Collection: Mohnish Pabrai - #38 'Advice For Beginners In Investing'


Video Link: https://youtu.be/GeU_zogQyes


In this episode, Mohnish Pabrai was asked what advice would he give to students passionate about value investing?


In this episode, you’ll learn:

  • Mohnish Pabrai advice for beginners in investing.

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[Transcript]

(Source: https://youtu.be/ot6pzc9ZwfU)

MOHNISH PABRAI 00:08

Okay yeah, that's a good question.


So the first thing I would do is to start creating what can be an [Inaudible] track record. So what you need to start doing if you're not already doing this is set up a separate brokerage account.


Hopefully one from where you're not writing checks for your groceries and such. And it doesn't matter what amount you put in, you know, you could have $5,000 or $10,000 in that account, for example.


And you trade on that account where you would trade a million dollar or a hundred million portfolio for example.


And you see if it'll give you a couple of data points, one is a – so don't do this on paper. It needs to be real money, real broker. And the first thing as you would yourself get data on how good an investor you are?


So after a few years, after 3 years or 5 years or 7 years, you will know whether you are meaningfully better than most investors or not because that data will start pointing in a particular direction.


And also, you learn a lot which is great and that can go on while you have another day job and such. So you can start building that today, while you are a student and such.


The second thing that you can do is to the extent that it doesn't have a conflict with your employer. And you got some years that you spend investing your own money and done well with it.


Then what you can do is you can call friends, family and fools, and especially the fools, they are the most important and try to convince them to give you some money to manage. And you know, start building now a record with more than just your own money. And you can do both of these things when you have a day job, as long as your day job is not managing money or if your employer doesn't object to these type of activities.


And you know over time if you do well, so like I said even small outperformance versus the market is pretty rare on a long-term basis. So if you are outperforming the market by 3% or 5% or any numbers like that.


You know, Buffett says that you can be in the middle of the Atlantic and potential investors will swim to you in shark infested waters in the middle of the Atlantic to invest with you, if you are doing well as an investor.


So if you do well then your existing investors are likely to give you more money to manage and they're likely to introduce you to other people and such that they know. And so the asset under management probably grow.

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