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Mastering the Market: 5 Must-Know Tips for Your Stock Market Adventure! Most students at Harvard/INSEAD/IIMs would be great at Corporate Finance or Business Analysis. But, they would rarely invest in equity markets directly. From my own experience of studying at INSEAD, I can tell you: that the business school taught me a lot about ‘analyzing’ business. But, it did not teach me how to make money by investing well. It is no surprise that less than 3% of Indians invest in stock markets. Lack of structured information is one of the primary reasons for this. If you are starting your stock market journey. Or want to learn about it, here are 5 key commonly discussed points that we will be going through in this blog: How to build a Mutual Fund Portfolio? Buy and Hold Framework Are the Economy and Stock Markets linked? How to Analyze Industries? Understanding different market viewpoints. [1] How to build a Mutual Fund portfolio. My Strategy I invest directly in stocks as an opportunistic and macroeconomic-oriented investor.  I only Invest in mutual funds when I find specific opportunities. Passive vs. Active Investing:  Choose passive investing over active investing in mutual funds due to its lower expense ratio, limited fund manager discretion, and the ability to cut losses or book profits easily. Lower expense ratios in passive funds make them more cost-effective and the lower exit loads means that you can book profits more easily. Investing in International Funds:  You can choose to diversify your portfolio by investing in international funds to reduce geographic risk.  Avoid Investing in: ● Nifty Next 50:  There’s no rational strategy for picking companies that move between the top 50 and top 100 ranks. ● Flexi Cap Funds:  They often fail to outperform their benchmarks over time. ● Actively Managed Large Cap Funds: You are much better off directly investing in such large caps (the information is well known) As per the chart below, only 11% of Large Cap funds have beaten the benchmark over the last 5 years [1] ● Hybrid Funds Hybrid Funds are a max of both Debt and Equity. There are times when you should invest in both, but you should not mix your allocation Also since indexation benefits have been removed, you can directly invest your Debt money into Fixed Deposits.   Small Cap and Mid Cap Funds:  You can choose to invest in actively managed funds when choosing to invest in small caps and mid caps. It is relatively harder for retailers to pick out small cap or mid cap stocks directly, so it would make more sense for you to pick out such opportunities through Mutual Funds if you have good conviction on these types of stocks. Also since these funds will give much higher returns, it’s ok to pay more in commissions. You can do an SIP on these types of funds. Diversification & Exit Strategy:  Always have a clear exit plan in mind, as per your market narrative. Diversification is essential to spread risk and avoid concentration in any single fund. The speaker prefers not to rely on the performance of a single fund. When choosing mutual funds, it’s important to consider how they fit into your overall investment portfolio and whether they complement your direct stock investments. [2] We often look for BUY AND FORGET stocks: But, honestly there are very few such stocks. And, there is a framework to understand what TRULY are buy and forget stocks: The Buy and Hold Strategy: Rakesh Jhunjhunwala’s success story with Titan exemplifies the potential of buy and hold investing, where he transformed a small investment into substantial wealth over time. But if you take a deeper look at the Titan stock, there are multiple instances where the stock fell by more than 35-40% [2]. Similarly, there are long periods of no returns. So this kind of behavior can cause a lot of panic and uneasiness among retailers who follow this technique.  Challenges of Buy and Hold: It’s essential to acknowledge that this strategy can be challenging due to the considerable price volatility that stocks can experience. Criteria for Ideal Buy and Hold Stocks: Market Leadership: A company should dominate its market segment. Red Flag Absence: Companies with minimal negative news or controversies are preferred. Massive TAM: Total Addressable market should be high.  Consistent Profit Generation: Stocks should exhibit a history of generating 15-20% annual profits. Valuation Consideration: Stocks should be purchased at reasonable valuations, and profit booking can provide a cushion against market downturns. 3 such stocks in my opinion are: 1. HDFC Bank ● They are a market leader in Private banks. ● Good management, No Red Flags ● They have a big TAM. Banking in India is just going to grow. ● Strong Macro Trends: India’s M1 Money Supply (Total Liquid money in the economy) has grown by 50% in the last 3 years [3]. As this supply has increased, this will automatically reflect in the banks revenue and growth ● Strong Fundamentals 2. Apple ● They are a market leader. ● Their TAM is massive, and they focus on the rich population. ● No red flags, Massive Cash Positions. ● Strong Macro trends: They will continue growing as new technologies come by, and Apple has enough money to leverage all of it. They have massive purchasing power and are considered a luxury product. 3. Hindustan Unilever ● Again, they are market leaders ● They have consistently grown their profits, revenue and will continue to do so. ● They have a strong management. ● They have massive pricing power, they can pass on their costs to the consumer. Remember, it’s good to book profits from time to time since this will increase your confidence to hold the stock, give you a cushion if the stock falls and give you a good Margin of Safety. Approach stock investments strategically, consider undervalued stocks, and stay informed about market trends and conditions to make informed investment decisions. If you are a new stock market

The Global Interest Rate Crisis of 2023: Implications for Economy and Stock Market The year 2023 has witnessed a seismic shift in the global economic landscape, marked by a rising interest rate crisis that has far-reaching implications for economies and financial markets worldwide. This crisis is a consequence of the changing interest rate dynamics, especially in the United States.  In this blog, we will delve into the details of this interest rate crisis, its impacts on various aspects of the economy, and what it means for investors. Here’s what we will cover: Understanding the Interest Rate Crisis Impact on the Economy Stock Market and Investments Implications for Indian Economy and Stocks Navigating the Interest Rate Crisis Understanding the Interest Rate Crisis: From 2008 to 2016, the world existed in a unique economic environment, characterized by historically low-interest rates. In the United States, these rates hovered close to zero percent [1].  During this period, countries like Japan and China were willing to buy US government debt securities at almost zero percent return.  However, in 2023, this scenario has dramatically shifted, with the interest rate in the US reaching a relatively high 6.5 percent. This change means that the US government is trying to sell its debt securities at a 6.5 percent interest rate, but countries like China and Japan are no longer as willing to purchase these securities.  This shift has given rise to what is now being referred to as the “interest rate crisis.” Interest Rate Crisis: Interest rate here is the prime lending rate which links all your other rates (Home Loans, EMI & all other types of loans). In India, this is called the repo rate. This Interest rate has gone through primarily 3 phases: ● 2008-2018: This rate in the US was close to 0% This led to a lot of free floating money in the economy. Countries and business could borrow at cheap rates and so could all of the common people. Government can borrow through Bonds, which can be purchased either by the people of the country. In the US case, this was purchased by countries like Japan and China. ● 2016-2019: Interest rates in the economy spiked up. This was primarily caused by the trade wars between USA and China. Now to back up this higher rates, the US had to issue bonds with higher rate of return. ● 2021-2023: The Interest rates are at around 6.5-7%. At this juncture, countries like China are not willing to borrow from the US.  