What’s a coffee can portfolio
What’s a coffee can portfolio
Namaskar dosto and welcome to another exciting podcast by Angel Broking.
Aaj ke podcast mein hum discuss karenge a type of investing called Coffee Can Investing. This type of investing impacts the way you choose your investments, your risk appetite and your investment horizon.
To kya hai yeh coffee can investing?
The term coffee can investing comes from a centuries old practice. It has its roots in America. Purane dino mein log apne valuable belongings ko coffee can mein ikatta kar ke mattress mein chupa lete the. They kept gathering and kept saving - for the proverbial rainy day.
Kabhi kabhi the rainy day never arrived, or arrived after so many years, that people forgot that they even had cash or (any other precious, saleable item) in the coffee can hidden within their mattress. Sometimes they might chance upon it years and years later. Bahut khush hote the, upon finding the coffee can savings after many years. Jaise aap bhi kabhi kabhi freshly washed jeans ko pehen ke bahar jab jaate ho and then suddenly pocket mein you find Rs 100. Lekin these were life savings, so their delight might have been that much more.
The chances are ki agar in logon ko yaad tha, ki coffee can mein paise ya koi dusre valuables pade hai, they might have spent it. They saved it and forgot it and therefore had the chance to enjoy it later.
Coffee Can Investing mein yeh “save it and forget it” motto use kiya jata hai.
How is coffee can investing different?
Maine shuruaat mein hi bataya tha ki coffee can investing mein, selection criteria, investment term aur risk appetite dusre investments se kaafi different hai.
Pehle discuss karte hai investment horizon
The investment term, as you may have guessed from the origins of coffee can investing, is long term. Very long term. 10 years se zyaada type long term. Your corresponding financial goals will usually be purchasing a home, funding the education of children, or a stress free retirement - well, at least a financially stress free retirement.
Second discuss karenge risk exposure
Since aap itne long term ke liye invest kar rahe ho, the risk too plateaus out because short term volatility is unlikely to affect the long term trajectory of the stock graph, provided of course aap ne apna selection theek se kiya hai. Look at the stock price graphs of most of the large cap companies. Aapko zaroor dikhegi ki zyaada tar, when you zoom out to a 7 year and 10 year view, stock price graph upward slope rehta hai - even if short term mein, stock price graph mein bahut upar-neeche ...zigzagging… that is volatility… rehta hai.
Third difference hai selection process
Aapko apne selections pe bhi dhyan dena hota hai. Mujhe yaad hai ki maine 1 minute pehle bola that the risk plateaus out lekin hear me out. You need to select companies that display stability and potential for good returns in the long term. They should have a sustainable business. Something fad-based might not work for a coffee can portfolio.
Selection process mein ek aur baat aur dhyaan dena hai and that is the number of stocks.
Why develop a coffee can portfolio?
Coffee Can investing is advocated by a lot of famous investors. Some of them are huge advocates of long term investing - and thus the famous quote: If you are not thinking of owning a stock for 10 years, don’t even think about owning it for 10 minutes
A host of books have been published on the subject, including humari india mein, there is a book called Coffee Can Investing - The low risk road to stupendous wealth. It is a national best seller, or so it says on the cover. Kaafi log iss concept mein interested hai, it seems.
Coffee can investing mein kai benefits hai that work for the average investor and that is probably the reason for its popularity.
Benefit number 1 - lower cost of investment
The fees and charges involved with a higher turnover of investments are reduced. You buy and sell once in 10 years versus every few months or years toh aapko yeh saare fees aur charges sirf ek baar barna hota hai.
There are transaction costs involved with every investment transaction. Iske upar aapko financial advisor bhi chahiye to help with your selections aur in ko bi payment ya commissions dena hota hai. This eats into your earnings. Long term mein yeh saare charges ko add up karne jayengein, toh it ends up being quite a large sum of money.
Benefit number 2 - less need for constant involvement
Since you have invested for the long term, aapko short term volatility pe hamesha dhyan dene ki zaroorat nahi hai. The portfolio does not need to be constantly and actively managed. In today’s employment landscape especially where many people do not get time for themselves, a hands-off investment approach could be a more useful investment solution than an approach that needs the investor to stay up to date with the market and the economy and countless other moving parts. Agar aapke naukri mein work-life balance ka sawal nahi hai, coffee can investing can be a great fix.
Benefit number 3 - comparatively lower risk
We already discussed a few minutes ago how the risk plateaus out in the long term. Also since you are handpicking only 20 stocks (which is the usual number in this investing style), you should ideally have time for more careful selection. Aur yeh bhi hai ki 20 stocks mein kaafi diversification hai toh risk mitigation by portfolio diversification bhi mil jata hai. Of course, yeh cheez pe dhyan dena while selecting
Benefit number 4 - comparatively lower taxes
Long term investments are subject to long term capital gains tax which stands at 10% versus the tax on short term capital gains, which stands at 15%. Aapko tax mein bhi 5% benefit mil jata hai.
Benefit number 5 - liquidity in a worst case scenario
Dost I read your mind and heard you thinking that “Phir FD PPF hi kar lete, agar 10 years ke liye invest kar rahe ho. Safer hai”. However, besides access to potentially higher returns due to stock market exposure, your stock market investments are also usually liquid. Of course the idea is to park your capital for 10 years, but should an emergency come along, kam se kam aapke pass koi option rahega right?
Dost yeh tha a quick look at coffee can investing. Yaad rakna ki the rules of stock market investing remain true here as well: consider your risk appetite; research your investments thoroughly; invest in line with your financial goals and investment horizon and lastly never lose sight of the fact that there are no guarantees on the stock market.
Jaane se pehle, ek baat yaad rakhiyega ke stock market investing mein risk hamesha rahega. This podcast has been made for educational purposes only and the investor must do his own research as well.
Aise aur interesting podcasts sunne ke liye humein follow karein via our youtube and other social media channels. Until then goodbye and happy investing!
Investments in the securities markets are subject to market risks. Read all the related documents carefully before investing.