Financial Freedom

An objective take for a layman

- Chetan Laddha

@marwadimoney
 Agenda
01 Journey – 18k/month salary to 7Cr+ net worth – 15 years timespan with 0 inheritance

02 Proofs of Net-worth

03 Developing the pathway & methodology for Financial Freedom

04 Investing Framework for Equities

05 Investing Framework for Real Estate

06 Few Ideas of increasing Income

07 Further Wealth

08 Freedom. What is enough?

22/06/2023 2
Journey -18k to 7 CR+ - 15 years
 Journey
- Origins & Reading

- Initial Business Stints

- Job

- Real Estate + Job

- Investing + Job

- Trading + Job

- Financial Freedom

22/06/2023 4
Proofs of Net-worth
Don’t take any of my word if I have not done it myself.
 SHOW ME THE P&L !

EQUITY REAL ESTATE

- Investment Portfolio Type Place

- Trading PnL 2BHK Gandhinagar
- Contract Notes
2BHK Gandhinagar
3BHK Vadodara
Subex – 23X - from original buy
3BHK Pune
price – contract notes
2BHK Pune
Cadsys – 3X - shareholding
Land Dholera
pattern - 1.3% of equity

ITC – 2X

23/06/2023 6
 The Proofs

- Real Estate (Index 2 copies)

22/06/2023 7
A Roadmap to Financial Freedom
 JOB – LAUNCHPAD FOR FINANCIAL FREEDOM

“Job is a launchpad for you until you make another launchpad for yourself that you always
wanted and will enjoy living off it”

Achievable Launchpads:

A. Real Estate
B. Paper Money
C. Internet
D. JOB

Make yourself Antifragile keeping your job.

23/06/2023 9
 Progress by Creating Launchpads Make yourself Antifragile

LP1
Job LP1 + LP2
+
Risk taking +More Risk +
possible for Job can be + Further
LP1 taken Job Risk can be
taken

Don't think of retirement corpus, 4% etc right now. It creates a blockage. The world is very complex
adaptive system. Instead focus on increasing income, investment, etc.
Time for that will come – One mistake I made.

- Take a job – Explore your passions. Try a lot of stuff. Monetize them.
- Keep the job – Get a couple of real estate rents to back you up as a first launchpad.
- Keep the job – Focus on increasing your income.
- Keep the job – Increase your income & payoff original RE investments.
- Keep the job – Pursue your monetized hobby/ business till it grows / dividend investing.
- Keep the job – Work on own terms & Quit when you want
24/06/2023 10
 The Traits of Financially Free –Quick Run Through
Soft Aspects & The Grind

• Believe Money is good

• Started Early
• Not wasting 20s or 30s – Lesser time allotment for timepass.
• No Sloth & Hard work Readiness – Risk Taking
• Delayed Gratification – Doesn't mean you skimp at everything !
• Feedback Loop & Curious Mind. Being open to criticism.
• Acknowledging Luck & Unfair World

“Action begets Opportunity. Opportunities seized Beget Luck. Luck leads to Success “

22/06/2023 11
Earning Opportunities – Supplement Job
Income
 Increasing Income & Knowledge– Use 5-9 time wisely !

1. Switch Jobs - Cybersecurity, IT, Banking –Earlier the better.

2. Spouse – Best & Safest way to increase income 

3. Overseas Employment – 1st world countries

4. Online Business – Earn $ Save in Rs.

5. Freelance – 1000 ways to do it.

6. Don’t skimp on books, podcasts & valuable trainings.

“Don’t be married to your job. Married earlier instead”.

22/06/2023 13
Investing - Stock Picking Framework using Self
Study
 Equity Investing Framework for Layman
The way to win in stock market, according to Charlie Munger, is to work, work, work,
work and hope to have a few insights – Charlie Munger

A. Mental Models & Second level thinking

Association Tendency – Tips once worked will not always work from the tipster.

Anchoring Effect – Bahot gir gaya. Aur kitna girega ?

Social Proof : Sab le rahe hai. Fail conventionally than to succeed unconventionally.

Base rate neglect & Law of Small Numbers – Outliers exist. You might not be one. You can fooled by sample size.