It can clearly be seen from the chart below that [2] [3], China and Japan were the biggest holders of US Debt. Impact on the World Economy: The rising interest rates have various significant implications for the economy.  First, the US government will have to repay its debt at a higher interest rate, creating a substantial financial burden.  In fact, it is estimated that the US debt repayment will soon exceed the defense budget, which could lead to cuts in government spending, potentially affecting various sectors of the economy [4]. This crisis may also lead to a delay in interest rate cuts, affecting various asset classes such as stocks and real estate.  Stock Market and Investments: The rising interest rates have direct consequences for the stock market and investment strategies.  Historically, when interest rates are cut, it results in asset price appreciation, causing stock prices to rise.  However, the expected delay in interest rate cuts and the interest rates settling at 3-4 percent have made the stock market outlook uncertain. Investors should consider the impact on specific stocks and industries, particularly those vulnerable to high-interest rates. Even when companies report strong financial results, they may face challenges due to the broader economic environment.  In fact, recent market trends have shown that even fundamentally sound companies like SBI Cards faced declines in their stock prices due to the ongoing interest rate crisis. Implications for Indian Economy and Stocks: The interest rate crisis in the US is not isolated and can have a ripple effect on the Indian economy and its stock market. For example, Indian companies that rely on foreign borrowing may face increased borrowing costs, affecting their financial health and future investments.  A credit default crisis could also emerge, putting pressure on various financial institutions. Companies should be evaluated based on their ability to handle financial stress.  Factors to consider include: ● Operating profit margins:  Higher OPM ● Reserves:  Cash to survive during troubled times ● Capital expenditure:  Low capital expenditure business ● Revenue/Profits:  Should be growing For instance, the ability of companies like SBI Cards to weather the challenges posed by the interest rate crisis is a key consideration for investors [5]. However this problem will be faced by all lending companies and not just SBI Cards. THis company is fundamentally strong sound as per the framework that we discussed [6]. Navigating the Interest Rate Crisis: Investors should approach this uncertain environment with caution and a data-driven strategy.  Diversifying investments and considering safer options can be a prudent strategy in times of economic uncertainty.  If you are a serious investor and are looking for advanced techniques with a focus on better returns, join my Youtube Community where I give live and timely updates on the Stock Market Conclusion The 2023 interest rate crisis is reshaping the global economic landscape, impacting not only the US but also countries like India.  Investors and businesses must adapt to the changing environment, considering factors like interest rates, stock market performance, and the resilience of individual companies.  Staying informed and making data-driven decisions will be essential for navigating the turbulent waters of the financial world in the coming years.  The evolving interest rate crisis poses significant challenges, but with careful planning and strategic investments, it is possible to navigate these challenges and thrive in a changing economic landscape. TL; DR: The Global Interest Rate Crisis of 2023 is affecting the global economy and stock markets. The crisis is caused by a significant increase in interest rates in the United States.

How to take Loans to Make Money – Benefits of taking a loan Introduction In today’s discussion, we delve into the world of loans, but not in the way you might expect. We won’t be talking about the run-of-the-mill loans that plague many with debt. Instead, we’ll uncover the strategic potential behind taking a loan – how it can be used to unlock opportunities, create wealth, and secure your financial future. So, what’s the buzz about loans and wealth creation? Let’s break it down. In this blog, we will explore the following key topics: The Villa in Goa: A Loan with a Purpose: A real-life example of how taking a significant loan to invest in a specific asset can yield substantial returns. The Art of Smart Leverage: Understand the various factors that make taking a loan a smart choice. The Asset vs. Liability Dilemma: Not all assets are created equal. Assessing the Goodness of an Asset: When considering a loan for an investment, it’s essential to pick the right assets. The Perils of Over-Leveraging: While loans can be advantageous, there’s a limit to how much leverage is healthy. Volatility Matters: Finally, we’ll discuss how the nature of the asset impacts the wisdom of taking a loan. Now, let’s dive deeper into each of these topics to uncover the secrets behind harnessing the power of loans for financial prosperity.   1. The Villa in Goa: A Loan with a Purpose I took a loan of one crore rupees to purchase a villa in the serene landscapes of Goa. Why would anyone take such a significant financial step? Well, let’s dissect the math behind it. Understanding the Villa Investment: The villa investment wasn’t a frivolous choice. It’s an asset that generates rental income through Airbnb. With a down payment of 90 lakhs and an EMI of 80,000 rupees, the monthly inflow from rentals nearly cancels out the outflow, leaving an investment of 90 lakhs. The Magic of Leverage: But here’s where it gets intriguing. Fast forward to 2032, and even with a modest 2X growth projection, the villa’s value is estimated at around 4 crores. That’s almost a four-fold return on the initial investment of 90 lakhs.  How is this possible? By opting for a loan and harnessing the power of leverage. 2. The Art of Smart Leverage Why choose a loan route instead of paying outright for the property? Several factors come into play: Safety and Verification: Banks conduct rigorous property verifications, ensuring you’re investing in a safe, non-disputed asset. Favorable Interest Rates: The current interest rates are friendly, but they could rise in the future. Locking in a fixed-rate loan now provides financial security. Currently its possible to get these loans at around 8%. Additionally its also good to get a fixed loan instead of a floating one since its likely that this rate can go up. Tax Benefits: Loans offer tax benefits, allowing you to save on interest payments. Business Expense: Some portion can be claimed as a business expense if you’re generating income from the property. Scalability: But that’s not all. Loans enable scalability. If you can identify more such lucrative opportunities, loans provide the means to seize them, multiplying your potential returns. 3. The Asset vs. Liability Dilemma Before you follow suit and grab the nearest loan, it’s crucial to understand the nature of the asset you’re investing in. The distinction between assets and liabilities isn’t universal. What’s an asset for one person might be a liability for another. Assets vs. Liabilities: Assets are what put money in your pocket, such as income-generating properties. Liabilities are expenses that take money out, like a fancy car or the latest iPhone.  