Equity Investment Quotes

Equity without income is unnatural.

At Mayflower-Plymouth, we believe that active capital management is the responsible way to invest. Even passive funds should be actively managed.

If you can follow only one bit of data, follow the earnings—assuming the company in question has earnings. As you’ll see in this text, I subscribe to the crusty notion that sooner or later earnings make or break an investment in equities. What the stock price does today, tomorrow, or next week is only a distraction.

At Mayflower-Plymouth we aim to employ capital and maximize ROI for central banks, sovereign wealth funds, pension funds, corporations, foundations and endowments, and individual investors around the world.

Trust is vital. In order for investors to have us steward their capital, a prerequisite is that they trust us.

The two greatest enemies of the equity fund investor are expenses and emotions.

At Mayflower-Plymouth, we care about profit and growth. And just as much we also care about things like the health of the earth, Whole Foods plant based or I-Tal living, vegan or vegetarian living, holistic education, spirituality, human rights, money equity, social cohesion, liberty, family, human health and more. To us, Investing is more than profit.

Trust is a prerequisite for financial transacting.

We can't all be bakers or chefs. Many of us have modest ambitions. But we can all buy a piece of the pie.

Shopping the equity market solely based on stock prices is like shopping for groceries solely based on food prices as opposed to the quality of the food. Price matters, but what really matters is the value that you get for the price.

Everybody who really makes money at some point owns a piece of a product, a business, or some IP. That can be through stock options if you work at a tech company. That’s a fine way to start. But usually, the real wealth is created by starting your own companies or even by investing. In an investment firm, they’re buying equity. These are the routes to wealth. It doesn’t come through the hours.

Many investors have a homogeneous view of portfolio diversification. They’re thinking about large cap vs small cap vs equity vs bonds. And that’s important, but nature views diversification much more holistically. And at Mayflower-Plymouth, so do we.

Regret is a lifestyle disease of equity investing.

Everyone our company touches should experience a net value-add as a result of our investment activities.

Trust is vital. In purser for investors to have us steward their capital, a prerequisite is that they trust us.

Municipal bonds finance local government projects, such as schools, roads, and utilities. So there’s a public good aspect to investing in municipalities that isn’t antithetical to equity investing but it’s different.

Basically, CEOs have five essential choices for deploying capital—investing in existing operations, acquiring other businesses, issuing dividends, paying down debt, or repurchasing stock—and three alternatives for raising it—tapping internal cash flow, issuing debt, or raising equity. Think of these options collectively as a tool kit. Over the long term, returns for shareholders will be determined largely by the decisions a CEO makes in choosing which tools to use (and which to avoid) among these various options. Stated simply, two companies with identical operating results and different approaches to allocating capital will derive two very different long-term outcomes for shareholders.

In the mutual fund industry, for example, the annual rate of portfolio turnover for the average actively managed equity fund runs to almost 100 percent, ranging from a hardly minimal 25 percent for the lowest turnover quintile to an astonishing 230 percent for the highest quintile. (The turnover of all-stock-market index funds is about 7 percent.)

Shopping the equity market solely based on stock prices is like shopping at the grocery store solely based on food prices instead of based on the quality of food — you may end up with a full pantry, and poor health. Price matters. But it’s really about the value that you get for the price.

Don't take advice from people unless they are writing you a check.

Teach your children about credit, tax and investing. Be extremely truthful about how they all work

The last transaction price is the least accurate measure of the fair value.

Prices are dominated by the minority, and values are governed by the majority.

The market rewards, not the best stock, but the best behavior.

Millions wish for financial freedom, but only those that make it a priority have millions.

Lesson: Look at your cash everyday if you wish, your bonds every couple of years and your equities every ten years! Really, do not look at your performance more than once a year.

The Decentralization of Finance is really good for humanity and it’s ultimately a win for each and every one of us. Because now that we can circumvent banks, exchanges and brokerage companies by using smart contracts on the blockchain… every person, every family, and every business will experience more liberty, more freedom, more opportunities, more abundance, more power, and more wealth. This makes way for more opportunities around financial wellness, permaculture investing, more effective crowdfunding, better ownership and equity arrangements, and more.

Markets are not efficient enough to incorporate actual inherent risk, given information bias, and emotionally challenged participants. Instead, prices are adjusted up to the cumulative perceived risk of all participants.

The only way for a business to survive the constant and persistent changes that take place through time, is to be anchored to something that is changeless and timeless — and that something is the mindset of creating value for others.

Waaant equity," hisses the alien intruder. "You can't be Pamela Macx," says Pierre, his back to the wall, keeping the sword point before the lobster-woman-thing. "She's in a nunnery in Armenia or something. You pulled that out of Glashwiecz's memories - he worked for her, didn't he?" Claws go snicker-snack before his face. "Investment partnership!" screeches the harridan. "Seat on the board! Eat brains for breakfast!" It lurches sideways, trying to get past his guard.

