Investment need not be boring all the time, you can relate with your investments and personal finance matters with pretty much anything you do on a daily basis. Why not Bollywood? In this article we have written about 6investment lessons you can learn from Bollywood movies – with examples
1. Cash shown on balance sheet might not exist
Lesson – Leel electricals owner of Lloyds brand sold its consumer business and Lloyds brand to Havells for Rs 1,600 crore & the company’s market cap reached Rs. 1200-1300 cr on the announcement of sale in October 2017.
The company’s management was able to siphon off the majority of the amount. The integrity of promoters do also matter.
Recently, Majesco limited sold its division for Rs 4455 cr & paid out Rs 2800 cr as interim dividend which was equal to company’s market share. Hence, one needs to look for red flags which occur.
2. Every investor has loser in his portfolio, very few have guts to talk about it in public
Movie – a still from 3 idiots movie, where the actor gives speech as he is the topper, but doesn’t understand meaning of words he is communicating in his speech.
Lesson – Any investor, no matter how hard due diligence is done there will be losers in the portfolio. Most of the managers that appear on public platforms elaborate only about their winners & how much returns winners have earned. Very few portfolio managers have the mental strength to talk about their mistakes & what they have done to correct them.
3. If someone promises returns too good to be true
Movie – a still from Phir Hera Pheri movie where Akshay Kumar describes a scheme to get rich quick to other 2 actors which eventually turns out to be a fraud.
Lesson – The Ponzi schemes have 2 things in common –
- They lure people for expectation of high returns
- The person/company who started it mostly runs away rich & away from justice
The Gujarat based Bitconnect, ran by Divyesh Darji promised interest of 10% per month for 1st 6 months & reduced as time increased. It eventually turned out it was multi level marketing (MLM) scheme. The fraud size is estimated to be $524 million to $12 billion.
The company tried to prove they were original by sponsoring bollywood event which paved the way for them to gather funds easily.
So, next time one promises returns too high then other similar instruments question seller about how they plan to earn abnormal returns. In most MLM schemes people don’t know how they will earn return, people are just focused on selling their product to buyer & then the next in the lower rank.
4. Beware of marketed stocks
Movie – a still from Welcome movie, where Nana Patekar as Uday sells potato (aloo) for a movie scene as he wants to become a star.
Lesson – What is your reaction to this headline?
“Rakesh Jhunjhunwala-owned Rare Enterprises buys 3 crore shares in JP Associates; stock spikes 14% intraday” (16 march, 2018)
“Let me also buy”.
Now consider some facts –
Rakesh Jhunjunwala listed portfolio size (where holding is above 1%) – Rs. 19,000 cr
Stake value bought on 16 March, 2018 – 55 cr.
This isn’t considering his wife Rekha stake & Rare enterprises listed company’s stake. So, a 55cr bet for him is a small bet with very low effect on capital of 19,000 cr.
The majority of the article will talk about it in isolation in absolute amount not in relative amount which is to context of total portfolio size. Many “FAMOUS” fund managers visit TV show & sell their holding to innocent people.
The recent case in point being CNBC anchor Hemant Ghai, who would buy before he recommended stock on TV & sold after recommendation was announced.
Link to Hemant Ghai case –
5. If a company has done successful M&A in past, it isn’t necessary next M&A would be successful too –
Movie – Student of year released in 2012 was success compared to student of the year 2 which was criticized widely.
Lesson – Mahindra & Mahindra’s first acquisition was a 100% stake in Gujarat Tractors Ltd, a fully-owned company of the Government of Gujarat. It was completed in 1999. After eight years, M&M acquired Punjab Tractor Ltd, making it the world’s largest tractor manufacturer.
They also acquired REVA Electric Car Company in 2010, SsangYong Motor Company in 2011, and a one-third stake in Mitsubishi Agricultural Machinery in 2015 to expand their investments worldwide.
The SsangYong Motor Company was purchased for Rs 2105 cr for 70% stake in 2010 in order to expand its car business.
But even after a decade of investments aggregating US $110 million company was unsuccessful in turning it around & decided to let it enter bankruptcy as it required another $400 million to be revived.
Hence, one needs to continuously monitor acquired company financials & key metrics to check management claims are justified or not. The quantum of M&A to company’s size also does matter.
6. There is no short cut to hard work & returns are clustered in nature –
Movie – Bahubali, was made on a budget of Rs 180 crore & recorded Rs 600 cr box office collections worldwide. The key point to note is that it took more than 4 years to shoot the 1st part of the movie.
Lesson – in stock market, companies & investors to do hard work which takes time to reap rewards. One needs to have patience & be able to digest volatility occurring during the period.
Also, the returns are often clustered. The returns of years occur in months or weeks, hence investing rewards patience. Effort in terms of research for idea generation could be 80% while output could be 20%. While, only 20% of output could actually make money.
Hence, investment process should be diligently followed (without frustration) and right allocation is key.
Balaji Amines stock price was more or less below Rs 600 for 13 years till July 2020, the 1 year returns are determining for the company. It shows clustering.
7. There will be always someone earning more returns than you did
Movie – still from 3 idiots where Aamir Khan tops the class & his other 2 friends are at the bottom, even though they didn’t hope to pass the exam, they did.
They were unhappy about friend becoming topper rather than being happy about getting passed.
Lesson – everyone tries to measure themselves on a relative basis. Comparing oneself relatively isn’t bad until one doesn’t get frustrated with oneself & changes his process completely without considering drawback of the process.
One should try to choose an appropriate benchmark with longer periods of time as shorter period markets can be irrelevant & show a rosy/ inaccurate picture.
Charts can lie – https://occaminvesting.co.uk/beware-graphs-bearing-outperformance/ . it explains how one can manipulate charts by changing X & Y axis titles & choosing time frame or method which shows higher returns.
“A picture is worth thousand words.” The picture shown above can be relevant in other situations too. This were the inferences I could derive from Bollywood movies which are popular. One can learn many investing lessons from outside investing world which are relevant.
https://www.collaborativefund.com/blog/ – describes such inferences. Do keep in mind – everything you read might not be relevant today, but as you accumulate more & more of it, it compounds & helps you become a better investor.
So next time, you are done watching a movie – ask yourself what lesson you learned from it. Keep your mind & horizon open, every movie has some learnings to be shared.
Finale – Even movie Titanic has a lesson to be preached. Be sure that your emergency fund savings are not locked in like in Titanic the lifeboats couldn’t be lowered. “A FAILURE PREACHES THOUSAND THINGS WHICH ARE OFTEN OVERLOOKED IN SUCCESS.”