The rule here is clear: avoid loans for liabilities. 4. Assessing the Goodness of an Asset If you’re considering a loan for an asset, aim for the ‘good assets.’  What makes an asset ‘good’?  One criterion is its potential to appreciate in value over time. Real estate, especially land, fits this description. It’s a finite resource with a history of value growth. ROI and Payback Period: Return on Investment (ROI) is another yardstick.  Calculate the payback period – the time it takes for the asset’s returns to cover your initial investment. A shorter payback period, typically less than four to five years, is a sign of a promising investment. Personal Circumstances Matter: Yet, your unique circumstances matter. Consider factors like your age, responsibilities, and risk tolerance when evaluating an investment’s goodness. 5. The Perils of Over-Leveraging While loans can be a potent wealth-building tool, there’s a fine line between strategic leverage and over-leverage.  The rule of thumb is that your total EMIs shouldn’t exceed 30% of your income. Straying beyond this limit could spell financial trouble in times of unforeseen hardships. Diversified Income Streams: Remember, having multiple income streams and not being overly reliant on a single source is your financial safety net. 6. Volatility Matters Lastly, the nature of the asset plays a vital role in determining whether a loan is a wise choice.  Volatility, or the certainty of cash flow, varies between asset types. For instance, stocks and gold have their own cycles. Real estate, especially rentals, offers more predictable income streams. Asset Volatility: Taking a loan to invest in highly volatile assets, like stocks, is often discouraged. Stability and predictability should guide your loan-related decisions. If you are a new stock market investor or are looking for advanced techniques with a focus on better returns, check out this course on Stock Market Investing which covers all the aspects from Fundamental Analysis to key concepts like Macroeconomics and Wealth building. Conclusion Loans are not to be feared; they’re financial tools that, when wielded wisely, can open doors to prosperity. Invest in good assets, avoid over-leveraging, and consider the nature of the asset before taking the plunge. Remember, the path to wealth isn’t about avoiding loans altogether; it’s about using them strategically to propel yourself toward financial freedom. So, evaluate your options, crunch the numbers, and

Follow this step-by-step process to retire early than 99% people Retiring early, a dream many cherish, is often seen as an unattainable goal. The mere thought of breaking free from the shackles of a 9-to-5 job and achieving financial independence appears as elusive as chasing a rainbow.  But is it really unattainable?  Can early retirement be within your grasp?  In a world where many are consumed by financial stress, there are practical strategies and insights that can help you achieve early financial independence.  In this blog, we will delve into precisely this topic, sharing practical insights and strategies that have been personally used to attain early financial independence. What’s Covered in This Blog: Let’s break down what we’ll be discussing in this blog: • The 90-9-1 Rule:  Understanding the rule and how it applies to various aspects of life and investments. • The Retirement Planning Math What steps do you need to take to do your Retirement Planning Math • The Role of Inflation:  How inflation can impact your retirement planning. • Asset Allocation:  The importance of diversifying your investments. • Assets to Consider for your Portfolio What assets should you include in your retirement portfolio. • Actionable Points for Setting Your Retirement Goal How can you get started today.   The 90-9-1 Rule: The 90-9-1 rule, a concept widely applicable across various domains, underscores the importance of understanding how most people use their time and resources.  This measures user participation as follows [1] : 90% of users are lurkers (They read or observe but do not contribute) 9% of users contribute from time to time  (But other priorities dominate their time) 1% users participate a lot and account for most contributions In this context, it helps us realize that only 1% of individuals are effectively using the internet to create wealth. This understanding is crucial for those seeking financial independence. In the context of gaining Financial freedom, if you dont know about Inflation, and other factors that affect your money, then you are doomed from the get go.  For eg: Medical Insurance Premiums in India have surged by 10-25% this year [2] and Medical Inflation in India is close to 14%. Key Takeaway:  To retire early, focus on making the most of your resources and opportunities, just as the top 1% do. The Retirement Planning Math: To start your retirement planning properly, you need to calculate a few metrics. Lets discuss them one-by-one: Step 1: Lifestyle Inflation: This is the first step to do your Retirement Planning Math. For this you need to look at 2 metrics: Current Lifestyle Inflation on your Lifestyle To reduce your current lifestyle expense you can always shift to a smaller city (if your work permits) to cut down on your monthly recurring expenses. Similarly, your lifestyle will always undergo some kind of inflation. This could be through better experiences, better materialistic items, better luxuries and so on. Therefore you should set your expectation for this Lifestyle Inflation.  Step 2: Save & Invest: Your current salary is irrelevant to your retirement planning.  Its about how much you save and invest! Step 3: Rate of Growth of Investments  As per a survey conducted by SEBI [3], more than 95% of Indian households invested their money in Fixed Deposits. As per the report [4], only 3.5 crore people in India invest in Mutual Funds. The money that you need to grow at a rate of at least 10% needs to be put in growth assets. This could be: Good Mutual Funds Good Real Estate  Fundamentally Good Stocks Official Inflation in India hovers around 6%. The rest 4% growth is for your Systematic Withdrawal Plan. The 4% Rule: The 4% rule is a fundamental principle in retirement planning. It suggests that you can withdraw 4% of your retirement portfolio’s value annually and expect it to last throughout your retirement. However, to achieve this 4% withdrawal rate requires prudent saving and investing strategies [5].   As an example: In 2023, you can retire with INR 1 crore if your yearly expense is 4%, which is 4 Lakhs. With this withdrawal and a growth rate of 10% on your investment of 1 crore (6% Inflation + 4% to keep the balance), your investment will not shrink. The Role of Inflation: Inflation, both official and unofficial, plays a significant role in retirement planning. The official inflation rate in India is approximately 6%, but it’s essential to consider the unofficial inflation that affects specific expenses, such as education and healthcare.  This insight leads to the realization that a more substantial financial cushion is needed for a comfortable retirement. Key Takeaway: Be aware of the impact of inflation on your future expenses and plan accordingly to maintain your desired lifestyle. Assets to Consider for your Portfolio •  Index Mutual Funds: They have lower expense ratio and exit loads. This commission can help you achieve higher returns Nifty 50 has given a historical CAGR of 12-15% if you take a long term view •  Direct Stocks If you are purchasing Direct Stocks you need to know when to Buy & Sell. You also need to allocate time to do Fundamental & Business Analysis of the companies you invest in. If you are a serious investor and are looking for advanced techniques with a focus on better returns, join our Wisdom Hatch community where I give live and timely updates on the Stock Market. • Real Estate Remember your house that you live in is not an Investment, its a place for you to stay. Real Estate Investments could be Commercial, Residential etc. But the point of it is to give stability and give consistent cashflows.  Fixed Deposits & Bonds FDs & Bonds are another medium for you to invest in stable assets.  Remember that this is not your growth money, its your stable risk free money. What other business can Jio Financials start considering? 1. Start by saving at least 10% of your income: This will get you into the habit of saving regularly. Increase