SHAREHOLDERS’ EQUITY has two components: CAPITAL STOCK: The original amount of money the owners contributed as their investment in the stock of the company. RETAINED EARNINGS: All the earnings of the company that have been retained, that is, not paid out as dividends to owners.

Basically, CEOs have five essential choices for deploying capital—investing in existing operations, acquiring other businesses, issuing dividends, paying down debt, or repurchasing stock—and three alternatives for raising it—tapping internal cash flow, issuing debt, or raising equity.

1. Project What is the project? Why is it unique? Why is the business needed? Why will customers love your product? 2. Partners Who are you? Who are the partners? What are your educational backgrounds? How much experience do you all have? How are you and your partners qualified to make the project a success? 3. Financing What is the total cost of the project? How much debt and how much equity is there? Are partners investing their own money? What is the investor’s return and reward for their risk? What are the tax consequences? Who is your CFO or accounting firm? Who is responsible for investor communications? What is the investor’s exit? 4. Management Who is running your company? What is their experience? What is their track record? Have they ever failed? How does their experience relate to your industry? Do you believe this is the strongest management team you can assemble? Can you pitch them with confidence?

Allies tend to crowd out the space for anger with their demands that things be comfortable for them. They want to be educated, want someone to be kind to them whether they have earned that kindness or not. The process of becoming an ally requires a lot of emotional investment, and far too often the heavy lifting of that emotional labor is done by the marginalized, not the privileged. But part of that journey from being a would-be ally to becoming an ally to actually becoming an accomplice is anger. Anger doesn't have to be erudite to be valid. It doesn't have to be nice or calm in order to be heard. In fact, I would argue that despite narratives that present the anger of Black women as dangerous, that render being angry in public as a reason to tune out the voices of marginalized people, it is that anger and the expressing of it that saves communities. No one has ever freed themselves from oppression by asking nicely.

What Hunter Biden, the son of America’s vice president, and Christopher Heinz, the stepson of the chairman of the Senate Committee on Foreign Relations (later to be secretary of state) were creating was an international private equity firm. It was anchored by the Heinz family alternative investment fund, Rosemont Capital.

From an asset-allocation perspective, when we talk about diversification, we're talking about investing in multiple asset classes. There are six that I think are really important and they are US stocks, US Treasury bonds, US Treasure inflation-protected securities [TIPS], foreign developed equities, foreign emerging-market equities and real estate investment trusts [REITS]. p473

Apple raised $17 billion in a bond offering in 2013. Not to invest in new products or business lines, but to pay a dividend to stockholders. The company is awash with cash, but much of that money is overseas, and there would be a tax charge if it were repatriated to the USA. For many other companies, the tax-favoured status of debt relative to equity encourages financial engineering. Most large multinational companies have corporate and financial structures of mind-blowing complexity. The mechanics of these arrangements, which are mainly directed at tax avoidance or regulatory arbitrage, are understood by only a handful of specialists. Much of the securities issuance undertaken by Goldman Sachs was not ‘helping companies to grow’ but represented financial engineering of the kind undertaken at Apple. What

As women gain rights, families flourish, and so do societies. That connection is built on a simple truth: Whenever you include a group that’s been excluded, you benefit everyone. And when you’re working globally to include women and girls, who are half of every population, you’re working to benefit all members of every community. Gender equity lifts everyone. From high rates of education, employment, and economic growth to low rates of teen births, domestic violence, and crime—the inclusion and elevation of women correlate with the signs of a healthy society. Women’s rights and society’s health and wealth rise together. Countries that are dominated by men suffer not only because they don’t use the talent of their women but because they are run by men who have a need to exclude. Until they change their leadership or the views of their leaders, those countries will not flourish. Understanding this link between women’s empowerment and the wealth and health of societies is crucial for humanity. As much as any insight we’ve gained in our work over the past twenty years, this was our huge missed idea. My huge missed idea. If you want to lift up humanity, empower women. It is the most comprehensive, pervasive, high-leverage investment you can make in human beings.

All too often high-income-producing UAWs spend countless hours studying the market—but not the stock market. They can tell you the names of the top auto dealers, but not the top investment advisors. They can tell you how to shop and spend. But they can’t tell you how to invest. They know the styles, prices, and availability at various car dealers. But they know little or nothing about the various values of equity market offerings. As

At Mayflower-Plymouth, we believe in having a long term view with investments. We believe that maximizing long-term ROI requires having a big picture view in terms of business and economics. We believe that equity without income is unnatural – so every portfolio should generate consistent income. We believe in prioritizing not just growth, but also resilience. And we believe that we should employ a multitude of traditional investment approaches toward the achievement of our investment goals.

