April 13, 2024
Gautam Baid’s Secrets To Millions
5 Millionaire Habits Anyone Can Start Today With Gautam Baid
Recently, I had the honor of interviewing Gautam Baid, bestselling author of “The Joys of Compounding” and managing partner of Stellar Wealth Partners India Fund, which achieved a stunning 42% return in 17 months.
While he shared a wealth of investing insights and wisdom, he also shared something highly applicable to everyone for a more successful life, something I felt I should share with you immediately.
Every day, Gautam starts his day by journaling. This habit has helped him tremendously in his personal development and investing growth. He writes down five things in his personal journal:
- 3 things he's grateful for
- 3 things that will make today great
- 3 positive affirmations
- 3 highlights of the day
- 3 things learned from the day
For points 1-3, he writes them down in the morning before he starts his day. For points 4-5, he reflects by journaling again before sleep.
These are simple mental exercises we can do every day to improve our lives. You don’t need to be a millionaire to develop these habits. But having this habit over time can make you one, overtime. That’s the joy of compounding working in our lives.
“Trust me, when you do this every single day, for many, many years, over thousands of days, you can actually reflect. Go back to these writings, and then you realize just how far you’ve come along in your life.” — Gautam Baid
Thank you, Gautam, for accepting my interview invitation once again. Here’s the full interview episode for you to learn from Gautam directly.
In this episode, fund manager Gautam Baid shared his investing secrets on how to properly value any single company using the PE ratio, the true essence of ROIC (Return on Invested Capital) vs. WACC (Weighted Average Cost of Capital), companies’ share buyback practices, his views on cryptocurrency, his way of constructing a solid portfolio, the opportunities in the India stock market, as well as his secrets to living a joyful life of compounding.
Here is the summary of the learning points I took away from this in-depth interview.”
- Importance of Lifelong Learning: Gardam Bay emphasized the significance of continuous learning in investing. During a challenging phase in his career, he dedicated himself to reading extensively, which laid the foundation for his success as an investor.
- Defining a Good Quality Business: A good quality business is characterized by a return on capital significantly above its cost of capital, a sustainable competitive advantage, and ample reinvestment opportunities at high returns on capital.
- Valuation and P/E Ratios: Gardam recommends two white papers to understand the fair P/E ratio for stocks based on the interplay between return on invested capital (ROIC) and earnings growth. These papers help clarify the concept of justified P/E multiples.
- Stock Buybacks: Buybacks create value for shareholders if the stock is bought below intrinsic value. However, if stocks are bought at inflated prices, it can dilute shareholder value.
- ROIC vs. WACC: Gardam suggests using the long-term annual returns of the S&P 500 or a country’s stock market as a proxy for the cost of capital when evaluating investments.
- Portfolio Concentration: Gardam’s fund typically holds 20-25 stocks, with no single stock initially exceeding 10% at cost and individual industry exposure limited to 30% of the overall portfolio value.
- Indian Market Valuation: High valuations in the Indian stock market are attributed to limited supply of quality equities and a scarcity premium for well-governed companies.
- Crypto Investing: Gardam does not invest in cryptocurrencies due to their lack of cash flow generation and difficulty in valuation. He believes crypto is suitable for traders with good risk management discipline.
- Simplicity in Personal Finance: Gardam advocates for simplifying personal finances by focusing on a single investment, one house, and one bank account to enhance happiness and peace of mind.
- Daily Habits for Success: Gardam emphasizes staying away from market noise, writing daily to reflect on gratitude, affirmations, and lessons learned, and sharing knowledge to attract like-minded people into one’s circle.
