Read Everything
The best advice that Ace investor Jim Rogers ever got:
Regards,
N
Tuesday, 23 June 2009
Sunday, 7 June 2009
The importance of Timing the Market
The importance of Timing the Market
You'll often observe self-proclaimed experts talking about the importance of time in the market being more critical for wealth-building than timing the market.
On many occasions, you'd have seen figures bandied by mutual fund folks about how much your returns will reduce if you miss out the best "n" days in the market each year.
They're all stating the truth, but only the partial truth.
It is equally important to ensure that you keep booking profits from time to time.
The very same fund managers hardly ever talk about what happens if you miss the worst "n" days in the market each year. I've always known intuitively that it is likely to have quite a significant impact on our wealth-building process.
I've been looking for readily available information that's India-specific. Thus far I've not located anything meaningful.
However, I've just located this interesting piece of info from the US markets (covering the period from 1966 to 2000):
Am quite sure that the figures will not be too different for Indian markets.
Just goes to show the importance of:
- Periodically booking profits, especially in over-valued scrips / mutual funds when the markets are overheated and quoting at crazy PE ratios
- Choosing the dividend payout option in mutual funds
- And keep investing the surplus generated from the above two steps in cash-equivalents to be converted into shares / mutual fund units when the appropriate opportunity arises.
Regards,
N
Thursday, 4 June 2009
Do your own research
Don't listen to "Experts"
Just came across something funny on NDTV Profit (which was repeated ad infinitum over the last 24 hours) - All about the proceedings at a seminar (or was it a conference) of Morgan Stanley.
These so-called experts gave some predictions about the year-end target levels for the Sensex. Again! Apparently, these folks have some nerve, indeed!
And, pray, what are their predictions?
???
???
???
???
Don't laugh ... ... ...
- Base case levels of BSE Sensex - around 15300
- Bear case scenario - 8500
- Bull case scenario - 19500
Essentially, they're predicting a range from a low of 8500 to a high of 19300.
And what are the investors expected to do from such predictions?
Guess they expect us to toss a coin or throw darts and decide for ourselves.
At least about the latter part about deciding for ourselves, I'd tend to agree with them.
However, if that were to be the case, what on earth do we part with our hard-earned money to seek their "expert opinions"?
Regards,
N
Friday, 8 May 2009
The Truth Behind Fund Recovery
The Truth Behind Fund Recovery
Here's an interesting insight into mutual fund investing:
- The Truth Behind Fund Recovery - http://valueresearchonline.com/story/h2_storyview.asp?str=13174
And my take on the same:
- In general, invest in high quality mutual funds, typically 5-star rated ones
- When the market reaches the peak (let's say, index PE levels of 23-28 - Index PE is available in the link http://www.nseindia.com/content/indices/ind_pepbyield.htm), book profits at least to the extent of your original investments (If you've invested 100 and it has grown to 175, retain 75 and take out 100)
- Park this Rs. 100 redeemed into a good quality liquid fund and wait for the inevitable crash
- When there's all-round panic and mayhem and when index PE reaches levels of 11-14, invest the same in those schemes of mutual funds from good quality mutual fund houses which have crashed the most among 3-star rated funds (Typically, in a bear market, these funds are likely to fall much more than 5-star rated ones).
- Wait for the semblence of recovery
- When the markets start going up, typically, these 3-star funds will outperform the 5-star funds in percentage terms quite significantly (when the PE levels have recovered to a more meaningful level of 16-18, for instance).
- At this stage, go in for a systematic redemption of the 3-star funds and a systematic investment in the high quality 5-star funds
- Repeat steps 1 to 7 repeatedly.
Regards,
N
Monday, 27 April 2009
Four Famous Filters of Investing
Four Famous Filters of Investing
From the one and only Warren Buffett:
Understand the Business that you wish to invest in
Checking whether the target company has a Sustainable Competitive Advantage
Check whether the target company has Able And Trustworthy Managers
Check whether the target company is available on the exchanges at a Bargain Price, as Bargain Price Is A Margin Of Safety
Enjoy safe and prosperous investing!
Regards,
N
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