raising chickens. It was almost as hard for Eisman to imagine himself raising chickens as it was for people who knew him, but he’d agreed. “The idea of it was so unbelievably unappealing to him,” says his wife, “that he started to work harder.” Eisman traveled all over Europe and the United States searching for people willing to invest with him and found exactly one: an insurance company, which staked him to $50 million. It wasn’t enough to create a sustainable equity fund, but it was a start. Instead of money, Eisman

But increasing the amount of equity finance in an economy is easier said than done: it is a project that would take decades rather than years. Some of the barriers are institutional: outside of the very small world of venture capital (of which more later) and the even smaller and newer field of equity crowdfunding, most businesses do not raise equity, and most financial institutions do not provide it. There are established agencies that can rate the creditworthiness of even quite small businesses, and algorithms to allow banks to quickly and cheaply decide whether to lend to them. Nothing similar exists for equity investment, and the equivalent analytical task (working out a company's likely future value, rather than its likelihood of servicing a fixed debt) is more complex. And cultural factors stand in the ways too: despite a very elegant financial economics theorem that shows that business owners should be indifferent between equity and debt finance, for many small business owners there seems a cognitive and cultural bias against giving away equity.

In recent years, annual trading in stocks—necessarily creating, by reason of the transaction costs involved, negative value for traders—averaged some $33 trillion. But capital formation—that is, directing fresh investment capital to its highest and best uses, such as new businesses, new technology, medical breakthroughs, and modern plant and equipment for existing business—averaged some $250 billion. Put another way, speculation represented about 99.2 percent of the activities of our equity market system, with capital formation accounting for 0.8 percent.

Here are my simple rules for identifying market tops and bottoms: 1. Market tops are relatively easy to recognize. Buyers generally become overconfident and almost always believe “this time is different.” It’s usually not. 2. There’s always a surplus of relatively cheap debt capital to finance acquisitions and investments in a hot market. In some cases, lenders won’t even charge cash interest, and they often relax or suspend typical loan restrictions as well. Leverage levels escalate compared to historical averages, with borrowing sometimes reaching as high as ten times or more compared to equity. Buyers will start accepting overoptimistic accounting adjustments and financial forecasts to justify taking on high levels of debt. Unfortunately most of these forecasts tend not to materialize once the economy starts decelerating or declining. 3. Another indicator that a market is peaking is the number of people you know who start getting rich. The number of investors claiming outperformance grows with the market. Loose credit conditions and a rising tide can make it easy for individuals without any particular strategy or process to make money “accidentally.” But making money in strong markets can be short-lived. Smart investors perform well through a combination of self-discipline and sound risk assessment, even when market conditions reverse.

Here’s a Reader’s Digest version of my approach. I select mutual funds that have had a good track record of winning for more than five years, preferably for more than ten years. I don’t look at their one-year or three-year track records because I think long term. I spread my retirement, investing evenly across four types of funds. Growth and Income funds get 25 percent of my investment. (They are sometimes called Large Cap or Blue Chip funds.) Growth funds get 25 percent of my investment. (They are sometimes called Mid Cap or Equity funds; an S&P Index fund would also qualify.) International funds get 25 percent of my investment. (They are sometimes called Foreign or Overseas funds.) Aggressive Growth funds get the last 25 percent of my investment. (They are sometimes called Small Cap or Emerging Market funds.) For a full discussion of what mutual funds are and why I use this mix, go to daveramsey.com and visit MyTotalMoneyMakeover.com. The invested 15 percent of your income should take advantage of all the matching and tax advantages available to you. Again, our purpose here is not to teach the detailed differences in every retirement plan out there (see my other materials for that), but let me give you some guidelines on where to invest first. Always start where you have a match. When your company will give you free money, take it. If your 401(k) matches the first 3 percent, the 3 percent you put in will be the first 3 percent of your 15 percent invested. If you don’t have a match, or after you have invested through the match, you should next fund Roth IRAs. The Roth IRA will allow you to invest up to $5,000 per year, per person. There are some limitations as to income and situation, but most people can invest in a Roth IRA. The Roth grows tax-FREE. If you invest $3,000 per year from age thirty-five to age sixty-five, and your mutual funds average 12 percent, you will have $873,000 tax-FREE at age sixty-five. You have invested only $90,000 (30 years x 3,000); the rest is growth, and you pay no taxes. The Roth IRA is a very important tool in virtually anyone’s Total Money Makeover. Start with any match you can get, and then fully fund Roth IRAs. Be sure the total you are putting in is 15 percent of your total household gross income. If not, go back to 401(k)s, 403(b)s, 457s, or SEPPs (for the self-employed), and invest enough so that the total invested is 15 percent of your gross annual pay. Example: Household Income $81,000 Husband $45,000 Wife $36,000 Husband’s 401(k) matches first 3%. 3% of 45,000 ($1,350) goes into the 401(k). Two Roth IRAs are next, totaling $10,000. The goal is 15% of 81,000, which is $12,150. You have $11,350 going in. So you bump the husband’s 401(k) to 5%, making the total invested $12,250.

