Article

Trading tips from a Taxi driver

27 Mar 2018

Being an avid traveler, I try to go to as many places I can and meet interesting people; some of these people end up inspiring me in numerous ways. Last month, I was traveling to Mumbai to visit my sister.

I boarded a taxi from Mumbai Central to go to my hotel. I had no clue that this hour-long taxi ride was going to upturn my financial life and change my way of reaching my financial goals.

Ten minutes into the ride, I noticed a photograph glued to the dashboard. It was a photo of the taxi driver, his wife, and his two daughters. Out of curiosity, I asked him what his daughters were doing in life, to which he gave me a surprising answer: "This one is Radha, and she is pursuing her Bachelor's degree from IIT Bombay, and this is Sandhya who is doing Ph.D. from Yale University in Connecticut." Out of all the possible answers, this was one that I was not expecting from a taxi driver.

I congratulated him on his daughters' hard work and achievement. Curiously, I asked him: "All this must be costing you a fortune; do you earn enough from the taxi to fund your daughters' education and cover your daily expenses?"

To my surprise, he replied: "No, not from the taxi; I mostly earn my money by trading in the share market. Driving a taxi is something I started with because I don't like to sit all day in the house doing nothing. So, I decided to do the one thing that I'm good at; apart from investing, of course." This reply was followed by a big laugh as I sat there, even more astonished than before.

Since I have always been fascinated by the share market and the infinite opportunities that it provides to build wealth, I decided to ask him how he manages his investment and the strategies that he uses to trade in the share market. Given below is a small summary of what I learned:

Share Market Trading Tips

Thorough research

On knowing that he hasn't had a loss in investing in 2 years, I asked him, how he picks the perfect stock. To this, he replied: "I research the investment inside and out before deciding to invest. I check the background of the company by looking at their previous earnings, their balance sheet, their income statement, and their potential to pay a regular dividend. If all of this seems right and I see that the company has a potential to grow in the future, I go ahead with my decision to invest in the company." I asked him where he got the time for all this.

"What are nights and early mornings for?" he replied with a smile.

Diversification

When he stated that he hadn't had a loss in over two years, I doubtfully commented: "But this seems like an impossible thing in the share market, even big-time investors incur regular losses." To this, I got an intelligent reply: "It's not that I have not suffered a loss in my investments, I just cut them by earning more profits through my other investments. You see, I am all in for diversification of my portfolio. I try to invest in different company's stocks rather than putting all of my money in just one place. It spreads my overall risk across multiple investments, and even if my one investment turns bad, profits from my other investments make my overall portfolio profitable."

"Well, that's just pure genius," I replied.

Discipline

On asking him what trait a person should have to be successful in the share market, he smiled and replied: "Discipline and patience are crucial. I have seen people selling their stocks as soon the prices go a little higher, losing out on earning so much more money as the price usually increases in the future. You have to be disciplined and patient when trading in the share market. If you sell early, you lose on making more money, and if you retain your stocks for too long even when the market is down, you incur massive losses. By regularly monitoring your investment, you will know the right time to buy or sell your stocks."

When I reached my hotel, I still had so many questions that I wanted to ask him. I realized that I didn't even know his name.

"In midst of all this, I forgot to ask your name.

"No worries, I am Dinkar Rajoria and here is my card. Feel free to call anytime you want a taxi."
"What about for investment advice?

"Call me anytime for that."

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mutual-fund

Why to Choose Mutual Funds Instead of Directly Investing Into Equities?

Whether to invest in equities or mutual funds is a question that has plagued every investor. As someone who needs the best value for his/her investment should you invest in equity directly or via mutual funds?

Let’s start by first understanding what these two terms ‘equities’ and ‘mutual funds’ stand for-

Equities- Equities generally represent ownership of a company. If you own any equity in a company, you are a part owner of the said company (depending on how much equity you own).

Mutual Funds – It is an investment scheme which is professionally managed by an asset management company. It pools together the resources of a group of people and invests their money in equities, debentures, bonds and other securities.

Why choose mutual funds over equities?

For people who’ve never invested in either stocks or mutual funds, it is hard to know which is better and where to start. Broadly speaking, if you are a novice investor, mutual funds are not only less risky but also way easier to manage. Here are some ways in which investing in mutual funds is beneficial as opposed to investing in equities -

Diversification

Mutual funds provide more diversification as compared to an individual equity stock. When you invest in equity, you are investing in a single company which has its inherent risk. For example, if you invest Rs.20,000 in buying equities of one company, you could face a total loss if that particular company performs poorly in the market.  

