Investing Chat with Alok Jain

Issue 0001, Feb 8 2021

“A journey of a 1000 miles begins with a single step” – Chinese proverb

A special journey begins today with the launch of acceler8– an investment newsletter which I wished to launch for a while now.

The mission of this newsletter is to bring the distilled wisdom of successful superinvestors to common man like you and me. There is no need to reinvent the investing wheel nor do we have the time to learn investing by committing all the mistakes ourselves.

Friends, here’s an humble attempt to present to you with interesting investing content: Investing insights, Superinvestor strategies, stock watchlists, investing chats with FinTwits & much more. Hope you will find it useful.

Keep Learning Happy Investing.

In the first issue, we have an investing chat with Alok Jain.

Alok Jain is the founder of Weekend Investing, a popular investing website and is quiet a popular FinTwit.

In his own words “I am a graduate from the Indian Institute of Technology Delhi (1991) and hold a Masters in Finance and an M.B.A. from University of Maryland USA (1995). I have been in the Indian stock markets since two and a half decades. I am passionate about building mechanical models to invest in the markets that can generate superior returns “

You can read more about him here

Ravi, Stock and Ladder: Hi Alok, Greetings. Firstly, a big thank you for accepting my request for an investing chat. I have been practicing momentum investing for a while now and I could not think of any other better person for learning a trick or two on momentum investing. First up, my favorite question: What brought you into the world of stock investing?

Alok, Weekend Investing: 

I would say it was luck by chance! Till the time I was in my engineering I had no idea what the stock market was. My father was an avid investor, but I never had much interest in that growing up.

Post my engineering I proceeded for further education to the US and that is where I got exposed to the world of finance through my education. Even then there was no real drive inside to be in the markets and as luck would have it just as I was finishing my MBA there was an opportunity that the National Stock Exchange was getting formed in India and they were inviting members with professional qualifications to start. So, I joined hands with a few investors and came back home to manage this. In a way it was a 1995 era start up!

Ravi, Stock and Ladder: Building on the first question, as an IITian, I am sure you will love “science” for its precision. And in the exact opposite spectrum is the imprecise “art” of investing. How did you come to terms with this polar opposite nature of these two worlds?

Alok, Weekend Investing: 

I could not. Ever. The exact reason for that is the love for logic and precision. I struggled for nearly two decades to try and understand and practice conventional investing but I failed.

It is out of these failures did the concept of non-discretionary / rule-based system approach come around for me.  Today I do not own a single stock that has not been bought due to some rule-based system.

Ravi, Stock and Ladder: When you talked about rules , remembered what Pablo Picasso had to say about rules

“ Learn the rules like a Pro, so that you can break them like an Artist”.

I guess breaking rules will be financially harmful for a momentum investor. Speaking of which, Alok Jain and Momentum investing are synonymous. Can you help some of our readers who may be unfamiliar understand what is “momentum investing “? Are there any books / blogs / author you would recommend for someone who want to learn about momentum investing?

Alok, Weekend Investing:

Momentum investing as described by the father of finance Eugene Fama is the biggest anomaly in the world of investing. Nobody really knows why it exists but it beats all other styles of investing hollow. Several academic papers have documented the same.

Momentum investing is a style of investing where the investment or exit decisions are made based on the price action of the stock versus conventional investing where the fundamental analysis of the stock or the industry along with the price position is the prime reason for selection or rejection.

Some pod-casts and presentations with examples are available here. Books like Dual Momentum by Gary Antonacci and others by A. Clenow are great start points. Blogs at AQR.com and Mebfaber.com are also great resources.

Ravi, Stock and Ladder: That is quiet a lot of information. I am sure, readers will find it useful. If someone is inspired by you story, I am sure there are many; what according to you are the key things to succeed as a momentum investor?

Alok, Weekend Investing:

Momentum investing is a logical and a true investing mechanism.  It busts all other styles because it is pure and it is unambiguous. This has to gel with your core life philosophy.  You will need to discover yourself and align with it if possible… sort of setting yourself free from the bonds of conventional thinking and letting go of our sense of control over things.

Ravi, Stock and Ladder: That was little heavy on logic and honestly slightly fuzzy to take in directly. Will ponder on that for more, meanwhile Corollary to the above, can you also tell us the key things not to do or the key mistakes to avoid to be successful as a momentum investor ?

Alok, Weekend Investing:

Momentum is counter intuitive… So, it will not allow you to succeed if you try to stay in both boats of conventional investing and momentum investing although I am sure there are rare experts who have managed that.

From my experience, I can say that you have to build this confidence and trust in momentum over time and that can be a slightly long time.

Ravi, Stock and Ladder: Very true. Everything valuable takes time and there are no overnight successes. Also thinking about the various adjectives used for momentum investing: Anomaly, Unconventional, counter intuitive. I am loving this.

Another of my favorite question. If a time machine was to take you back 25 years, what would you have done differently in your investing career

Alok, Weekend Investing: 

When I interact with the youngsters on Twitter and I do that a lot, I feel my generation has been left far behind on the learning curve in terms of speed of acquiring knowledge.

I see many who are yet to cross the age of 25 but possess more knowledge than those who may have spent that many years in actual practice. The free access to resources and the social media has caused this.

If I were to go back in time maybe I would not spend so much time trying to get conventional investing work for me and maybe start discount brokerage services few decades earlier 😊. 

I am a very “go with the flow” person, never planned much what I will do in life or had any specific goals, so I don’t get too excited or disappointed with what ever is happening. I believe that if I do the right things, the right things shall happen to me.

Ravi, Stock and Ladder: Discount brokerage services, phew! I did not see that coming. Incidentally, my good friend Vasanth Kamath, has a high regard for you as a successful smallcase publisher. Tell us something about your smallcase offering and how readers can benefit from the same

Alok, Weekend Investing:  

Vasanth is a great visionary. Meeting him was again my luck. In mid-2018 I sent a cold mail to Vasanth saying why don’t you invite SEBI advisors like me on your platform for a win-win situation. He listened and executed this amazing publisher platform and within two quarters I had rolled out my products as their first smallcase advisor.

I run a bunch of simple momentum investing smallcase which are suitable for retail investors in the 3-5lac or more portfolio size bracket and who are looking for market beating performance with the convenience of managing their portfolio with a weekly click.

One of our products the Mi ST ATH has been most popular that has clocked 47% CAGR in the last many years. The products are differentiated based on market sub segments they address and the risk profiles.  I lay a special emphasis on client service and try to make sure I can give the user an unmatchable experience.

Ravi, Stock and Ladder: Speaking of luck , Bruce Springsteen said “When it comes to luck, you make your own “. Alok, I think you made your own luck.

Last question, tell us about your interests outside the world of investing. And any message for wannabe DIY momentum investors.

Alok, Weekend Investing:  

I love my work so I really don’t look beyond that to stay entertained.  My other interests are studying global macro and the global monetary system as it stands at the edge of change.

I am pretty simple outside my work too. A beer and a good movie are all I need on a weekend night! FOR DIY momentum investors, jump in, experience it, you will not regret it!!

Thanks Alok, that was certainly insightful. Thanks for your time and wishing you the best.

Dear readers, hope you enjoyed reading this.

Happy investing.