A classic LBO works this way: An investor decides to buy a company by putting up equity, similar to the down payment on a house, and borrowing the rest, the leverage. Once acquired, the company, if public, is delisted, and its shares are taken private, the “private” in the term “private equity.” The company pays the interest on its debt from its own cash flow while the investor improves various areas of a business’s operations in an attempt to grow the company. The investor collects a management fee and eventually a share of the profits earned whenever the investment in monetized. The operational improvements that are implemented can range from greater efficiencies in manufacturing, energy utilization, and procurement; to new product lines and expansion into new markets; to upgraded technology; and even leadership development of the company’s management team.

I strongly believe in the fact that there’s still plenty of money and plenty of private equity capital available around the globe. What are in short supply are great entrepreneurs and great teams. A trading opportunity or a company’s biggest challenge is and has always been the team behind it. There’s enormous change under way in every facet of the world. Some is technology driven, some is market driven. All that change creates unprecedented opportunity, but to take full advantage of such opportunities I mostly focus on the team. The right teams and right people behind those opportunities always win. There is no secret sauce. Trading and investing has, in my experience, boiled down to building relationships and exchanging value. It consists of striking the right balance between backing and interacting with the right teams with the right business model at the right time and with the right amount of money.

We're all equal before a wave. —Laird Hamilton, professional surfer In 2005, I was working as an equity analyst at Merrill Lynch. When one afternoon I told a close friend that I was going to leave Wall Street, she was dumbfounded. "Are you sure you know what you're doing?" she asked me. This was her polite, euphemistic way of wondering if I'd lost my mind. My job was to issue buy or sell recommendations on corporate stocks—and I was at the top of my game. I had just returned from Mexico City for an investor day at America Movíl, now the fourth largest wireless operator in the world. As I sat in the audience with hundreds of others, Carlos Slim, the controlling shareholder and one of the world's richest men, quoted my research, referring to me as "La Whitney." I had large financial institutions like Fidelity Investments asking for my financial models, and when I upgraded or downgraded a stock, the stock price would frequently move several percentage points.

Data sliced sufficiently finely begin once again to tell stories. The top 1 percent of the income distribution—representing household incomes in excess of roughly $475,000—comprises only about 1.5 million households. If one adds up the numbers of vice presidents or above at S&P 1500 companies (perhaps 250,000), professionals in the finance sector, including in hedge funds, venture capital, private equity, investment banking, and mutual funds (perhaps 250,000), professionals working at the top five management consultancies (roughly 60,000), partners at law firms whose profits per partner exceed $400,000 (roughly 25,000), and specialist doctors (roughly 500,000), this yields perhaps 1 million people. These are surely not all one-percenters, but they are all plausibly parts of the top 1 percent, and this group might comprise half—a sizable share—of 1 percent households overall. At the very least, the people in these known and named jobs constitute a material, rather than just marginal or eccentric, part of the top 1 percent of the income distribution. They are also, of course, the people depicted in journalistic accounts of extreme jobs—the people who regularly cancel vacation plans, spend most of their time on the road, live in unfurnished luxury apartments, and generally subsume themselves in work, encountering their personal lives only occasionally, and as strangers.

What’s an IPO, exactly? A company decides it wants to “float” part of its equity on the public markets, allowing employees and founders to sell private shares to pay them off for years of service, as well as sell shares out of the corporate treasury to have some money in the bank. Large investment banks (such as my former employer Goldman Sachs) form what’s called a “syndicate” (“mafia” might be a better term) wherein they offer to effectively buy those shares from Facebook, and then sell them into the capital markets, usually by pushing it via their sales force onto wealthy clients or institutional investors. That syndicate either guarantees a price (“firm commitment”) or promises to get the best price it can (“best effort”). In the former case, the bank is taking real execution risk, and stands to lose money if it doesn’t engineer a “pop” in the stock on opening day. To mitigate the risk, the bank convinces the offering company to expect a lower price, while simultaneously jacking up what real price the market will bear with a zealous sales pitch to the market’s deepest pockets. Thus, it is absolutely jejune to think that a stock’s rise on opening day is due to clamoring and unexpected interest. Similar to Captain Renault in Casablanca, Wall Street bankers are shocked—shocked!—that there should be such a large and positive price dislocation in the market they just rigged.