How to PLAN and BUY a house in India? Introduction: In this article, we’re going to delve into the intricate world of real estate in India. If you’re contemplating purchasing a house or investing in property, this is the ultimate guide for you.Over the years, I’ve gathered valuable insights from buying real estate across three different Indian states. So, rest assured, you’re in good hands. In this blog, we’ll address some essential questions and topics: ● Should You Consider Purchasing Real Estate? How does your financial portfolio size impact your decision? Exploring opportunities in distressed sales. Analyzing the rent vs. EMI scenario. ● Planning Your Dream Home: Build or Buy? Weighing the pros and cons of building your own house. The advantages and disadvantages of buying from a builder. Financial considerations for each option. ● Choosing the Right Property: Location Matters The significance of rental yield. Market cycles and their impact on property prices. Smart budgeting when purchasing property. ● The Long-Term Benefits of Real Estate Tax planning advantages. Wealth preservation through property. Diversifying your investment portfolio. Let’s dive into these key aspects of planning and buying a house in India. Should You Consider Purchasing Real Estate? Portfolio Size Matters: Before you decide to invest in real estate, it’s crucial to assess the size of your financial portfolio. Real estate can be a fantastic investment, but only if your financial portfolio is robust. The 3-20-30-40 rule is a helpful guideline: Ensure your budget doesn’t exceed three times your family’s annual income. Opt for a 20-year home loan tenure. Keep your EMI payments below 30% of your salary. Be prepared for a 40% down payment on the property. Distressed Sales and Good Deals: Exploring opportunities in distressed sales can be a wise move. These are situations where property owners need to sell quickly, often offering excellent deals. If you can secure a loan, taking advantage of such opportunities can be financially rewarding. Rent vs. EMI Analysis: One common dilemma is whether to continue paying rent or invest in a property. In metros like Delhi or Mumbai, where property prices are high, the rent vs. EMI scenario can be crucial. Calculate your rental yield and consider your long-term plans before making a decision. Let’s take an example: Consider that you are paying a rent of 1 Lakh a month for a house worth 4 crores in Delhi. Here your Rental Yield is (12 Lakhs / 4 crores), which comes out to be around 3%. This is not a great yield, so it would make more sense to rent. Your Ideal Rental Yield should be more than 4%. Planning Your Dream Home: Build or Buy? Building Your Own House: Building your own house can be a fulfilling experience, but it’s not without challenges. Consider these factors: Time and effort required for construction. Understanding local laws and securing necessary permissions. Assessing the cost-effectiveness of this option based on your lifestyle. Buying from a Builder: When purchasing from a builder, keep in mind that you may lose a portion of your budget, typically around 25-30%. However, it can save you significant time and effort. To ensure a smooth experience: Visit construction sites to assess progress and quality. Don’t rely solely on the builder’s reputation; do your due diligence. Consider buying properties that are 50% completed even if it is at a slight premium. Pay an independent contractor to inspect the property regularly. There are situations where reputed builders complete their initial projects well and then after their market value is set, their project quality decreases. Choosing the Right Property: Location Matters Rental Yield and Market Cycles: Your property’s location plays a crucial role in its long-term value. Consider these factors: Calculate rental yield to gauge investment potential. A property that gives 4% rental yield is considered to be a good investment. Understand market cycles; in some areas, property prices may be on the rise, while in others, they may stagnate. As seen in the chart below, Real Estate prices have been going down over the last decade.  This could possibly mean that this could be a favorable time to purchase good Real Estate. Budgeting Smartly: Budgeting wisely is essential when purchasing property. Define your budget based on your financial situation, and aim for properties that align with your long-term goals. Smaller blocks, typically under 2 crores, can be more manageable and easier to resell. The Long-Term Benefits of Real Estate Tax Planning Advantages: One of the perks of owning real estate is its potential for tax planning. Explore the tax benefits of property ownership in India, as it can significantly impact your financial portfolio. Wealth Preservation Through Property: Unlike money in a bank account, property typically appreciates over time, acting as a hedge against currency devaluation. While there may be periods of stagnation, property ownership preserves your wealth. If you are a serious investor and are looking for advanced techniques with a focus on better returns, join my Youtube Community where I give live and timely updates on the Stock Market Conclusion Purchasing a house in India is a significant decision that requires careful planning. Remember to align your investment with your financial capabilities, choose your approach wisely, consider the location, and explore the long-term benefits of property ownership. I hope you found this practical guide insightful and helpful as you embark on your real estate journey. TL; DR: ● Should You Consider Purchasing Real Estate? Assess financial portfolio size: Follow the 3-20-30-40 rule. Explore distressed sales for good deals. Analyze rent vs. EMI scenario based on rental yield. ● Planning Your Dream Home: Build or Buy? Building Your Own House: Consider time, effort, and legal aspects. Buying from a Builder: Be aware of potential budget loss. Ensure quality and progress checks. ● Choosing the Right Property: Location Matters Consider rental yield and market cycles. Budget smartly, aligning with long-term goals. ● The Long-Term Benefits of Real Estate Explore tax planning advantages. Property preserves wealth over time. ● Conclusion: Careful planning is essential when

