Books I’ve liked: Personal finance, investing & entrepreneurship

Every now and then, a friend asks me for a book recommendation, especially on personal finance, entrepreneurship and investing. Not because am an investing guru (which I am not), but because I read a ton of them!

I thought I will note it down here as well.

All these are books that I have read and liked a lot.

Few like One up on Wall street gave me the confidence that I too can be an investor in the stock market, which until then was crocodile infested space to me. Few like Intelligent Investor have been a huge huge help on almost everything finance. Few like Where are the customers yachts? changed my opinion on the stock market quite abruptly and changed my style of investing drastically.

And yet, few like Richest man in Babylon made me realize that simplicity and a principled method matters. A few like Extraordinary popular delusions helped me stay away from making costly mistakes.

Perhaps, there have been a few that have led me astray as well. Rich dad poor dad? Could be!

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After 3 months

It’s been 3 months since I quit my job.

And I can relate to a quote by Derek Sivers I read recently.

“Most people over-estimate what they can do in one year, and under-estimate what they can do in 10 years.”

To start with, I guess I had too many options to choose from and hence, had been facing a problem of plenty. Naturally, that meant dissipated attention.

Deciding what to do next is not easy and I have been behaving like a flip-flop. Here, here and here.. I have had different opinion. Initially, I thought I would do something related to my hobbies. Then, after some deliberation, decided against it and thought my interest in personal finance and analytics (my regular job) were worthier things to work on. If not my own startup on Analytics, perhaps a job in a startup, I felt.

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Four more days before I add to the unemployed pool.

The last 3 weeks have been very good.

I’ve been spending time on figuring things out and am pretty pleased with what I’ve figured out. Very importantly, was able to realize that certain things weren’t for me. Also, been able to figure out few things that I certainly would want in life.

I would say, the map is almost 3/4th done. There are missing links, those can be figured out, by trial and error.

A few key updates

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The richest man in Babylon

I am reading the 1920s classic, “The richest man in Babylon“. I liked the book. It is full of simple wisdom that is so difficult to notice these days. I liked the simplicity of the book. I would recommend this book to anyone.

In fact, I think this book could have been the inspiration for books like “The wealthy barber” and “Rich dad poor dad”.

Here are excerpts from 2 of my favorite chapters.

Seven cures for a lean purse

Step 1: Start Thy Purse to Fattening.
For each ten coins you earn, spend only nine.

Step 2: Control Thy Expenditures
Budget your expenses that you may have coins to pay for your necessities, pay foryour enjoyments and gratify your worthwhile desires without spending more thannine-tenths of your earnings.

Step 3: Make Thy Gold Multiply
Put each coin to labor so that it may reproduce its kind.

Step 4: Guard Thy Treasures from Loss
Guard your treasures from loss by investing only where the principal is safe, where itmay be reclaimed if you desire so, and where you will not fail to collect a fair rental.

Step 5: Make of Thy Dwelling a Profitable Investment
Own your own home.

Step 6: Insure a Future Income
Provide in advance for the needs of your growing age and the needs of your family.

Step 7: Increase Thy Ability to Earn
Cultivate your own powers, study and become wiser, become more skillful, andrespect yourself.

The five laws of gold

1. The First Law of Gold
“Gold cometh gladly and in increasing quantity to any man who will put by not lessthan one-tenth of his earnings to create an estate for his future and that of his family.”

2. The Second Law of Gold
“Gold laboreth diligently and contentedly for the wise owner who finds for it profitableemployment, multiplying even as the flocks of the field.”

3. The Third Law of Gold
“Gold clingeth to the protection of the cautious owner who invests it under the adviceof men in its handling.”

4. The Fourth Law of Gold
“Gold slippeth away from the man who invests it in businesses or purposes with which he is not familiar or which are not approved by those skilled in its keep.”

5. The Fifth Law of Gold
“Gold flees the man who would force it to impossible earnings or who followeth thealluring advice of tricksters and schemers or who trusts it to this own inexperienceand romantic desires in investment.”

Conservative investors sleep well !! Good book!!!

I just finished “Conservative Investors sleep well”  by Phil Fisher. (It is also sold as part of “Common Stocks and uncommon profits”). Its really very good and I enjoyed it a lot. Here is a brief on it.

Fisher talks about Four dimensions of conservative investing.

1. First dimension

Excellence in the following activities

A. Low cost operation. (High profit margins)

B. Stong marketing organisation.

C. Strong research and technical efforts.

D. Good financial skills.

And of course the skill to integrate all of this in the right mix.

2. Second dimension.

This is the people factor. Competent management and good labour force make all the difference. Fisher also talks about 3 elements needed with regards to this dimension. They are

1. Managements need to realize that the world is changing fast.

2. Take efforts to make the employees feel that their co is a good place to work for.

3. Orientation towards sound & long range growth.

3. Third dimension

These are the characteristics that make the business favorable as a conservative investment. They are

1. Profitability.

This can be expressed in ROIC and OPM. But also the sales turnover is also an important consideration.

2. Economies of scale.

3. Market leader in sales and high OPM

4. Multidisciplinary technology development

5. Well marketed products that have become habit buying now

6. Extremely high ROIC is also a danger, says Fisher as it might attract a lot of new people to start business thereby reducing profits.

4. Fourth dimension.

This dimension talks about how the Financial community

1. values an industry

2. values a company

3. values stocks in general.

A stock price is not only what the financial community thinks of the company, but also of the industry and also of stock picking in general. During a time when the industry is viewed negatively, even a good company would be valued low. And during times when stocks as a whole are considered as bad investments, again, stocks of such companies would be cheap.

This is only a very brief gist. Please do take the time to read this fantastic book.