Statisticians say that stocks with healthy dividends slightly outperform the market averages, especially on a risk-adjusted basis. On average, high-yielding stocks have lower price/earnings ratios and skew toward relatively stable industries. Stripping out these factors, generous dividends alone don’t seem to help performance. So, if you need or like income, I’d say go for it. Invest in a company that pays high dividends. Just be sure that you are favoring stocks with low P/Es in stable industries. For good measure, look for earnings in excess of dividends, ample free cash flow, and stable proportions of debt and equity. Also look for companies in which the number of shares outstanding isn’t rising rapidly. To put a finer point on income stocks to skip, reverse those criteria. I wouldn’t buy a stock for its dividend if the payout wasn’t well covered by earnings and free cash flow. Real estate investment trusts, master limited partnerships, and royalty trusts often trade on their yield rather than their asset value. In some of those cases, analysts disagree about the economic meaning of depreciation and depletion—in particular, whether those items are akin to earnings or not. Without looking at the specific situation, I couldn’t judge whether the per share asset base was shrinking over time or whether generally accepted accounting principles accounting was too conservative. If I see a high-yielder with swiftly rising share counts and debt levels, I assume the worst.

Construction finally began that winter, and by early 1974 Syncrude’s Mildred Lake site bustled with 1,500 construction workers. But the deal remained tentative as cost estimates grew beyond the initial $1.5 billion to $2 billion or more and the federal government’s new budget arrived with punitive new taxes for oil and gas exports. Then, in the first week of December, one of the Syncrude partners, Atlantic Richfield, summarily quit the consortium, leaving a 30 percent hole in its financing. A mad scramble ensued in search of a solution. Phone calls pinged back and forth between government officials in Edmonton and Ottawa. Finally, on the morning of February 3, 1975, executives from the Syn-crude partner companies and cabinet ministers from the Alberta, Ontario and federal governments met without fanfare and outside the media’s brightest spotlights at an airport hotel in Winnipeg to negotiate a deal to save the project. Lougheed and Ontario premier Bill Davis both attended, along with their energy ministers. Federal mines minister Donald Macdonald represented Pierre Trudeau’s government, accompanied by Trudeau’s ambitious Treasury Board president, Jean Chrétien. Macdonald and Davis, both Upper Canadian patricians in the classic mould, were put off by Lougheed’s blunt style. By midday, the Albertans were convinced Macdonald would not be willing to compromise enough to reach a deal. Rumours in Lougheed’s camp after the fact had it that over lunch, Chrétien persuaded the mines minister to accept the offer on the table. Two days later, Chrétien rose in the House of Commons to announce that the federal government would be taking a 15 percent equity stake in the Syn-crude project, with Alberta owning 10 percent and Ontario the remaining 5 percent. In the coming years, it would be Lougheed, with his steadfast support and multimillion-dollar investments in SAGD, who would be seen as the Patch’s great public sector champion. But it was Chrétien, “the little guy from Shawinigan,” whose backroom deal-making skills had saved Syncrude

Of course, I hope to identify the Micawbers in future but, even if I don’t, a rigorous regime of incremental investment, with drawdowns conditional upon clearly agreed project milestones, will better protect all concerned.

Keynes had been appointed to the board of the National Mutual, one of the oldest institutions in the city, in 1919.107 He had served as chairman of the insurer, and helped manage its investment portfolio from 1921. That portfolio lost £641,000 ($61 million), an enormous sum of money in 1937. While Keynes was recuperating from a heart attack, F. N. Curzon, the acting chairman of the insurer called him to account for the loss.108 Curzon and the board criticized Keynes’s investment policy of remaining invested in his “pet” stocks during the decline.109 In a response to Curzon in March 1938, Keynes wrote:110 1. I do not believe that selling at very low prices is a remedy for having failed to sell at high ones. . . . As soon as prices had fallen below a reasonable estimate of intrinsic value and long-period probabilities, there was nothing more to be done. It was too late to remedy any defects in previous policy, and the right course was to stand pretty well where one was. 2. I feel no shame at being found owning a share when the bottom of the market comes. I do not think it is the business, far less the duty, for an institutional or any other serious investor to be constantly considering whether he should cut and run on a falling market, or to feel himself open to blame if shares depreciate on his hands. . . . An investor is aiming, or should be aiming, primarily at long-period results, and should be solely judged by these. . . . The idea that we should all be selling out to the other fellow and should all be finding ourselves with nothing but cash at the bottom of the market is not merely fantastic, but destructive of the whole system. 3. I do not feel that we have in fact done particularly badly. . . . If we deal in equities; it is inevitable that there should be large fluctuations.

We should also have insisted that the company invite other investors at that point, rather than our chasing the original investment so aggressively. Easy in retrospect, isn’t it?

The study findings show that genetics has a similar role in acquiring financial wealth, explaining about one-third of the decisions, as found in the twin studies. The role of genetics is very high (over 50 percent) in educational level attained, but plays no role in the equity portion of the portfolio. The genetic role for stock market participation is nearly 14 percent. Overall, the study illustrates that a person’s genes has an impact on their financial decisions.

Compared to females from a same-sex twin, the study concludes that female twins from an opposite-sex pair: allocates more of her financial assets to equity; invests in a higher-risk portfolio, as measured by return volatility; and allots a higher proportion to individual stocks relative to mutual funds.