India’s Golden Age: Why Next 30 years will compound wealth for India? Introduction Imagine settling in a foreign land, not for its exotic beaches or vibrant culture, but because you can live five times better than in your home country, while spending only half as much. This intriguing trend is sweeping Southeast Asia, with Americans leaving the U.S. to embrace life in countries like India.  As per the graphic below, the aggregated total balance sheet of the 5 biggest Central Banks in the world was around $5 trillion [1]. In the next 14 years, this number stands at almost $26 trillion. This is a whooping 420% increase. This substantial move is hurting the developed nations a lot more than the emerging economies.  This blog explores the macroeconomic underpinnings of these phenomena and how it relates to India’s future prosperity. In this journey through the next 30 years, we will answer key questions: Why is India set to grow economically? What role does population play in India’s future? How is India positioned to benefit from global productivity changes? Why is India an attractive investment destination for the next three decades?   The Productivity Equation Historically, economic growth has hinged on two factors: an expanding workforce and rising productivity. This can be simplified as “population times productivity.”  From the Persian Empire’s dominance, driven by controlling a substantial portion of the world’s population, to the Roman Empire’s belief in annexing new lands for prosperity, this equation has held true. In the contemporary context, this equation still applies. The United Nations projects a world population decline after 2050 [2]. But India stands out as an exception.As per the chart below [3], India’s population decline is only likely to happen post 2080. India’s population growth is expected to continue well beyond that point, providing a significant window for economic expansion.  While there are global concerns about overpopulation, India’s demographic dividend presents an opportunity for growth. Productivity Growth and India’s Advantage The world has witnessed three phases of significant growth: the era of trade and financial markets, the Industrial Revolution, and the current era of what we call “fake money” innovation. This can be highlighted from the chart below [4]. The first phase of Trade and Financial Markets took place from around 1600-1650. The second phase of the Industrial Revolution took place from 1750-1850. And the current phase started at around the 1950s. The era of trade and financial markets was marked by significant innovations such as the establishment of financial markets and cross-country trade, boosting global productivity. The Industrial Revolution, which originated in the UK, revolutionized manufacturing and increased productivity on a massive scale. The current phase is characterized by the innovation of “fake money.” This trend started when the U.S. moved away from the gold standard in the 1970s. While some might question the authenticity of this innovation, it has indeed added to productivity by increasing the velocity of money. Governments and central banks have been using this “makeup” on the economy to make it more attractive and stimulate growth. India’s productivity started to rise after 2002-2003, somewhat later than in Western countries that benefited from the creation of fake money.  Now, with increased sustained inflation due to money printing, investors are seeking higher returns and are willing to take on more significant risks.  This leads to more money flowing into emerging economies like India, where the potential for returns that outpace inflation is appealing. Investor’s Goal: Beat Inflation Investors worldwide share a common objective: beating inflation. As inflation surges due to money printing, the challenge intensifies. Even top mutual funds struggle to outperform inflation. Hence, investors are looking to emerging markets to achieve this goal. India’s Attractiveness for Investment This point can be better understood by looking at the FDI Investments in India [6]. As per the chart, in the 2000s India’s FDI Investment was around INR 4029 crores. In the next 5 years this number doubled to almost INR 9000 crores. This was followed by a period of stagnation due to the Financial Crisis in 2008. Then again from 2014, this trend continued to grow. India’s FDI investments reflect its attractiveness as an investment destination. During calm economic periods, money flows into emerging markets, making India an appealing option. In recent years, India has produced numerous unicorns, thanks to this capital influx.  According to Global Unicorn Index 2023, India ranks 3rd on the most number of Unicorns [7]. Key Catalysts for India’s Prosperity To spur innovation and economic growth, catalysts are essential. India has seen a surge in internet adoption, with one of the world’s highest rates. Internet penetration is reaching even the remotest corners of the country, opening up new markets and opportunities. Internet Penetration in India has grown exponentially and is set to continue this pace going forward [8][9]. Additionally, the adoption of digital payment methods, like UPI 2.0, is changing consumer behavior. People are saving less and spending more, contributing to economic growth. This shift mirrors global trends where consumeristic cultures tend to lead to higher GDP growth. As per the chart below [10], the volume of UPI based payments in India has almost doubled consistently every year since its introduction. In the past, India was known as a nation of savers. However, this is changing rapidly, and it’s not just about spending but also about the efficiency of spending. Digital payment innovations are reducing transaction friction, leading to more consumption and economic growth. If you are a serious investor and are looking for advanced techniques with a focus on better returns, join my Youtube Community where I give live and timely updates on the Stock Market. Conclusion India is poised for a golden age in the next 30 years. Its population growth and increased productivity align with global economic shifts, making it an attractive investment destination. With the world’s focus on beating inflation, India’s potential for strong returns becomes evident. As you plan your investment strategy, consider India’s promising future. Embrace its potential and be part of

How to make regular income? Building a Steady Dividend Income Introduction: Many individuals aspire to secure their financial future through dividend income, often opting for either dividend-paying stocks or allocating funds into fixed deposits, recurring deposits, debt mutual funds, or government securities.  For example, this was the list of some of the highest dividend-paying stocks in India [1]: Alternatively, they would invest their money in other instruments such as debt, bank deposits, government schemes etc [2].   However, a pivotal factor often underestimated is the element of timing. What This Blog Will Cover: In this comprehensive guide to creating a reliable dividend income stream, we will address the following key points: Understanding the Two Paths to Dividend Income Case Study highlighting the Timing Issue Avoiding the Timing Trap Where should you Invest your Money? Should you Buy Dividend Paying Stocks? How to find the optimal time to Invest in these assets Understanding the Two Paths to Dividend Income When embarking on the quest for a dependable dividend income stream, it’s vital to comprehend the two primary avenues: dividend-paying stocks and fixed-income investments like fixed deposits, recurring deposits, debt mutual funds, and government securities.  Each option carries its own set of advantages and drawbacks. However, one critical issue looms large over both – the timing factor. The Timing Issue: A Case Study To illustrate the timing challenge, consider the example of IOC (Indian Oil Corporation Limited), a venerable dividend-paying stock. In the previous year, IOC distributed a consistent dividend of around 12 rupees per share. Now, envision two investors: one who acquired IOC shares at 65 rupees and another at 90 rupees [3]. The first investor, who entered at 65 rupees, currently enjoys a stock price of approximately 72 rupees, resulting in a profit of 7 rupees, complemented by the 12 rupees in dividends, tallying up to 19 rupees in gains.  However, the second investor, who purchased at 90 rupees, faces a loss of 18 rupees, even with the same 12 rupees in dividends.  