Book review: The Thoughtful Investors.

A book that must be read by investors who prefer their own research and have been struggling to find a book with examples of Indian companies

In the subhead of Author’s Note in ‘The Thoughtful Investor’, Basant Maheshwari writes: “Most people can’t figure out ki paisa jaldi banana hai ya jyada?” (Meaning, ‘whether to make quick money or lots of money?’). 

This simple sentence can make one think about the purpose of investment. As this can lay the cornerstone of the investment philosophy and allow perspective. 

Basant Maheshwari’s background is interesting and there are many lessons for all investors. Most importantly it tells us about his grit. A man who saw the double whammy of luck, once in the form of losing his business to government and then when on suggestion from his friend when he tried learning software in late 1999, the technology bubble went bust. Many people would have given up at this point. On the other hand, Maheshwari created multiple source of earnings by teaching, getting into mutual fund distribution and stock investments. 

The book has seven segments distributed over its 430 pages, it targets serious investors and deals with nearly all the topic that an investor would want think or know about. While the editing could have been better making the reading flow smooth and interesting. But the biggest benefit for an Indian investor is references to Indian stocks and examples which can be easily related to. 

For example when he explains that wealth creation needs patience, the illustration is so apt that any investor can check up on the Indian stocks and connect to it instantly, for example: “A point to consider is Nestle whose stock went nowhere from 1999 to 2005 before rising ten times in the next eight years and Asian Paints which is more than 2000 times over the last twenty nine years and was up just 3 times for the period 1992 to 2002. Both these companies were doing well despite the stagnating stock prices and hence their investors were in the long term, adequately rewarded for the waiting period.” 

One of the weakness would in the books would perhaps be its history lessons. While all the usual suspects are there but none are from our own backyard: Harshad Mehta, Ketan Parekh, or 2008 crash. Considering that the book was catering to Indian investors it would have been excellent to have details of these three events as part of history.   

In the book Maheshwari also talks about how he has made his money by staying away from pharmaceuticals. Now some investors may think, that was not the wise decision but he has defended his rationale well. He says, "Personally, I think that a) at best a froup of pharmaceutical businesses can generate an annualised return of 30% which we can get from other opportunities as well and b) Warren Buffett become the richest investor in the world by ignoring the pharmaceutical stocks in US which is as a country was the mother of all research & development activities of any kind." Another way of looking at it would be that an investor should stay in their area of competence rather than making investment without having a full understanding of the business. 

The book also provides a brief checklist for investors who like to do their own research for reference. It’s a book worthy of reading for any investor if they plan to make money by participating in stock markets.