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Kavan Choksi of KC Consulting On The 5 Essentials for Smart Investing

An Interview With Jason Hartman

Diversification is key — I advise anyone looking to invest to be as well-diversified as possible. This means not putting all your money into one stock or sector. Because in the case that one investment takes a fall, your entire portfolio value will fall as well. It’s important to be disciplined and set appropriate allocations across different asset classes.

As a part of my series about The 5 Essentials of Smart Investing, I had the pleasure of interviewing Kavan Choksi.

Kavan Choksi is a successful investor, business management and wealth consultant. He works strategically with companies across fast-moving consumer goods, retail and luxury markets — leveraging his vast experience to help clients turnaround and revitalize their business. With expertise in economics and finance, Kavan has developed a passion for investing over the years and enjoys helping others do more with their money. You can find him on LinkedIn, where he posts inspiring quotes, offers financial wellness advice, and talks about his outlook on markets and the economy.

Thank you for doing this with us! Our readers would like to learn a bit more about you. Can you tell us the “backstory” about what brought you to the finance industry?

After graduating from university, I moved to Japan where I began my career in the retail industry. It was a remarkable experience that gave me full visibility of all the different functions within an organization, including sales, accounting, finance, marketing and HR, just to name a few.

However, when I arrived, the company was in a less-than-optimal position as the business had been losing money for over a decade. We had to undergo a major restructuring in order to claw our way back to profitability. This experience really taught me about the inherent risks of entrepreneurship, and how things can quickly go wrong if you don’t manage the business properly.

From my perspective, the key to success in any organization is having the right people around you. It’s important to be able to hold your employees accountable in a way that’s both fair and transparent. This requires clearly communicating your financial and operational goals in advance so that everyone’s singing from the same hymn sheet. Fortunately for me, this was a lot easier to do in a country like Japan, where people are naturally inclined toward prioritizing teamwork over individual success.

Having gone through this difficult journey of turning around a business in decline, I began to appreciate the fact that it’s never a good idea to be over-reliant on one source of income. Whether you’re an employee on a monthly salary or an entrepreneur running a successful business, there will always come a day when circumstances change, and you can no longer depend on your main source of income. It was this realization that drew me toward the world of finance and instilled in me a desire to pursue a path towards greater independence and financial freedom. I no longer wanted to be shackled or constrained by one source of income. And so, it was time to start exploring new opportunities that allowed me to diversify my income and mitigate risks.

Can you share with our readers the most interesting or amusing story that happened to you in your career so far? Can you share the lesson or take away you took out of that story?

About 9 or 10 years ago, a well-known jewelry brand was looking to expand outside of the United States and Europe by entering the Asian market. Their strategy was to use the local distributors to market their products. They decided to enter into an exclusive partnership agreement with the company I was working for at the time, in order to begin establishing their retail footprint in Japan. We opened about 20 stores in two years but unfortunately, it turned out to be a total disaster.

The brand owners figured that if their marketing and product offerings had been successful in the US and Europe, it would automatically be well received in Asia. However, they significantly misjudged the culture clash and weren’t able to get their message to resonate with Japanese consumers. Because of this, the entire launch was a failure.

To me, this was a story of sheer hubris and intransigence, because it shows how you can’t rely on what has worked in the past, especially when you’re trying to communicate with a completely different demographic. You must be willing to innovate and tailor your value proposition to satisfy the demands of the consumer — especially in an unfamiliar market.

Are you working on any exciting new projects now? How do you think that will help people?

Many investors have their money spread across several different trading or investment platforms. From my own experience, I’ve often found that it’s rather tedious to keep flipping back and forth between multiple different apps. So, I’ve started working on developing my own visualization and analytics tool which helps me consolidate all the data into one master dashboard with the click of a button.

This has helped me get a comprehensive overview of all my investments under one single screen. It has also allowed me to drill down into individual components of my portfolio to see how they’ve been performing. Having greater visibility over my investments has given me the ability to make timely decisions regarding capital allocation across different asset classes. At the end of the day, if you can’t see what you’re doing, there’s no point of doing it at all!

I believe that the development of these kinds of tools will help new-age investors create a holistic view of all their different investments to get a better understanding of how their portfolio is performing in real-time

Ok. Thanks for all that. Let’s now jump to the main core of our interview. According to this report in Fortune, nearly two-thirds of Americans can’t pass a basic test of financial literacy. In your opinion or experience what is the cause of these unfortunate numbers?

