer in Singapore. The ISO 20022 will be a game-changer. It will change the way banks relay cross-border payment instructions. While it may not be mandatory as yet from a regulatory perspective, those that don’t comply now will risk being excluded from the international payment systems.
We will be involved with only cryptos that will be on the blockchain and will be ISO20022 compliant. There are only a few of them. My writings in this space could be a bit boring, long-drawn, and lengthy as they will be educative on the asset class itself. We do not involve with any cryptos which do not have a use case or utility.
It is estimated that there are around 300 mln people involved in cryptos worldwide. More than 90% of them are momentum players. Only less than 10% are long-term holders. When it comes to cryptos, I don’t trade, I only invest. Stay tuned for more!
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Abraham George is a seasoned investment manager with more than 40 years of experience in trading & investment and multi-billion dollar portfolio management spanning diverse environments like banks (HSBC, ADCB), sovereign wealth fund (ADIA), a royal family office and a hedge fund. Currently, he is a co-founder of a new hedge fund where foreign citizens can invest in Indian growth stocks like Tanla operating in hyper-growth markets like CPaaS.