Liking Tendency / Authority Bias – Like an investor and you find logic in whatever he/she says. Bad CEO wearing coat

Confirmation Bias & Sunken Cost – Buying what you analyse because you spent time on it

Contract Misreaction Syndrome – Price badh gaya, bech do (Fear of loss and bhaago)

Everything should be kept as simple as possible, but no

simpler. - Einstein
22/06/2023 15
 Equity Investing Framework for Layman
The way to win in stock market, according to Charlie Munger, is to work, work, work,
work and hope to have a few insights – Charlie Munger

B. Learning Resources – The preparation

Balance sheets - Language of business is accounting – You got to know basics !

Annual Reports – MD Statement, Business Future Outlook, Risks, Competition

CRISIL Reports on companies – Rating Agencies – Not for the recommendation.

References :

How to read a balance sheet – YouTube videos - FREE

Mock Company Analysis – Vijay Malik –FREE

Mock Annual Report Analysis - Vishal Khandelwal – FREE

Investment Thesis of Successful Investors - FREE

Everything should be kept as simple as possible, but no

simpler. - Einstein
29/06/2023 16
 Equity Investing Framework for Layman
The way to win in stock market, according to Charlie Munger, is to work, work, work,
work and hope to have a few insights – Charlie Munger

C. Ideation : Wealth Creation OR Cash Flow

a. Wealth Creation : Circle of Competence & Scuttlebutt - Sivanand Mankekar

b. Dividends – Proven Track record companies (Debt free , Established Business, Monopolies throwing Cash)

D. Non- Number Filters & Top-Down Approach

a. Longevity & Future market size

b. Products/ Services & Demand

c. Management Pedigree

d. Reviews

Everything should be kept as simple as possible, but no

simpler. - Einstein
29/06/2023 17
 Equity Investing Framework for Layman
The way to win in stock market, according to Charlie Munger, is to work, work, work,
work and hope to have a few insights – Charlie Munger

E . Number Filters

a. Debt Numbers - Balance sheet consolidated debt. Calculate Debt/Equity, Debt/free cash flow, interest
coverage ration.

b. High PE - Only few cases can be justifiable like where there is no competition, no debt, pricing power, etc.

C. Increasing Revenue & PAT.

d. Cash Equivalents.

e. Working Capital, R&D spend, Better utilisation of capital.

f. Spotting Fraudulent : E.G. Related party transactions & Loans to see where is money going.

Everything should be kept as simple as possible, but no

simpler. - Einstein
29/06/2023 18
 Equity Investing Framework for Layman
The way to win in stock market, according to Charlie Munger, is to work, work, work,
work and hope to have a few insights – Charlie Munger

E . Final Selection

- Market Cap – Lower the better – INVESTING EDGE

- Margin of safety – Can use DCF if you want.

- Comparative peer group analysis.

F: Execution

- Watchlist Ready

- Check Liquidity

- Build position as company performs – this is a margin of safety

Everything should be kept as simple as possible, but no

simpler. - Einstein
29/06/2023 19
 Equity Investing Framework for Layman
The way to win in stock market, according to Charlie Munger, is to work, work, work,
work and hope to have a few insights – Charlie Munger

E . Review & Exit

-Business performing

- Change of business line

- Management Misconduct

- You find a better opportunity.

- After it has grown to 4X 5X, depending on your conviction of business performance, trail it.(VERY DIFFICULT)

- Cupid Ltd – Example of my exit

Everything should be kept as simple as possible, but no

simpler. - Einstein
29/06/2023 20
 CASE STUDIES – CADSYS INDIA LTD & SUBEX LTD
The way to win in stock market, according to Charlie Munger, is to work, work, work,
work and hope to have a few insights – Charlie Munger

Cadsys India Ltd :

- Area of competence : IT

- Market cap is small - addressable market was very high

- Products: 5G, MEP Infra, GIS softwares, Smart Cities - USA market

- 1989 established company with good promoters - They took salary cut in Covid. Almost 75% was promotor owned.

- CEO is a followed of Swami Mukundanand who is a very renowned monk and preaches ethics and values.

- Customers like AT&T given 21 million dollars over 4 years. Make that calculation. Profit would be over market cap.

- 18-20 rs - 75Lakh outstanding shares.- 14 cr market cap. in 2 years, they are going to make more money.