As someone who went through the British education system and started my career in Japan, I’m not able to speak to the U.S. side of this question. However, I believe that a significant factor that has contributed to this problem is a lack of focus on STEM (science, technology, engineering and math) education.

Subjects like finance, economics, business and accounting aren’t taught in grade school or even implemented as part of high-school level curriculums. Students often don’t have the opportunity to study these subjects until they reach the university level. We simply need to do a better job of exposing kids to these subjects from a younger age.

If you had the power to make a change, what 3 things would you recommend to improve these numbers?

Overall, school curriculums need to shift in a large way to catch up with the world we live in. It’s not possible in a day, but I believe it can be done with the right amount of resources and buy-in from key stakeholders from around the world.

If I were to recommend three things to those stakeholders, they would be:

  1. Overhaul school curriculum in its entirety
  2. Bring schools into the 21st century by building in more tech-centric coursework around things like AI and biochemistry
  3. Include important subjects like financial literacy and entrepreneurship

Ok, thank you! Now to the main question of our interview: You are a “finance insider”. If you had to advise your adult child about 5 non intuitive essentials for smart investing, what would you say? Can you please give a story or an example for each?

Investing in a dynamic and volatile economy can be quite challenging, even for the most seasoned investor. A looming recession can make investors think twice about anteing their hard-earned money — especially in a world that’s become accustomed to years of quantitative easing and exceptionally low borrowing costs. Almost a decade of access to cheap money has led to soaring valuations, which have now come crashing down to earth during the first half of this year. It’s no wonder many asset managers are waiting for this period of volatility to pass before they’re willing to put their money where their mouth is.

Despite the febrile environment that we find ourselves in today, there are several ways to arm ourselves with the right information to practice ‘smart investing’. While no investment is ever guaranteed to make you a profit, there are always ways to minimize your risk and maximize your upside potential.

Here are five ways I’d recommend for consumers to practice smart investing strategies.

  • Awareness and continual education

There is an infinite amount of information available at our fingertips daily, updating investors on news, trends, reports and more — painting the landscape of what has happened and what’s possibly to come.

I recommend all investors spend at least one hour per day reading and studying the current market news and trends. Here are a few examples of the things I’m watching out for daily:

  • Economic calendar — Each week, there is likely one or more events happening that will directly impact the direction of the economy and stock market. For example, in the United States, MarketWatch publishes a calendar of upcoming economic data releases. These events are ranked in order of significance, and it is important for every investor to form their own hypothesis in advance of how they think the market is going to react to the data under different scenarios.
  • Earnings calendar — Companies that are publicly traded have quarterly earnings calls to let investors know the current health of the business. You can use MarketScreener to find upcoming earnings call for the companies you’re interested in. Be sure to keep a lookout for analyst upgrades/downgrades a few days before a company’s scheduled earnings call, as these tend to set the tone for how investors are expected to react.
  • Podcasts — My diet consists of listening to at least one or two podcasts every day that are centered around business and finance news. It’s often useful to get a sense of how investors and market commentators are interpreting the data and understand how they currently assess overall market sentiment. You’ll often find conflicting opinions on a particular issue, but it’s important to understand the arguments from several different angles in order to draw your own conclusions.
  • Federal Reserve news — As inflation is top of mind for many, every piece of news and information from the central bank can quickly shift market sentiment and trigger rapid stock market movements in both directions. So be sure to keep tabs on upcoming Federal Reserve announcements and press conferences. A useful gauge to look at is the CME’s FedWatch Tool, which is a real-time forecast that shows what the market believes the Fed is going to do at upcoming FOMC meetings. It is a reliable indicator that helps determine to what extent future rate hikes (or cuts) have already been priced in by the markets.
  • Market volatility — Keep a close eye on the VIX. A reading of anything above 30 usually indicates a period of heightened market volatility, whereas a value below 20 generally corresponds to a more stable environment.
  • Cross-asset correlations — Make sure you get up to speed on all the major cross-asset relationships that exist. There is a lot of empirical data which suggests that strong correlations do exist between different asset classes, and some of these trends have certainly stood the test of time. For instance, some of the well-known correlations include movements between USD and gold, stocks and bonds, risk-on and risk-off assets, etc. It’s important to learn how the dynamics in one asset class can impact another.
  • Other key metrics — I always keep a track of the major indices (S&P, Nasdaq, Dow Jones, etc.), bond markets (US treasuries), commodity markets (energy, metals, crops, etc.), the housing market, key currency pairs, etc. Doing this gives me a more rounded view of the general direction of travel. It also helps me reaffirm my overall outlook on markets.
  • Take time to arm yourself with up-to-the-minute information

Information overload is an everyday struggle for investors as there aren’t enough minutes in a day to sort through every piece of news. So, if you’re interested in a specific sector of the market, or even simply want overall news of the day, take the time to set up alerts on your phone or desktop.

