7 Lessons From Pranjal Kamra's “Investonomy”
Created on 30 Nov 2023
Wraps up in 8 Min
Read by 3.4k people
Updated on 10 Feb 2024
Benjamin Franklin once said, “An investment in knowledge pays the best interest". I cannot agree more. Researching a particular company and looking for the pros & cons of an investing sector is the first step to successful investments. There are several sources available at your disposal to do so, among which books by influential figures take the top place.
Amidst the plethora of books available, choosing the right one can be a challenge. The stock market is anyway a web of several sectors with further subdivisions. However, for those seeking a comprehensive and approachable guide to the stock market, "Investonomy: The Stock Market Guide That Makes You Rich" by Pranjal Kamra (PK) is an excellent choice.
CEO and co-founder of FinTech startup Finology, PK seamlessly unravels the intricacies of the stock market in Investonomy, making it accessible to even the most novice investors. The book lays a solid foundation by introducing readers to basic financial terms such as "shares" and "stock market." This approach ensures that readers clearly understand the building blocks before delving into more complex concepts.
Then, the book goes beyond mere theoretical knowledge and equips readers with the tools and strategies to develop their own personalised investment plans. It is a perfect depiction of PK’s intellect, investment standards, and up-to-date strategies.
Let’s begin the show by enclosing PK’s…
Motive Behind the Publication of Investonomy
Investonomy consists of 28 chapters with a wide spectrum of topics, ensuring that readers gain a well-rounded understanding of the stock market. However, the book is not restricted to the fundamentals of the finance realm. It divulges the mistakes investors make to the myths they believe in, breaking many stereotypes. This is one of the author's biggest motives for writing the book.
While reading this book, you will encounter several hard-hitting eye-openers that might change your outlook on finance. The beauty of the book is its straightforward facts and simply structured language, making it equally suitable for all readers. This particular parameter is one of the biggest reasons for recommending this book to the masses.
Check out what the book's author has to say about his motive behind bringing out Investonomy. 👇
Pivotal Lessons from Investonomy
I will be describing 7 crucial pointers one can learn from Investonomy.
1. The Fallacian Trap (Self-Devised Theory)
Many analysts develop their own theories for particular segments of the stock market. Pranjal Kamra took this one step ahead by devising a theory that not only explains a unique section of finance but also informs people about a pivotal aspect. I am talking about one of the biggest traps innocent investors fall into while beginning or amid their financial journey.
The theory is called The Fallacian Trap, and it refers to the practice stock brokerage firms adhere to in order to gain the trust of a large chunk of customers in the least amount of time. In a defined manner, The Fallacian Trap refers to the structured tactics agencies perform to gain customers' trust for long without suffering from losses. Just look at the image from the book below. 👇
It portrays an example of one of the strategies advisory agencies use to gain a maximum number of clients. The bifurcation of groups of customers with possible “hike” or “drop” stock movement is viciously smart.
The many pointers of this trap are explained beautifully in Investonomy with the help of a relatable example.
Fascinating theory, isn’t it? 😳
This theory is just the beginning. The next lesson will open your eyes to new possibilities and expectations. 👁️
2. Investment Myths Are Just That; Myths
Unknown is the biggest fear of humankind. It is also one of the major reasons for people’s uncertainty in accurately managing their finances. Our minds are plagued by notions like “the stock market is a gambling pit”, “one loss/profit means you are on the right track”, and “only large-cap stocks are profitable”.
These groundless biases add ghee to this fire and lead to situations like ever-mounting debt, no retirement plans, and raw financial management. 🔥
Investonomy guides investors in shattering these raw moulds by illuminating the truth. Several biases, like familiarity bias, representativeness, anchoring, and more, are explained with relevant examples for easy understanding.
Lesson From PK's Investing Experience: One such example comes from PK’s life. The incident is about his early investing days in the stock market, and we all know how that usually goes for naive investors, right? Investonomy’s author was not different. PK bought shares of TVS Motors after his father gifted him a TVS Wego for his birthday. Here, two factors were in play: representativeness and emotional influence.
Although the investment turned out positively for PK, he knew with experience that to succeed in the stock market; one must learn to be wary of such baseless ideas.
Learn about the common mind traps investors fall into by clicking on this article link.