This scenario underscores the timing issue – the stock price’s fluctuations can significantly impact your overall returns, regardless of constant dividend payments Avoiding the Timing Trap To construct a robust dividend income plan, you must grapple with the timing aspect, irrespective of your chosen investment route. In this blog, we’ll explore two primary options: fixed deposits (FDs) and government savings bonds. Option 1: Fixed Deposits (FDs) Fixed deposits offer returns that are relatively immune to market volatility, making them an appealing choice for crafting a steady income stream reminiscent of dividends.The opportune moment to venture into FDs is when the general inflation rate remains lower than the offered interest rate. The target Inflation in India is between 4 – 6% [4] Currently the inflation rate in India sits at around 6.5% as per the chart below [5] Therefore, if the situation figures where the FD interest rate is more than the target inflation rate then that would be a good time to invest in a Fixed Deposit. When the inflation rates come down, it is likely that the FD rate will beat Inflation if you do it for 2 years. The chart below shows how the FD rates have changed in the last 20 years [6]. Presently, Indian banks are enticing investors with favorable rates, often hovering between 7-9%.  Nonetheless, a critical caveat is to meticulously assess the credit quality of the bank offering these lucrative rates.  Option 2: Bonds Bonds encompass a broader category, including various fixed-income assets like Government Securities (G-Secs) and Treasury Bills (T-Bills), Liquid Debt Funds, and Debt Mutual Funds. Each of these has its own characteristics and considerations for timing. Government Securities (G-Secs) and Treasury Bills (T-Bills) Government bonds, such as G-Secs and T-Bills, are considered low-risk investments. G-Secs typically have longer maturities, while T-Bills have shorter ones. The timing factor plays a pivotal role here. Government bonds should feature in your portfolio if you harbor a long-term investment horizon and anticipate moderate inflation levels. Investing in government bonds underscores the paramount importance of safeguarding your principal investment, with the caveat that your funds remain locked in until the bond matures. Liquid Debt Funds Liquid Debt Funds are a type of mutual fund that primarily invests in short-term debt securities. They offer a more liquid alternative to individual bonds. The optimal time to invest in liquid debt funds is when you anticipate the need for liquidity in the short term. They are suitable for investors who want to balance safety and liquidity. Debt Mutual Funds Debt Mutual Funds provide exposure to a diversified portfolio of debt securities. The timing for these funds depends on your investment horizon and risk tolerance. Where Should You Invest Your Money? Firstly, let’s compare T-Bills with Fixed Deposits.As per the chart below, T-Bills generally generate slightly higher returns as compared to Fixed Deposits [7]. In terms of liquidity, Fixed Deposits top the chart. There are subsequent secondary market liquidity issues with T-Bills. So avoid purchasing T-bills if you don’t plan on holding till maturity. Liquid Debt Funds over the last few years have given less than 5% CAGR (Compound Annual Growth Rate). This is because of a concept called the Inverted Yield Curve. An inverted yield curve is when short-term interest rates are higher than long-term interest rates. So therefore it makes more sense right now to invest in Short Term Debt over Long Term Debts.  When the Interest Rates are cut, that is when you can rotate your money to Debt Mutual Funds. Avoid Purchasing Hybrid Mutual Funds. They have 2 main issues: High Expense Ratio Lack of Transparency and Control Should you Buy Dividend Paying Stocks Avoid buying too many dividend paying stocks given the current macro circumstances. The credit right now is drying up in the economy. There is a lack of credit flow in the economy. Dividends are normally paid out when the company has excess profit or does not want to reinvest the money back into the company.  So given the current

Mastering the 8 Money-Making Skills You Need in 2023 Introduction: In the rapidly evolving landscape of the 21st century, mastering money-making skills is the key to securing your financial future. Irrespective of your age or current profession, there’s always room to enhance your income potential.  In this comprehensive blog, we will delve deep into the eight critical money-making skills, dissecting each skill’s significance and offering practical insights on how to acquire and hone them. What You’ll Learn in This Blog: Marketing Skills: Building Your Personal Brand Structured Thinking and Problem Solving: The Cognitive Edge Effective Communication: Beyond Words Judgment and Decision Making: The Art of Wise Choices Setting up Habits & Systems: The Foundation of Productivity Sales: Mastering the Art of Persuasion Finance and Investment Skills: Your Financial Compass Trend Identification and Capitalization: The Visionary Advantage 1. Marketing Skills: Why Marketing Skills Matter to Everyone: Marketing isn’t just for marketing professionals. It’s the art of capturing attention, conveying messages effectively, and influencing decisions. In today’s interconnected world, understanding the basics of marketing is essential for career advancement and personal branding. How to Initiate Your Marketing Learning Journey: Embarking on your marketing education is easier than ever. There are courses that offer a solid foundation in marketing principles, spanning everything from SEO to social media marketing. Practical Application of Marketing Expertise: Learning marketing is only the beginning. Apply your newfound knowledge by creating personal projects. For example, if you’re pursuing a corporate career, develop a personal website to experiment with SEO, content marketing, and social media strategies. Practical experience reinforces your understanding and ensures real-world applicability. 2. Finance and Investment Skills: The Fundamental Role of Financial Literacy: Comprehending finance is paramount for prudent money management. Whether it involves budgeting, investing, or planning for retirement, financial literacy serves as your compass in navigating the intricate financial landscape. Learning Finance and Investment Skills: Numerous online resources, books, and courses are available to enhance your financial acumen. There are even various movies and documentaries that can help you generate interest in Finance contents. Various platforms offer courses covering a wide range of financial topics, making learning accessible. Focus on broader basics like Macroeconomics, Balance Sheets, Business Analysis etc. Additionally, focus on personal finance: budgeting, managing and investing your money sensibly. If you’re interested in investing or learning more about investment concepts, you can join my YouTube community, where I cover various topics and provide stock-specific commentary on the Stock Market. 3. Setting up Habits & Systems: The Foundation of Productivity: Effective habits and systems are the building blocks of productivity and success. They help you streamline your work, stay organized, and consistently achieve your goals. Initiating Your Habit and System-Building Journey: Start by identifying areas where you can implement habits and systems. This could include time management techniques, goal-setting frameworks, and workflow optimization. Practical Application of Habits & Systems: Implement these habits and systems in your daily life. Whether it’s adopting a morning routine for better productivity or setting up project management tools for efficient work, consistency is key. Keep these 3 points in mind: ● Plan your day ahead (Use a planner) Note 3 important tasks to complete that day ● Follow a Do-Learn-Repeat Framework Note 3 points of improvements at the end of the day ● Optimize your Time Avoid Distractions and follow a Routine. 