- Debt was nill. But they were increasing for working capital at the back of order flow. Management was very candid about it when asked.

- Cash equivalent of 5 cr when I invested

-Bought - 1.3% of the company

29/06/2023 21
 CASE STUDIES – CADSYS INDIA LTD & SUBEX LTD
The way to win in stock market, according to Charlie Munger, is to work, work, work,
work and hope to have a few insights – Charlie Munger

Review :

- Did not go anywhere for 2 years.

- 11.35 half yearly EPS.

- PE investor

- Buyout of an allied business to grow in USA.

- Promotor Issued warrants.

29/06/2023 22
 CASE STUDIES – CADSYS INDIA LTD & SUBEX LTD
The way to win in stock market, according to Charlie Munger, is to work, work, work,
work and hope to have a few insights – Charlie Munger

Subex Ltd

Area of competence : IT

- Market cap is small - addressable market was very high - 180 cr

- Established : 1992

- CEO was with Subex for 25 years. Knows it inside out.

- 75% of global CSP were its clients - Switching Effects.

- It had largest honeypot network. Leadership in darknet

- share at 3.5 rs. Cash in books 2 rs.

- They decided to clean up balance sheet overhand of FCCB. No more dilution was going to be possible. Beyesian Mindset

- Debt free and interest payments were done.

- half million shares of subex.

- Subex - Association was with greedy promotors

29/06/2023 23
Investing Framework –Real Estate
 Real Estate Investing Framework for Layman
Real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full, and
managed with reasonable care, it is about the safest investment in the world – Franklin Roosevelt

A. Deciding the Location

- Location : City : Tier 2 / Tier 3, & outskirts.

- Look at proposed infrastructure developments of the city – Visit Local office & Connects

- Look employment that will be generated there and what kind of income group will live there.

- LIG/MIG housing always needed

- Low ticket housing is the key at the start.

- Auction properties / Distress Sales – VERY GOOD OPPORTUNITIES

- This takes the longest time and don't give up after 2-3 tries.

Ninety percent of all millionaires become so through owning real estate – Andrew Carnegie
25
 Real Estate Investing Framework for Layman
Real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full, and
managed with reasonable care, it is about the safest investment in the world – Franklin Roosevelt

B . Groundwork

- Checking for basics like RERA, dump yard, Nala, cremation ground, property papers vetting

C. Financing :

Leverage from bank and rent it out.

Low ticket financing helps here.

Increased income over next 5 years will make this look very small.

Pay as much as possible over 3 years – Amortisation schedule of banks.

Ninety percent of all millionaires become so through owning real estate – Andrew Carnegie
26
Diversifying further – Trading & Other Avenues
 Trading – A Simple Trading Pit Perspective

a. High probability setups – OTM Strangling and managing Risk

b. Option Wheel Strategy

Any strategy should work if you get the first principles right. Believe in Occam’s Razor.
23/06/2023 28
 Building Further Wealth

Business Proposals (Private Equity – LetsVenture type of platforms)

- Asymmetrical returns are possible here.

Further Real Estate

a. Commercial – Office spaces, Co-working spaces, Retail spaces.

b. JV Financing – Early Stage financing of Real Estate- in your city

Franchisees (Local Ones like famous cafes).

22/06/2023 29
What is Enough !
 When to stop & Why to stop ?
- This is when you calculate how much you need for Freedom – Retirement & Other stuff. Until then grow
money. Usually late 30s if you start early 20s

- Don't calculate when you are 20 and then work on that goal. It makes no sense.

- Existential Crisis

- Adding value to your life by helping people.

- Rat race & Definition of enough.

- Spirituality & Exercise – Mental & Physical Health topmost priority

- Enjoying Wealth

- If you lose sight as to why you started your financial freedom journey in first place, you are confused and need
to rethink.

22/06/2023 31
 Summary
Main idea behind this is to have a smooth financial curve and a protection against downside. (JOB +
Other avenues). Very well risk adjusted way to look at life.

A broad blueprint on how to achieve it – I have walked on this blueprint.

Average IQ, Hard work, Delayed gratification, Trying different stuff, some luck this can be done.

Excessive homework & Time management is crucial.

Real Estate, Equity, Internet are worthwhile money pots of limitless opportunities.

22/06/2023 32