Investors often face doubt when it comes to picking the right stocks, capital allocation and exit strategies with all the noise and complexity surrounding the stock market. Much to readers’ relief, Ahmedabad-based CFA Charterholder Vivek Mashrani cuts the clutter in his new book ‘You Can Compound’, a tell-all guide to investing packed with useful information to navigate the turbulent waters of money management and growth.
The book provides a comprehensive framework that integrates easy allocation techniques and screening concepts to discover the right stock. Making it simpler to read the megatrends in the economy, it shields the reader against the common mistakes that can set them back years on their investing journey.
Starting with the story of Chatur and Ranjita, who represent many in India’s rising middle class, the book dives into their abysmal financial situation, until their friend Aryan — who worked the same job as Chatur but recently quit after attaining financial independence — jumps in. He identifies these common problems: the lack of smart planning and passive income. Aryan explains how their low return on investments coupled with inflation is actually eating into their finances and thus begins the lesson on making money work for you rather than working for money. The secret? Compounding.
Quoting one of the most successful investors of all time, Warren Buffet, “If you don’t find a way to make money while you sleep, you will work until you die”, the book is full of quotes from successful investors and Mashrani builds on their words through many practical strategies like the Flywheel Model and Bamboo Investing to build a powerful portfolio that delivers.
The author is Founder and Director at Ahmedabad-based Technofunda Ventures. “You can’t make big money in stocks if you don’t give them a chance to make big money for you. There is nothing easier than making big money in the market once you have latched onto a big winner because at that point, all you are doing is sitting tight and riding the winners,” writes Vivek Mashrani, member of CFA Society India and an MBA in Capital Markets from NMIMS, Mumbai.
What strikes, in particular, is the simplification of complex concepts making them easier to understand for readers who might not be equipped with prior knowledge of concepts such as technical and fundamental analysis. The author uses analogies such as the TREE analogy, classifying businesses into classes like Banyan and Mango, representing high-quality companies and Cactus and Weed, representing low-quality companies. Thus, giving you a simple approach to identifying the right businesses for your portfolio.
"All businesses have unforeseen risks; the best risk mitigation strategy is to diversify stocks. The minimum stock types in an investor’s portfolio range from 15 to 20; this amount of stock
provides adequate diversification and meaningful allocation for some gains. An average of 19 stocks in a portfolio is the sweet spot; an investor enjoys maximum diversification benefits at this point," says the investing coach as he recommends not putting all their eggs in one basket to investors.
He further strongly advises having an exit strategy while averaging up. The book advises, "Avoid premature selling and give the stocks time to make big money. Know when to sell; do not sit on a rising stock forever."
Laying special emphasis on mindset and principles such as maintaining an investing journal, the book is filled with similar advice which is crucial to avoid burnout in the market and cut losses, while embarking on a sustainable no-shortcut journey to wealth creation. On that note, the author-investor also suggests not falling into the boredom trap, and prematurely selling the mega compounding stocks just for the appearance of being busy! "The ecosystem rarely wants you to sit tight, they want you to keep churning so they can charge you fees, brokerage, taxes and sell you stuff. The greatest fortunes come from riding your winners and adding more capital as they keep compounding," he says in the best-selling book.
Split across 20 chapters, the book ends with positive affirmations that can be printed as posters. This book is a very useful addition to one’s reading list especially if you are looking to increase your financial literacy and become a well-rounded investor.
You Can Compound is available for INR 499 on Amazon India and https://youcancompound.com with special bonuses.