4. Sales: Mastering the Art of Persuasion: Sales skills are not limited to traditional sales roles. The ability to persuade and influence others is a valuable skill in various aspects of life and business. Initiating Your Sales Learning Journey: Begin by studying sales techniques and strategies. There are many courses and resources available to help you understand the psychology of sales and effective persuasion. Practical Application of Sales Skills: Apply your sales knowledge to your personal and professional interactions. Whether you’re negotiating a deal, pitching an idea, or simply trying to persuade someone, practice is essential. Follow a framework like the one mentioned below [1]: 5. Structured Thinking and Problem Solving: The Significance of Structured Thinking: Structured thinking is your ability to break down complex problems into manageable components. It equips you with the logic and precision needed to approach challenges effectively. This skill transcends industries, making it invaluable in your career journey. Let’s use an example: Imagine that you have a Villa which you plan on using for short term rentals. How will you look at this problem? Start thinking about solutions: How to Market the Villa? How do you run Operations? How will you look at the Customer Support and Review problems? This is one way how structured thinking can help you in your life. The Symbiotic Relationship Between Structured Thinking and Problem Solving: Structured thinking and effective problem-solving go hand in hand. Your approach to a problem often dictates the quality of the solution. Cultivating structured thinking enhances your problem-solving acumen significantly. Practical Steps to Cultivate Structured Thinking: Developing structured thinking entails refining your cognitive abilities.  Engage with thought-provoking material, such as articles from Harvard Business Review, to hone your thinking processes.  Eliminate distractions to focus your thoughts more effectively. You can also check out our course on Structured Thinking and Management Consulting where we cover key aspects to develop this crucial skill effectively. 6. Effective Communication: Moving Beyond Basic Communication Skills: Effective communication transcends the ability to convey messages. It encompasses clarity, conciseness, and the capacity to articulate complex ideas with ease. A crucial skill for career advancement, effective communication is a valuable asset in any profession. Tips for Enhancing Your Communication Skills: Enhance your c0mmunication skills by recording yourself speaking and evaluating your delivery.  Strive for clarity of expression, ensuring you can convey intricate concepts succinctly. The Synergy Between Writing and Speaking: Writing plays a pivotal role in improving speaking abilities.  When you write, you structure your thoughts and articulate ideas clearly.  The synergy between writing and speaking elevates your overall communication proficiency. 7. Judgment and Decision Making: The Relevance of Judgment in Long-Term Financial Success: Judgment is your capacity to

Why India’s Youth is Falling Behind in Financial Literacy? Introduction In a world driven by the relentless flow of information and the omnipresence of social media, it’s become increasingly apparent that India’s youth is facing a looming crisis – a crisis of financial ignorance.  This isn’t just a personal observation; it’s a fact that even the World Bank acknowledges [1]. The data below says that the Literacy Rate in India is higher than countries like Pakistan. Now, let’s take a look at another chart. This chart covers the financial literacy in a country [2], and it clearly shows that Pakistan is more financially literate than India.   Keeping this in mind, let’s delve into this pressing issue, understand its gravity, explore the reasons behind this alarming trend, and discover actionable steps for a brighter financial future. What We’ll Cover in This Blog: Why is India’s Savings Rate Declining? How Are People Allocating Personal Loans? What’s Driving the Increase in Credit Card Debt? Why Should You Care About Your CIBIL Score? How Does Social Media Influence Spending Habits? Why Is Consumerism a Financial Pitfall? What Are Synthetic Financial Products, and Why Are They Complex?  Why Is Financial Education Crucial? What can you do to circumvent these situations? The Savings Rate Plunge: One clear indicator of the problem is the declining savings rate as a percentage of GDP.  It’s crucial to grasp the concept of savings, which is essentially income minus expenses. If you’re earning one lakh and spending thirty thousand, your savings amount to seventy thousand.  The equation is simple: if your salary grows faster than your expenses, your savings increase.  However, the savings rate as a percentage of GDP is dwindling [3].  India’s GDP is growing, but people are spending even faster and undertaking high levels of lifestyle inflation.  This raises questions about the sustainability and sensibility of such financial behavior. Unwise Borrowing: A closer look at borrowing patterns reveals a worrying trend. Personal loans are being used for non-critical purposes like buying cars, education, and electronics [4].  When we categorize these expenses into critical and non-critical, it becomes apparent that a substantial chunk of personal loan funds is directed towards non-productive ventures.  For instance, many individuals refinance existing loans, a financially unhealthy practice. And, shockingly, nearly seven percent of personal loans are dedicated to purchasing cars on credit.  It’s worth emphasizing that buying a depreciating asset with a loan doesn’t make financial sense. The Growing Usage of Credit Card Debt: The rampant usage of credit cards is another facet of the financial crisis. Approximately 70% of iPhones purchased in India are financed through EMIs [5]. While some can afford iPhones, a significant portion cannot.  As seen below [6], iPhone sales increased by 400% because of EMI schemes and discounts. Still, they succumb to the allure of cheap credit. This culture of living beyond one’s means is further eroding financial sensibility. Similarly Credit Card issuance in India has grown exponentially in the last few years and it’s only set to grow faster [7]. The CIBIL Score Conundrum: Your financial decisions today affect your future in subtle but significant ways. A prime example is your CIBIL score, which plays a pivotal role when you apply for loans, especially home loans.  Individuals with CIBIL scores above 750 are considered excellent borrowers and receive lower EMIs [8].  However, excessive credit card debt and frequent maxing out of credit limits lead to lower scores, resulting in higher EMIs when it truly matters, such as buying a home. Personal Retail loans surged by 50% in 2022 [9]. The Role of Social Media: Social media, particularly platforms like Instagram, fuels a culture of instant gratification. It’s a breeding ground for FOMO (Fear of Missing Out). We see friends and acquaintances enjoying extravagant vacations, buying iPhones, and living seemingly luxurious lives.  This exerts undue pressure on impressionable minds, especially the younger generation, compelling them to spend money they don’t possess. Consumerism and the Debt Trap: Consumerism is on the rise, driven by the ease of obtaining credit cards and loans. This phenomenon encourages people to spend recklessly on things they can’t afford, leading to a perpetual cycle of debt.  The pursuit of a bigger house, a more extravagant car, or the latest gadgets often traps individuals in a never-ending race to keep up with an unsustainable lifestyle. This has led to increase in Household Debt in India over the last decade [10] The Complexity of Synthetic Products: The financial landscape is cluttered with synthetic products and derivatives. These complex financial instruments can be challenging to understand for the average person.  