Friday, November 1, 2013

Diwali 2013...

“I will love the light for it shows me the way,
Yet I will endure the darkness
For it shows me the stars...”

“An optimist may see a light
Where there is none,
A pessimist always runs to blow it out.”

Have a Wonderful Diwali

Friday, October 11, 2013

3 Principles to generate superior returns from your investments...

On 31st March this year the BSE Sensex was at 18835.
The return across different time periods looked like this:
1 year 8%, 3 Years 2%, 5 years 4% and 7 years 8%

To anybody investing in Indian Equities over the last 7 years! It has without doubt been a painful experience.  This is understandable but not justified, if you have set your goals and believes in your financial plan.  The challenge is to control your emotions, to stay away from panicking and taking impulsive decisions regarding your portfolio. It is not so hard if you believe in basics.
We all like our investment to generate the best (which in our mind is highest) returns.  Rather we should aim for superior returns across our lifetime.
First to understand “Superior Lifetime Returns” – it’s not the highest return but return that is required to achieve goals with minimum time, effort & stress. If you stick with these principles & practices – they will account for 90% of your investment success.  So here are the 3 Principals to ensure your investments deliver SUPERIOR RETURNS…


There is difference between hope and faith.  Hope is the state which promotes the desire of positive outcome related to events and circumstances in one’s life or in the world at large. But we don’t have proof for hope.  Faith on the other hand (at least in the investing world) is based on historical data and facts.  You need to be an optimist to make create wealth in equities.  Equity may delay returns but have never denied it.


Warren Buffett once said “The Stock Market is a highly effective mechanism for the transfer of wealth from the impatient to the patient.”  Some may not lose faith easily but they do lose patience.  We are beginning to learn from our media to focus on the “Breaking News” rather than the complete picture.  Likewise in investing we focus on the current bleak situation rather than on our own long term goals. Even the long term investor is tempted ‘right now shift to debt till the things improve’.  In doing so have you considered that you are attempting to be right Twice Over !!!  Once when trying to exit, and once when re-entering.  There is no successful investor who can ever boast of getting this strategy right consistently.


Patience will help in not doing wrong things and Discipline will help in keep doing right things.  All of you at some time or the other have heard me speak of SIP (Systematic Investment Plan).  This is the medicine that will bring discipline into your investing.  Dispassionate investing on a monthly has weathered many a storm and given Superior Returns over time.  Remember discipline fails, the plan fails.

Coming up next – 3 Practices to achieve superior returns from investments…

This article has been inspired by a Financial Planner Hemant Beniwal.  His articles regularly appear in financial magazines.

Tuesday, October 8, 2013

Does High Income mean Financial Security

Does high income means Financial Security
Do you always struggle to pay your bills towards the end of the month despite earning decent money? If yes, then you need to keep a check on your spending habits. It's a common notion that higher income is the key to one's financial success. Many of us believe that jobs paying lucrative packages and providing thriving opportunities are a pre-requisite to secure our financial future. But we often forget that money doesn't beget money on its own; it's us who can make money work for us. We need to understand what may spoil your financial future despite of you earning high income.
 What should you be careful of?
·        Excessive spending would leave lesser amount in your hands for investment
·        Excessive debt would always eat into your earnings eroding your surplus
·        Poor utilisation of your surplus may reduce your chances of earning attractive returns on your investments
High income and lesser responsibilities may entice people to spend excessively on their lifestyle related expenses and splurge money on recreation without even giving a second thought. One might be getting a good hike in income every year; but may pile up huge debt being extra-optimistic about future rise in income. Some may have lesser debt but ineffective investment plans may still generate lower returns on their investments. This may eventually lower your chances of generating wealth that you may otherwise have generating have had you invest in winning investment propositions.
What should you do to make your money work for you?
·        Avoid impulsive buying
·        Plan and monitor monthly expenses
·        Make effective use of credit cards
·        Avoid excessive borrowing
·        Make a list of your goals
·        Forecast amount you need to achieve your goals
·        Prepare an effective investment plan
·        Monitor and revisit your plan at regular intervals to make it more effective
 Many of us spend first and invest later but it should rather be the other way round. You should spend on your lifestyle and other recreation activities only after investing an ascertained amount every month.  Habit of investing systematically helps you grow your investments which can be utilised for achieving your goals in future. It is important to estimate amount you may require to achieve your goals in future. You should try to first predict as to how much money you may need if a particular goal was to be satisfied today. 
Using appropriate rate of inflation you may arrive at the amount you might require in future to satisfy the same life goal. For Example, if you have 15 years left in your retirement; you must first forecast how much money you may need every month post- retirement if you were to retire today and try to estimate how much money you would need every month after you hang up your boots. For planning your finances you might take professional help. Once the amount needed for fulfillment of goal(s) is ascertained you may chalk out a suitable investment plan. You must know your risk appetite before investing in any asset. Right asset allocation and timely monitoring is the most important part of any investment plan.