3. Drawing Real-Life Scenarios
Learning financial terms, jargon, or strategies is not difficult; keeping it memorised is. PK associates with the notion that the trick to retaining the financial ins & outs lies within relatable examples. And that's precisely what he explains in Investonomy.
Let me give you a reference. One of the first terms explained in the book is “What is a Share?” For this, multinational IT firm Infosys’ founding story and the roles founders Narayana Murthy, Nandan Nilekani & others played have been described.
Similarly, for the many concepts, strategies, and ideas discussed, the book contains fitting references to make the concept relatable to the readers.
4. The Answer is in “Asking the Right Questions”
One of the things that makes Investonomy stand out from the piles of other finance books is its unique presentation style. PK has answered the many queries investors, beginners, and veterans alike have with the form of questions.
You must be thinking that, how does one answer a question by asking questions, right? Well, that is the trick. You see, humans have all the answers they need to customise their investment goals. All one needs is a slight push in the right direction. And that’s what Investonomy does.
Many chapters include a question bank for readers to answer, just like this image. ⬇️
Try it and find the answer to a prevalent question: How much money can one make in five years?
So, what was your answer? Let us know in the comments below. ⤵️
And to know about the right answers to your many finance-related questions, visit Insider.
5. Psychological Analysis is Equally Important to Fundamental One
If asked to describe Pranjal Kamra’s success story in one word, then “realistic” would be it. He has learned everything from his own experiences in the market, which, mind I tell you, were a jumbled collection of profits and losses.
The good news for us is that he has poured everything he grasped from his years of time in the stock market into Investonomy. 🤗
Along with describing the basic finance jargon and crucial metrics, the book includes insights into the psychological aspects of investing. The book also contains the mindset investors usually possess and how that mindset differs from the manner successful investors think.
I have adopted some pointers from the book for you to ponder on:
- The stock market is not a money-making factory. It’s a medium to help you create wealth.
- Patience and deep research are the two pillars of a successful investment strategy.
- There is no investment journey without significant losses and well-timed risks.
Learn about the basics of investing, starting with the fundamental aspects by reading the article: How to do Fundamental Analysis of the stock market?
Coming back to the topic, alongside what came his way, Kamra also learnt a thing or two from prominent figures in investment history.
6. Applying “Ben Graham” & “Michael Porter” in Investing Style
Michael Porter’s Five Forces Framework, designed in 1979, is a great model for industry analysis. This model has been explained in the book simply for easy understanding.
In a similar fashion, Ben Graham’s principles about analysing financial statements are widely accepted. His main approaches: Margin of Safety, Mr Market, and Cigar Butt, are superbly described in the book, whose summary is given below:
- Margin of Safety: It expresses the difference between an investment's intrinsic value and its current market price.
- Cigar Butt: Also known as the “net-net investing strategy”, Cigar Butt is a value investing approach that involves purchasing stocks of financially distressed companies at a price below their liquidation value.
By looking at the ideologies of the two prominent investment gurus, it is clear that PK follows a stringent strategy devised from well-crafted experiences.
What are you waiting for? Start knowing the depths of investment literacy by reading about the concepts of eminent personalities. Here are a few options for you to begin with:
- Powell’s Balancing Act: Navigating the Footsteps of Volcker and Bernanke
- Investing Wisdom from Buffett and Munger
7. The Ultimate Checklist for Investing
To succeed in life, everyone must have a plan. And to form a plan, you need a checklist. The same rule applies to investing as well. But don’t worry! Because Investonomy has got you covered.
Chapter 28th of the book plunges into a detailed checklist every investor must go through while building their financial plans. This checklist covers all the aspects necessary to crossview while investing.
- Which sector does the stock belong to?
- How is the financial health of the company?
- How can you be analytical, strategic, and patient all at the same time?
The ultimate checklist contains many more prospects, which are incredibly essential for all investors. In short, you will be getting the ultimate answer to “how to do things” in the stock market.
And grab that copy of Investonomy right now, as time is of the essence in the investing world.
The Bottom Line
I hope the above pointers give you an insight into what Investonomy gives to the masses. The book has been reviewed by multiple analysts, influencers, and common folks alike, who describe it as the perfect way to know about the stock market. For all the many aspects I missed, grab a copy of Investonomy and sate your curiosity about the investing world.
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