I have realized that my writing process is one where I ruminate over a subject or a topic for quite some time and then just before the last minute when I MUST hit publish, I write it out.
For today, I had been thinking of a topic and had planned to pen it down during lunchtime in office, yesterday. On my way to work, I quickly got into the cab (see how I now save money on commuting).
I noticed that the driver was dressed a little differently than the regular cabbies that I am used to. Instead of a khaki uniform, he wore a baseball cap and a green t-shirt with jeans.
While on the way, I started with my usual ritual of calling home and talking to my parents. The cabbie was also on call but talking in Marathi, a language I am yet to understand despite living in Mumbai for almost the past 10 years. Suddenly, my ears perked up when I heard him say Rakesh Jhunjhunwala (the Indian equivalent of Warren Buffet), “dividend”, “Castrol”, “Rolta” and “bonus”.
That call went on for about 10 minutes. Most of my call at home was distracted with half an ear and most of my brain trained to try and decipher what he was saying.
Once his call got over, I started with a question of whether he invested in stocks and I haven’t had a more enlightening commute probably ever.
I asked if I could share his story on my blog. He didn’t say anything to the contrary but preferred to remain anonymous.
Disclaimer: It is a true story and not something I made up to preach in disguise like Rich Dad Poor Dad. If I had that level of imagination, I would be writing fiction.
Here are some lessons that I got from this conversation:
1. Education is not a mandatory criterion for doing well in life
So, my cabbie had studied till class 7 whereas a lot of my colleagues have fancy MBA degrees (including me). However, looking at the current trend, I am not sure whether they well end up as comfortable financially as that guy. The cabbie was a personification of the PAW in The Millionaire Next Door whereas most people around me I see are typical UAWs.
When I told him how a lot of more educated people are scared to invest in equities, he simply said – a lot of times educated people act like the uneducated.
2. Over time, investing will serve you well
When I asked him since when was he trading and investing in stocks and he simply said since the time of the Harshad Mehta Scam a.k.a 1992. For the uninitiated, Harshad Mehta scam remains one of the biggest and earliest stock market scams.
The great bit was that this scam which ended up scaring quite a few people was the starting point for this guy.
He started at the time when the IPO (Initial Public Offering) for a company from an Indian conglomerate, Indogulf was released. Taking help from his cab owner he applied and was allotted 5000 shares. Clearly, he was saving that time to have enough money for those shares.
3. Investing works better than keeping money in a bank
The cabbie made the point that to grow Rs. 1000 to Rs. 2000 in a bank will take 9 years 3 months. Honestly, this calculation is a little erroneous as with the approximately 7% p.a. interest rate on bank deposits (FDs etc), it now takes over 10 years for money to double there.
On the other hand, in well-researched stocks, money doubles much faster. Even with Mutual Funds, the average return rate has hovered around 15%. Isn’t it time you started investing?
4. Do not use living expenses to invest in the market
He still drives his taxi and his wife works in a government job in Vashi. Is he financially independent? Most definitely. Did he decide to retire early? No.
He made a simple statement that he does not use his living expenses to invest in the market.
Carve out money from your income/salary beyond your living expenses and invest it in equities. That way you will grow your money while sleeping easy knowing that fluctuations in the market do not impact your day-to-day living.
5. Use your money to build assets that will result in passive income
I asked him where he lived. I shouldn’t have been surprised to hear that he had flats in Kemps’ Corner, Sanpada and in Lonavala. While he lived in the flat in Kemps’ Corner, the other 2 were put out on rent.
He also took vital notice of the bonuses and the dividends that his stock earned him, making it a vital factor in his investments.
Passive income? Check and check.
6. Anything that depreciates is not an asset
The funniest anecdote that he gave also had a lesson for me. When his daughter was preparing for Class 10 exams, she expressed a wish to get a laptop as a reward for doing well and achieving more than 80% marks. While waiting for the result, she told him that she was sure she would get more than 80% and that he should buy the laptop.
The cabbie classically said – Kid, if you end up not getting those marks, what will I do with that laptop? Even the kabaddi wala (recycling guy) will not give me any value for it.
Assets are only those which appreciate in value over time. Knowing that distinction will help in life.
7. Don’t be so attached to money that you end up taking no risks
When I told him that so many people around me do not invest and how did he end up doing it, he responded – people are afraid of losing their money. I have never run after money. We came into this world with no money and will go without any money either.
8. Technology is not a barrier to investing
I asked him how he manages to remain updated on the latest happenings in the market. Turns out he reads the “Business Standard” newspaper every evening, watches some bit of CNBC and sometimes asks his daughter to check some information on the internet for him.
While he started with paper trading, he now has a demat (dematerialized or digital equities) account. Does that mean he trades and invests digitally? Nope. He is one of the call-in investors and that call was probably a call-in trade that I overheard.
When I had interviewed to be a part of the marketing team of a securities company, I had been told that call-in trading is big. At that time I found that a little ludicrous. Turns out, there might be a huge number of people doing just that.
9. Check for a company’s’ balance sheet and the debt it has
I was curious to know his approach to investing. Did he do it solely on the basis of hearsay or was there some thought to it?
The cabbie said he studied the company’s balance sheet, especially with respect to the debt it carried. He did that through the newspaper that he read every day.
He kept track of the bonus and dividend that a company gave and often sold stocks which got inflated. He bought those stocks back when the price cooled off a bit.
If my ride had lasted longer, there were many more questions in my head – for instance, why was he still driving a cab? Was he a migrant to Mumbai or started out here itself? What was his saving strategy? Alas, time was limited and so were my learnings.
Now, you can either believe the story and take inspiration from it or pick holes in it like my husband and another team member. The husband especially refused to believe it when I told him the cabbie planned to send his daughter to London for MBA.
What do you choose? Let me know in the comments or email me at firstname.lastname@example.org
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