Drop us an email and help us re-work your finances for a secure financial future.

Thursday, September 19, 2013

Second Level Thinking from Investor Howard Marks..

19th September 2013 BSE Sensex 20646 Up 684 points in a single day

The recent run up in the markets would leave us wondering suddenly what has changed.


Investor Howard Marks says “lack of second level thinking is the biggest differentiating factor between a good and a bad investor”.

If it's a good company, let's buy the stock is what a first level thinker would think. However, the second level thinker would say, it's a good company but it's priced as if it's a great one. So the stock is expensive and hence, let’s sell.

Likewise, if the first level thinker thinks the outlook is bad and hence, we should sell our stocks, the second level thinking would lead us to believe that everyone is also thinking the same way and thus, it could actually be the time to buy.

Making Investment decisions based more on feel good factor and intuition is not what one must do.  
If you apply second level thinking, perhaps we realize we are not out of the woods yet. The markets are just reacting to the news and no real action has happened on the ground.  Our fundamentals remain pretty weak.

But this once again highlights the power of equities,  which one must never ignore.

Tuesday, December 20, 2011

Will Santa Visit Dalal Street - Dec 2011.

Prof. David Crystal from Cambridge Encyclopedia of the English Language once said –
When 300 million Indians speak a word in a certain way that will be the way to speak it.”
I think it says enough for the way that the world looks at India. The growth story in India is still intact.

We see queues at counters, they see the ticket sales.
We see the jam packed trains and buses, they see the imminent growth of these services.
We see inefficient private / public companies, they see the turnaround opportunity and resultant profits.
And the list will go on and on.

Inspite of these facts, why do we read the headlines in newspapers which shout doomsday?
Markets at 2 year lows on fears of slump. FII led Sell Off leads downward trend.
No one wants to catch a falling knife. Scary and Confusing isn't it?
We fear whether our hard earned money will diminish in value
Because some crazy people are pulling the stock markets up and down like a yo-yo.

Sometimes it makes sense to take a step back and look at what is happening around us.
Yes, the government is slow in implementing reforms.
Yes, the government is doling out freebies to economically backward classes.
Yes the corruption issue is blowing out of hand.

But does the stock market track government's profits or privately held and listed companies' profits?

Are private companies facing problems?
Yes, the costs are going up. The profit margins are impacted.
But what does this mean?
It means that the companies will focus on improving their productivity.
The penetration will increase and sales will continue to go up.
Profit margins will rationalize and be stable going ahead.

If you agree to what is written above,
You should not be concerned about what will happen in the next few days
or months in the stock markets.
You should not worry about what will FIIs do and what will happen to interest rates and oil prices –
More importantly you should not get swayed by what media reports daily through their channel paid investment experts. How will media earn profits without creating sensational news?