Meanwhile, on Raghav’s wish list was a film company. He was a Hindi film buff, but he was not in any way star-struck. He simply thought it was a good business idea, and that the time was right. Vandana, who had a lot of connections in the film industry, was to be a part of the venture. Raghav launched the film company as a personal venture, though TV18 was a minority investor, with a holding of 20 per cent. In June, the Indian Film Company raised Rs 400 crore at London’s Alternative Investment Market, much to Raghav’s amazement. ‘Almost any guy with even half a track record and a gleam of new economy, media or technology in his eye could go to London, float a company which hardly did anything, probably even if revenues were zero, and pick up equity. We did exactly that with our film fund. We had no track record in the film business. Zero.’ But investors were more than willing to throw money around in 2007.

Investment wisdom, however, begins with the realization that long-term returns are the only ones that matter. Investors who can earn an 8 percent annualized return will multiply their wealth tenfold over the course of 30 years, and if they have half a brain, they will care little that many days, or even years, along the way their portfolios will suffer significant losses. If they are, in fact, anguished by the bad days and years, they can at least comfort themselves that the rewards of equity ownership are paid for in the universal currencies of financial risk: stomach acid and sleepless nights.

Having “extra” capital gives you a cushion for when outcomes do not in fact follow your plan. Moreover, it increases your optionality—if you need to invest in growth, you can do much more without having to go through the time-consuming process of raising another round. As Mariam Naficy, CEO of Minted, told me, “Act like you’ve got half the amount you have in the bank because you’ve got to factor in all the failures and all the optimizations that kill great entrepreneurs and businesses all the time. Both of us know so many people who had good ideas and were on the right track, but just ran out of money.” At both PayPal and LinkedIn, we raised large financing rounds right before a market meltdown (2000, 2008), and we sure were glad we did. In the case of PayPal, that money allowed us to keep growing during the dot-com bust; without it, we wouldn’t have made it to our IPO. In the case of LinkedIn, the situation wasn’t as dire, but I realized that the value of the optionality from additional funding far outweighed the potential negatives of equity dilution.

What does this mean in practical terms? Let’s keep things simple, ignore private equity and commercial real estate, and focus just on the broad stock and bond market. You might buy three funds: an index fund offering exposure to the entire U.S. stock market, an index fund that will give you exposure to both developed foreign stock markets and emerging stock markets, and an index fund that owns the broad U.S. bond market. Suppose we were aiming to build a classic balanced portfolio, with 60 percent in stocks and 40 percent in bonds. Here are some possible investment mixes using index funds offered by major financial firms:     40 percent Fidelity Spartan Total Market Index Fund, 20 percent Fidelity Spartan Global ex U.S. Index Fund and 40 percent Fidelity Spartan U.S. Bond Index Fund. You can purchase these mutual funds directly from Fidelity Investments (Fidelity.com).     40 percent Vanguard Total Stock Market Index Fund, 20 percent Vanguard FTSE All-World ex-US Index Fund and 40 percent Vanguard Total Bond Market Index Fund. You can buy these mutual funds directly from Vanguard Group (Vanguard.com).     40 percent Vanguard Total Stock Market ETF, 20 percent Vanguard FTSE All-World ex-US ETF and 40 percent Vanguard Total Bond Market ETF. You can purchase these ETFs, or exchange-traded funds, through a discount or full-service brokerage firm. You can learn more about each of the funds at Vanguard.com.     40 percent iShares Core S&P Total U.S. Stock Market ETF, 20 percent iShares Core MSCI Total International Stock ETF and 40 percent iShares Core U.S. Aggregate Bond ETF. You can buy these ETFs through a brokerage account and find fund details at iShares.com.     40 percent SPDR Russell 3000 ETF, 20 percent SPDR MSCI ACWI ex-US ETF and 40 percent SPDR Barclays Aggregate Bond ETF. You can invest in these ETFs through a brokerage account and learn more at SPDRs.com.     40 percent Schwab Total Stock Market Index Fund, 20 percent Schwab International Index Fund and 40 percent Schwab Total Bond Market Fund. You can buy these mutual funds directly from Charles Schwab (Schwab.com). The good news: Schwab’s funds have a minimum initial investment of just $100. The bad news: Unlike the other foreign stock funds listed here, Schwab’s international index fund focuses solely on developed foreign markets. Those who want exposure to emerging markets might take a fifth of the money allocated to the international fund—equal to 4 percent of the entire portfolio—and invest it in an emerging markets stock index fund. One option: Schwab has an ETF that focuses on emerging markets.