I have found it makes a huge difference for me. I’m able to save time each day, while still getting the information I need to make informed investment decisions.

I currently have alerts set up through these websites: MarketWatch, Bloomberg, Seeking Alpha and TipRanks

  • Understand the basics of stock trading

Stock trading is usually assumed to be buying and selling stocks on a short-term basis. This practice is unsustainable and has been proven not to work in the long run.

For myself, I focus on trend investing. This is looking at one stock or a group of stocks that are going up or down in a similar pattern. For example, if tech stocks are beginning to trend upward, that is the leading indicator I will use to make an investment.

However, I recommend anyone beginning to invest in the stock market to look backward to identify trends. Go as far back as the 1970s to study how companies have performed, and what cyclical trends have occurred to make your own informed investment decisions

  • Maintain liquidity in your portfolio

Liquidity means that you have money within your stock portfolio that isn’t invested but is ready to be deployed at any moment. I always maintain 5–10% of my portfolio in cash, in order to take advantage of emerging market opportunities.

  • Diversification is key

I advise anyone looking to invest to be as well-diversified as possible. This means not putting all your money into one stock or sector. Because in the case that one investment takes a fall, your entire portfolio value will fall as well. It’s important to be disciplined and set appropriate allocations across different asset classes.

What are your thoughts about investing in cryptocurrency? Can you explain what you mean?

For all the crypto enthusiasts out there, this may not be pleasant reading. I recommend staying away from crypto in times of high volatility or during a rate hiking cycle like the one we are currently in. Many people have been burned by investing in crypto as it is relatively untested in this environment and unpredictable regarding how it will evolve. If you can’t bring yourself to stay away, then make sure you don’t allocate more than 5% of your portfolio to this. I’d even say between 0 and 2% is a safer bet. There are better ways to make money.

I don’t like Crypto because there’s no way to determine its intrinsic/fundamental value. It’s volatile and isn’t suited for long-term sustainable returns. Crypto is primarily driven by external factors beyond regulatory and government oversight. As a new asset class, there are still many issues and concerns regarding the proper regulations. The news continues to be dominated by headlines about crypto funds and lenders going bust. In my opinion, this makes crypto uninvestable.

What are your thoughts about daytrading, using apps like Robinhood? Can you explain what you mean?

I find that the underlying value of trading apps like Robinhood offers a great value proposition to everyday people. It allows for people who may not have the financial bearings to be large investors but allows them to participate in open markets in a meaningful way.

It can also be a great way for people to familiarize themselves with real-time trading, by using demo accounts that don’t risk any of their own money.

However, just like anything else in life, be careful and ease your way into it. There have been too many people that have lost significant amounts of money by not knowing what they are doing.

None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful towards who helped get you to where you are? Can you share a story about that?

When I first moved to Japan and started my career in retail, I was fortunate enough that the then CEO of the company took me under his wing and showed me the ropes. He was a mentor to me and taught me the basics and fundamentals of retail. In our time together, I learned the business from the ground up. Beyond that, he taught me discipline, how he approached problems, and how he analyzed things. If I didn’t have that grounding, I don’t think I’d be where I am today.

The most interesting aspect of this relationship was the fact that I didn’t speak any Japanese at the time, and he didn’t speak any English. He taught me everything through an interpreter, so credit to the interpreter as well. But this experience was very influential and shaped me to be who I am today.

Can you please give us your favorite “Life Lesson Quote”? Can you share how that was relevant to you in your life?

“What lies behind you and what lies in front of you, pales in comparison to what lies inside of you.”

— Ralph Waldo Emerson

This quote is extremely relevant to me as I’ve had a life full of experiences, and I know that more exciting ones are to come. But my greatest gift I believe is my intuition and using that to go forward in life I know will make me successful.

You are a person of great influence. If you could inspire a movement that would bring the most amount of good to the greatest amount of people, what would that be? You never know what your idea can trigger. :-)

A movement I want to create is that of greater financial literacy. Financial resources are more plentiful and readily available than ever before. Anyone can now become a part of the world economy, creating more wealth than ever before.

Thank you for the interview. We wish you continued success!

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Jason Hartman

Jason Hartman

Author | Speaker | Financial Guru | Podcast Rockstar