I am not convinced that Equity investing is learnt in a college. In fact it is not. If you must have a qualification, I do think the CA degree, and if your energy levels permit, the CFA degree (US) are surely a good beginning.

I benefited surely by my Law training – and wondering whether all promoters are crooks. The training as a CA helped me read the balance sheets much better than I would have read as a non CA. No doubt about that. Right from the change in method of depreciation to other accounting shenanigans, I have to thank the CA institute. Also Late P M Phadke, partner, Sharp and Tannan who made me calculate ratios (OMG these days Bloomberg gives you all this free!!). However calculating those ratios in 1983 (and making cash flow and fund flow statements – which you now get free)  still holds me in good stead. When I see assets at least I know whether it is gross assets, net assets, revalued assets minus depreciation, or something else that has gone into the numerator. If you land on the ratios from a helicopter, you keep wondering what is this ‘asset’.

Doing equity research  – to sell research reports (what else?) also meant we met bankers, merchant bankers, cantankerous promoters, nice promoters, kameena promoters. At this time we also made project reports with amazingly stupid and naive assumptions. We also met officers of big financial institutions and we learnt how with the right buttons some of them would lend knowing that it was going to be a NPA. It hardly mattered to them. We met fund managers who after a 90 minute presentation on how to manage Rs. 200 crores (remember it was 1995) would ask ‘all that is fine where should I invest my wife’s Rs. 15,000).

Doing all this research, meeting so many people connected with the market, regulators, investors, doing private placements, IPOs, secondary markets – as a broker, investor, etc. one learns well. Lost money when my broker went bankrupt, and I could not recover my money even knowing top politicians, journalists, etc. EVERYBODY knew he was playing a game, but could do nothing. At this time I was convinced that the crooks in this country can use the law much better than the law abiding citizen. Not cribbing, just recognising.

We are an illegal country as far as enforcement is concerned. You need to know people in the government, police, etc. so that nobody takes you for a ride, not to punish somebody else.

In this journey you meet people who have gone bankrupt and  people who have made, hold your breath, Rs. 10,000 crore for their families. You meet people who have read upwards of 10,000 books – mostly on investing, economics, and investor behavior. People who believe that to do equity research you need to know everything from anthropology to zoology. And some people who believe that knowing 2 good people to call for a scrip is far, far more important than 2 months of research. It is normally through books that you meet Phil Fisher, Benjamin Graham, Warren Buffett, – and quickly realize that NOTHING of that can hold in India. All these people are talking of a huge bull run in the USA – when the US controlled the world economy. India does not, so many of those rules will not apply. Then you meet big and small Indian investors – with different styles. I know people who buy only A group shares, those who never touch an A group share, those who trade daily, those who do position trades, those who hold for a mammoth 30 years, those who hold for 15 years, and as the company matures shift to a new start up. You realize that there is no one style.

You will see different styles – Value investing and Growth Investing. Frankly all investments are Value Investing. The value has to go up. Sometimes Value comes from Growth and sometimes Growth brings value!!

How does one learn ‘equity investing’. Well, to say the least, it is difficult. Read a lot. Realize that Equity is like God. All religions have their own codes, but all claim to lead there. John Templeton believed in diversification. Warren Buffett believes in concentration. However WB depends for his income from RE-insurance -which is diversification business. Rakesh Jhunjhunwala is very different from Vallabh Bhansali as far as investing styles are concerned. For a common man to know who is more successful is difficult. Mukesh Ambani is a good businessman and knows how to use his cash strategically. He used it well to acquire a strategic stake in East India Hotels and the full media business in India.

You also realize that styles come and go – but the core of all investing is Value Investing. You need to get value from your investing.

Then you meet clients – and each client has a different capacity to take risks, and capacity to sit on profits. I have clients who bought Gillette at Rs. 90. Some sold off at 120 and some holding today at Rs.2500. I know clients who filled their lives with equities and some who loved their debt portfolios. I had met a man who had fixed deposits of Rs.14 crores in 1983. He swore by debt, hated equities. Paid taxes like mad and said “it is our duty to pay taxes”. I met people with Rs. 14 crore equity portfolio and not having to file an INCOME TAX return.

Make a list of the investing Gods of India, and see if you can do a 2 year internship with them. What you learn can make you a billionaire, provided of course you keep your ego out, use your eyes and ears 4 times more than your mouth.

The worst, worst people who to learn from are those whose only success story is that they have made money in equities. If they have not dealt with clients, not done due diligence work, not done client advisory, not done client portfolio rescues – these people do not understand client behavior. Those who have no idea about client behavior, they have no business doing advisory. Markets behave rationally, investors do not.