If you invest the same amount in mutual funds, it will be invested in different kinds of stocks and financial instruments, high-risk and low-risk both, so you might not face total loss even if one company does poorly.

Scale of Investment and Lower Costs

For an individual investor buying and selling stocks is a difficult task due to its high price. Thus, any gains made from stock appreciation are nullified if the overall trading costs are considered. Comparatively with mutual funds, as the money is pooled from a large number of investors, the cost per individual is lowered.  

Another advantage of mutual funds is that you don’t need to invest large sums of money. Buying equities for a profitable venture needs huge amounts of money, a minimum of few lakhs. With mutual funds, you can start with Rs.1000 and earn profits on that as well.

Convenience

Keeping an eye on the markets everyday is a time-consuming business, especially if you are investing as a side gig. There are people who spend their lives studying the market and still end up sustaining heavy losses. Though investing in mutual funds does not guarantee high returns, it is stress-free and needs less work as compared to investing in equities.

To sum it up

It is important to remember that mutual funds have their own disadvantages as well. Thus, as with any financial decision, educating yourself and understanding the suitability of all the available options is the ideal way to invest. 

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Trading tips from a Taxi driver

27 Mar 2018

Being an avid traveler, I try to go to as many places I can and meet interesting people; some of these people end up inspiring me in numerous ways. Last month, I was traveling to Mumbai to visit my sister.

I boarded a taxi from Mumbai Central to go to my hotel. I had no clue that this hour-long taxi ride was going to upturn my financial life and change my way of reaching my financial goals.

Ten minutes into the ride, I noticed a photograph glued to the dashboard. It was a photo of the taxi driver, his wife, and his two daughters. Out of curiosity, I asked him what his daughters were doing in life, to which he gave me a surprising answer: "This one is Radha, and she is pursuing her Bachelor's degree from IIT Bombay, and this is Sandhya who is doing Ph.D. from Yale University in Connecticut." Out of all the possible answers, this was one that I was not expecting from a taxi driver.

I congratulated him on his daughters' hard work and achievement. Curiously, I asked him: "All this must be costing you a fortune; do you earn enough from the taxi to fund your daughters' education and cover your daily expenses?"

To my surprise, he replied: "No, not from the taxi; I mostly earn my money by trading in the share market. Driving a taxi is something I started with because I don't like to sit all day in the house doing nothing. So, I decided to do the one thing that I'm good at; apart from investing, of course." This reply was followed by a big laugh as I sat there, even more astonished than before.

Since I have always been fascinated by the share market and the infinite opportunities that it provides to build wealth, I decided to ask him how he manages his investment and the strategies that he uses to trade in the share market. Given below is a small summary of what I learned:

Share Market Trading Tips

Thorough research

On knowing that he hasn't had a loss in investing in 2 years, I asked him, how he picks the perfect stock. To this, he replied: "I research the investment inside and out before deciding to invest. I check the background of the company by looking at their previous earnings, their balance sheet, their income statement, and their potential to pay a regular dividend. If all of this seems right and I see that the company has a potential to grow in the future, I go ahead with my decision to invest in the company." I asked him where he got the time for all this.

"What are nights and early mornings for?" he replied with a smile.

Diversification

When he stated that he hadn't had a loss in over two years, I doubtfully commented: "But this seems like an impossible thing in the share market, even big-time investors incur regular losses." To this, I got an intelligent reply: "It's not that I have not suffered a loss in my investments, I just cut them by earning more profits through my other investments. You see, I am all in for diversification of my portfolio. I try to invest in different company's stocks rather than putting all of my money in just one place. It spreads my overall risk across multiple investments, and even if my one investment turns bad, profits from my other investments make my overall portfolio profitable."

"Well, that's just pure genius," I replied.

Discipline

On asking him what trait a person should have to be successful in the share market, he smiled and replied: "Discipline and patience are crucial. I have seen people selling their stocks as soon the prices go a little higher, losing out on earning so much more money as the price usually increases in the future. You have to be disciplined and patient when trading in the share market. If you sell early, you lose on making more money, and if you retain your stocks for too long even when the market is down, you incur massive losses. By regularly monitoring your investment, you will know the right time to buy or sell your stocks."

When I reached my hotel, I still had so many questions that I wanted to ask him. I realized that I didn't even know his name.

"In midst of all this, I forgot to ask your name.

"No worries, I am Dinkar Rajoria and here is my card. Feel free to call anytime you want a taxi."
"What about for investment advice?

"Call me anytime for that."