Average Annual Returns of Actively Managed Mutual Funds Compared with S&P 500 20 years, Ending June 30, 2012 Sources: Lipper, Wilshire, and The Vanguard Group. S&P 500 Index Fund 8.34% Average Active Equity Mutual Funda 7.00% Shortfall +1.34%

The Upside of Heuristics The economist Harry Markowitz won the 1990 Nobel Prize in Economics for developing modern portfolio theory: his groundbreaking “mean-variance portfolio optimization” showed how an investor could make an optimal allocation among various funds and assets to maximize returns at a given level of risk. So when it came time to invest his own retirement savings, it seems like Markowitz should have been the one person perfectly equipped for the job. What did he decide to do? I should have computed the historical covariances of the asset classes and drawn an efficient frontier. Instead, I visualized my grief if the stock market went way up and I wasn’t in it—or if it went way down and I was completely in it. My intention was to minimize my future regret. So I split my contributions fifty-fifty between bonds and equities. Why in the world would he do that?

YOU HAVE some money in a savings bank; you are contributing to your company’s 401( k) at the maximum rate allowed; you have equity in a home, if you want it; you’ve tied up $ 1,000 in bulk purchases of tuna fish and shaving cream; you have lowered your auto and homeowner’s insurance premiums by increasing your deductibles; you have adequate term life insurance; you’ve paid off all your 18% installment loans and insulated your attic—you have done, in short, all the things that scream to be done. Now what?

A very basic thing to know about your money is that, over the really long run, people who buy equities—stocks—will almost surely make a lot more money (if they’re at all sensible in how they do it) than people who make “safer” investments.

Hedge and private equity funds do not care about the market and are not judged by the market. Their clients have very high expectations; they want their investments to grow in value every year without fail.

Warren Buffett complains about it every year; it is a lot harder to manage billions than millions. The investable market is much smaller.

the smaller hedge funds tend to do better performance-wise than the large funds. Their management fees are not enough to keep the doors open so they have to make good returns and take those incentive fees, creating a sort of Darwinian eat-what-they-cook situation. And it is just easier to invest a tiny fund (again, just ask Warren Buffett).

A PE fund usually has a finite life of ten years, by which time investors expect fund investments to have been realised with all capital and profits returned in cash.

Like most PE funds, the CHAMP funds are structured as ten-year limited life funds, during which the GP has five years in which to invest the committed capital. And not until 75 per cent of the fund’s allocated capital has been invested (and/or committed to be invested) is the GP allowed to begin marketing another fund.

The typical PE fund is expected to be fully invested by year five and thereafter the management fees decline rapidly. So by year four of the fund’s life the GP will be wanting to give serious thought to the prospects for raising another fund.

Lesson 9 in Part One of this book—timing is more important than analysis—was developed from my experiences with early VC investing, and in particular our experience in the 1990s with the dotcom boom and bust. But it is a lesson that may apply just as aptly to fundraisings.

Harbour-Vest’s demonstration of faith was key: faith in the Australian economy, in the thesis that buy-outs would indeed work well in Australia, and in the integrity and quality of the PE managers and the supporting infrastructure of lawyers, accountants, investment banks and lenders, all necessary to a long-term viable and sustainable PE sector.

HTT avoids walking the same tightrope that KKR did by seeding their deals across all their funds. Assuming that their LPs are not invested in every fund the firm offers, the brunt of any losses is dispersed across the many LPs in all the firm’s offered funds.

Stock investors should expect periods of time when equities do not make money after inflation. It is the nature of investment risk. This is also why time in the market is critical to stock investors. In the long run, equities have outpaced inflation by a wide margin, and they are expected to remain one of the best real return investments in the future. You have to stay invested during all market conditions to benefit from the gains. U.S.

The message is clear: in the long run, stock returns depend almost entirely on the reality of the investment returns earned by our corporations. The perception of investors, reflected by the speculative returns, counts for little. It is economics that controls long-term equity returns; emotions, so dominant in the short-term, dissolve.

I would add that I am not persuaded that international funds are a necessary component of an investor’s portfolio. Foreign funds may reduce a portfolio’s volatility, but their economic and currency risks may reduce returns by a still larger amount. The idea that a theoretically optimal portfolio must hold each geographical component at its market weight simply pushes me further than I would dream of being pushed. (I explore the pros and cons of global investing in Chapter 8.) My best judgment is that international holdings should comprise 20 percent of equities at a maximum, and that a zero weight is fully acceptable in most portfolios.

According to the media and other stock market "experts," the equities bull is forever hiding just around that next corner on Wall Street. But millions of investors who listened to the experts back in 1998-2001 about "the New Economy" get hammered in the stock market and are still trying to get back to even. The smart investor looks for opportunities to acquire value on the cheap, with one eye out for a dynamic change in the offing that might make that investment even more valuable.

Have clear objectives, understand your risk profile and return requirements, allocate your investments in asset classes (equity,

such as the fact that the Indian equity market will generate about 12-15% annual return in INR, the INR will depreciate in future, etc.