FIIs are a shrewd lot. If they are selling today, they will buy tomorrow.
You will get scared today and sell but will you buy tomorrow?
Did you buy in 2008 when the equity markets were offering a mouth watering discount of 60%?
It is similar times to those in 2008. Wonderful opportunity to buy NOT sell.

One way to invest is to buy as and when you have money and hold till the time you need the money.
The other way is to inculcate a sense of discipline. Irrespective of circumstances,
buy regularly and ensure a healthy portfolio.

The second method is caller Systematic Investing. I am sure all of you are aware of SIPs.
Now it is upto you. Do you want to make a mistake again and lose out or do you want to take this opportunity and double your SIPs to have a wonderful Christmas a couple of years later.

Remember, Santa Claus only comes once a year - Start an additional SIP once a year.

Friday, September 2, 2011

Portfolio Notes 05.11.2010

2 years ago I had circulated the attached note at a time when if you were investing it was like looking into the barrel of a loaded gun or catching a falling knife! Well a lot has changed since then and we are now looking upwards at a Sensex of 21000!

Uncertainty has finally given way to exuberance. After 32 months the Sensex crossed the 21,000 mark once again. India’s growth story has always remained strong. But, for the markets to move up, FIIs with their large pockets have to believe it. And that they did. FIIs came back with a bang. Their investments crossed US$ 18 bn by the end of September 2010. This surpassed the 2007 level, at the height of the bull-run.

While the anchors of all business channels and their ‘experts’ will be beaming and business news paper headlines will be cheering, I advise caution at these levels. You have to be cautious because you always have to worry about the pitfalls which may come in the future. At the end of the day, you have to balance your risk and return

At the same time, you always have to be confident about future. It is very rare to see a pessimistic man making money in the market. It is always the optimism which prevails.

• DO NOT IGNORE this market thinking it is too high PARTICIPATE through SYSTEMATIC INVESTING.
• Have a close look at your ASSET ALLOCATION ie how much money of your total wealth is in equities?
• TONE DOWN your expectation of return from the Equity Markets. Over a longer term (5 to 10 years) will deliver 15% plus returns.
• BELIEVE in the Growth Story of our country and you will prosper. 05.11.2010 – Sensex @ 21004 Highest since Jan 2008

Portfolio Notes 11.10.2008

The Indian equity market, like markets around the world, has been falling daily. All our existing investments have been losing value rapidly, and investors like you have questions and may not be finding answers in all the noise created by media‘experts’ and news-papers. At times like these, it is prudent to refer to some words of wisdom from the richest investor in the world, Warren Buffett:

“Unless you can watch your stock holding decline by 50% without becoming panic-stricken, you should not be in the stock market.”

We have now been granted that opportunity! How we deal with it will decide what kind of investors we are. Remember, you have not made a loss (or profit!) until you actually sell your shares or mutual fund units. So we all have a choice now – panic and lock in our losses or stay calm and profit from current events.

“Look at market fluctuations as your friend rather than your enemy; profit from the folly rather than participate in it.”

The largest and most profitable companies in India are now available at half to onethird
the price they were available at in January 2008. Are these companies really worth that little now? No. Were they worth their January price either? Probably not. Fair value was probably somewhere in between but we are way below that point now.

Yes, what is happening in the US and consequently around the world is serious. Will it affect the profitability of Indian companies? Only to a certain extent. Will these companies cease to be profitable? No! At most, profits may decrease slightly for a year or two or simply not grow as much as earlier expected.

Will their profits increase over the next five years? Very likely!

Share prices today are falling because there are more sellers than buyers. Financial
institutions around the world need cash desperately and are selling their shareholdings at any price. The smart investors, like Warren Buffett, are busy buying.

You should be too. The only caveat: Only invest money you will not need for at least three years, preferably even longer.

Invest today and in five years you will be thrilled you managed to buy Mutual Fund units so cheaply – exactly as those who bought 5 years ago still feel today.

“Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can't buy what is popular and do well.” 11.10.2008 – Sensex 10,527 went down to 8509 by end Oct 2008