For example the 2008 Financial Crisis was driven by a financial product called Mortgage-Backed Securities and Collateral Debt Obligations (CDOs). Similarly more such products such as REITS (Real Estate Investment Trusts), BNPL schemes etc. are continuously gaining traction. Without proper financial education, individuals might inadvertently invest in products they don’t fully comprehend, putting their hard-earned money at risk. The Complexity of Synthetic Products: The bottom line is that financial literacy is essential. Finance is a complex subject that cannot be condensed into one-minute reels or simplified for entertainment. It’s a matter of your financial well-being and security.  If you’re willing to spend considerable time researching product reviews for a T-shirt, you should be willing to invest even more time in understanding your financial choices. What can you do to circumvent these situations? Understand that the Consumerist Culture is a means for you to spend your money and it will just keep growing. Learn more about Finance (Managing your money and Investing). Avoid Stock News, Prioritize Fundamentally Driven Analysis. Absorb different narratives and concepts, and then maintain your own viewpoint. Focus on :  Risk-Reward and Diversification Creating and Hedging your Portfolio If you are a serious investor and are looking for advanced techniques with a focus on better returns, join my Youtube Community where I give live and timely updates on the Stock Market Conclusion The plight of India’s youth in financial matters is a matter of

How to buy your first stock In the ever-evolving world of finance, the stock market stands as a beacon of opportunity for those willing to venture into the realm of investments. Whether you’re a newcomer or an experienced hand, understanding the nuances of the stock market is pivotal to achieving your financial goals.  This blog post serves as a guide to stock market investments, tailored specifically for beginners, and packed with valuable insights to set you on the path to financial success. We’ll walk you through the fundamental principles of investing your first 25,000 rupees in stocks, demystifying the complexities and helping you make informed decisions. In this guide to stock market investments for beginners, we will cover the following key points: Harnessing the Power of Compounding Mutual Funds or Direct Stocks? Navigating the Risk and Reward Landscape The Importance of Diversification How to Purchase Stocks? This guide is your roadmap to making informed decisions and achieving success in the world of stock market investments. Let’s dive deeper into each of these key points to equip you with the knowledge and strategies you need to thrive in this dynamic financial landscape.   Harnessing the Power of Compounding Let’s commence our journey by exploring the incredible potential of compounding – the magic that can turn modest investments into substantial wealth over time.  Suppose you start with 25,000 rupees and achieve a conservative 12 percent Compound Annual Growth Rate (CAGR).  In a decade, you could accumulate a substantial sum – approximately 60 lakh rupees [1]. While inflation remains a concern, strategic investments can outpace its erosive effects, making the stock market an attractive avenue for wealth generation. Mutual Funds or Direct Stocks? Now that you’re equipped with the knowledge of compounding, let’s address the pivotal question of where to allocate your hard-earned capital.  There are 2 primary avenues:• Mutual Funds: These professionally managed portfolios invest in a mix of stocks and bonds [2].  They offer the advantage of minimal micromanagement but come with their own set of challenges, including high expense ratios and the daunting task of selecting the right fund from a sea of options. • Direct Stocks:  Investing in individual companies.  This approach bypasses additional commissions but requires a deeper understanding of the stock market.  Beginners should tread cautiously and educate themselves thoroughly before venturing into this realm. Navigating the Risk and Reward Landscape Successful investing is rooted in comprehending the risk-reward equation. While rewards, or returns on investments, are relatively straightforward, understanding risks can be elusive. Here are crucial factors to consider: Company Size: Smaller companies often offer higher growth potential but come with elevated risk. Sector Dynamics: Different sectors exhibit varying levels of volatility. For instance, tech and finance can be more unpredictable. Stock Price: Investing at all-time highs carries inherent risk. Seek a margin of safety when making your choices. Macroeconomic Factors: External variables like economic conditions can profoundly impact your investments. Business-Specific Risks: Analyzing the competitive landscape of the companies you invest in is pivotal. The Importance of Diversification Diversification is the investor’s shield against risk.  Ensure that your portfolio comprises at least 10 to 20 stocks, and aim to limit individual stock allocations to 5 to 10 percent of your total investment.  Spreading your investments across various assets minimizes your exposure to unforeseen market turbulence. How to Purchase Stocks? For beginners, it’s advisable to follow a balanced approach to minimize risks during the early stages of your investment journey: For every one aggressive stock you purchase, have two defensive stocks. This should make your portfolio 33% aggressive and 66% defensive. Follow the margin of safety principle by buying stocks at a good price, especially during the early stages of your investment journey. Avoid purchasing stocks at a premium or near their all-time highs. Focus on long-term survival and growth. Take a long-term view of your investments, and avoid making hasty decisions based on short-term fluctuations. Pay attention to a company’s debt levels. Check the Debt to Equity Ratio and avoid companies with excessive debt, particularly in a high-interest-rate environment. Consider starting with mostly Large Cap stocks or Index Funds, focusing on wealth preservation. Allocate around 80% of your portfolio to these, reserving 20% for riskier assets like small-cap or mid-cap funds, which offer potential for wealth growth. Build your positions gradually by not investing all your money at once. Spread your investments across different stocks to diversify your risk. If your monthly investment amount falls short of the price of high-value stocks, don’t be disheartened. Start by acquiring stocks that align with your budget and gradually build your portfolio. Seize opportunities when market conditions favor you. If you are a serious investor and are looking for advanced techniques with a focus on better returns, join my Youtube Community where I give live and timely updates on the Stock Market Conclusion This guide is your gateway to embarking on a successful stock market investment journey. Remember that investing is a marathon, not a sprint. While the allure of quick riches may be tempting, focus on steady, sustainable growth. If you find yourself uncertain or in need of further guidance, do not hesitate to explore various resources available to you.  Seek out investment communities, courses, and professionals who can provide valuable insights.  Armed with these principles, you are well-prepared to make informed decisions and navigate the complex world of stock market investments.  Happy investing! https://www.youtube.com/watch?v=k6ByGE3aySA TL; DR: This blog is a guide for beginners on how to buy their first stock and succeed in the stock market. It covers key topics including harnessing the power of compounding, choosing between mutual funds and direct stocks, understanding the risk-reward landscape, the importance of diversification, and how to purchase stocks. Compounding can turn modest investments into substantial wealth over time. Beginners can choose between mutual funds (professionally managed portfolios) or direct stocks (investing in individual companies). Understanding and managing risks in the stock market is essential, considering factors like company size, sector dynamics, stock price, macroeconomic factors, and business-specific risks. Diversification is