Dividend received from a mutual fund is exempt from tax for the investor. However, other than equity oriented MF schemes, Dividend Distribution Tax (DDT) is required to be paid by the MF schemes issuing the dividend. Please refer to DDT for more details.

A minimum allocation of 65% in equity shares of domestic companies is required to consider any MF scheme as an equity oriented MF for taxation purpose.

An equity investor buys and holds the shares of stock in a company in anticipation of dividends and/or capital gains.

may invest in the equity shares of the company under the FDI scheme of the Government of India.

Any buy or sell transaction in the shares of a company listed in a recognized stock exchange is subject to STT. The mutual funds with at least 65% allocation to investment in shares of companies (equity) are considered as an equity mutual fund and are also subject to STT. The

The taxation of capital gains on sale of equity or equity mutual fund is different and depends on whether STT has been paid or not.

Listed equity shares or equity MF (STT is paid) Not Taxable - Exempt 15% Listed equity shares (STT is not paid) Lower of 20% with indexation or 10% without indexation Taxable as per slab rate Unlisted equity shares (STT is not paid) 20% with indexation Taxable as per slab rate Equity MF sold until July 10, 2014 (STT is not paid) Lower of 20% with indexation or 10% without indexation Taxable as per slab rate Equity MF sold after July 10, 2014 (STT is not paid) 20% with indexation Taxable as per slab rate Let us calculate and understand the taxation with the examples given below.

media continued to scare investors, as

investors. I have been a student of the philosophy of value investing, which of course was established, executed, and popularized by superinvestors Benjamin Graham, Warren Buffet, and Seth Klarman among

investing to the task of identifying profitable investments in the technology sector. The

Mr. Ankur from USA invested in an equity mutual fund that is an overseas fund of funds. He sold the fund after 10 months of investment for a profit of Rs. 1,000,000 without paying STT. As equity mutual fund was sold before 12 months, the capital gain would be a STCG. However as STT was not paid, STCG would be included in the income and taxed as per the income tax slab rates.

am managing my own portfolio of investments, as well as consulting with other independent investment managers.

Mr. Keyur from Australia sold an equity mutual fund subject to STT after 18 months of purchase for a gain of Rs. 1,000,000. As STT is paid and the holding period is more than 12 months, the gain would be a LTCG and would be exempt from income tax in India.

Companies can also rent or buy equities that exist in consumers’ minds. Donald Trump no longer significantly invests in constructing new buildings, instead he rents his name to people who do and want to attach the mindspace associated with the Trump brand to their building.

U.S. Bancorp & Capital Trust is a licensed Investment Bank and Statutory Trust specialized in assisting entrepreneurs and businesses across the world with equity investments, management consulting, financial advisory services and establishment of investment banks and capital protected private equity funds.

A great business will show a consistent return on equity (ROE) above 20%.

Rule 1—Low debt Rule 2—High current ratio Rule 3—Strong and consistent return on equity Rule 4—Appropriate management incentives.

OUR RICHES ARE IN HEAVEN Heaven is also precious to us because it is where our riches are. Matthew 6:19–21 says, “Do not lay up for yourselves treasures on earth, where moth and rust destroy and where thieves break in and steal; but lay up for yourselves treasures in heaven, where neither moth nor rust destroys and where thieves do not break in and steal. For where your treasure is, there your heart will be also.” What a statement! How can we lay up for ourselves riches in heaven? The only way we can get our treasures from here to there is by investing in God’s work. We can’t take our money with us to heaven, or our homes, cars, boats, or articles of clothing. But we can take other people with us by investing our lives and resources in the spreading of God’s kingdom. The only things going from earth to heaven are human souls and the Word of God. So if you’re trying to build equity in heaven, invest your time, talents, and treasure in the Word of God and the souls of men and women who need the message of Jesus Christ.

After twelve months of going nowhere, the investment committee loses patience and takes over the deal more directly. Organic is sold to a special-purpose acquisition company (or SPAC) listed on local stock exchanges. A SPAC is a cash box with a blank check raised from investors to buy a business within a set timeframe as determined by the executives who run the vehicle. Often, as the vehicle is publicly listed, a SPAC can strike a deal at a higher purchase price than a private equity firm would be willing to pay. Its investors will accept a lower return than they would from a private equity fund, often because the investment is marketed to them as a safer or more straightforward bet. In this case, the SPAC is run by a former senior executive of a French food retail chain and a major hedge fund seeking to expand into the private equity industry. Their joint sector and finance experience is convincing enough for the SPAC’s investors to agree that the transaction is likely to be worthwhile. The

He was a financial titan who had built a powerful and lucrative investment firm before a lengthy ban from the securities industry for insider trading and a short prison sentence ended his career. He emerged from incarceration to devote the rest of his life to philanthropy and politics, a transformation that did not convince some of his critics. He was perhaps not the ideal role model, but his advice was always crisp and helpful to recall at the right moment.