Five charts that should worry Indian equity investors in 2018

January 4, 2018, 4:24 am

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1. India among three most expensive markets in the world Souce: starcapital.de “Between 1979 and 2015 we observed an average Shiller-CAPE of 18.3 and an average price-to-book (PB) of 1.8 in 17 MSCI country indices. Based on the assumption that these average valuation levels approximately represent a fair valuation level, Southern Europe, and Emerging Markets are attractive whereas the US stock market significantly trades above its fair value.” The United States, Switzerland, and India stand out as the most expensive markets in the world at the moment when considered on Shiller CAPE (Cyclically Adjusted Price-Earnings) and Price-Book metrics. However, my

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The complete list of 2018 stock recommendations

January 10, 2018, 6:12 am

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When I started investing in equities, I used to be in awe of equity research reports. Immaculately formatted 5-page documents with their glossy charts and tables of financial projections followed by a confident Buy / Sell / Hold recommendation based on a precise target price. I figured those target prices were arrived at by hardcore sector experts working with proprietary excel models of such complexity they would probably crash any computer with conventional specifications. That awe lasted until I realized the “models” in use might as well have been random number generators due to their sensitivity to assumptions about an unknowable

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The difference between Financial Planning, Asset Allocation and Security Selection

January 15, 2018, 1:16 am

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I get a few emails every week asking for stock recommendations. So I ask a few questions to form the context of the person’s experience with various investment vehicles, track record, their ability and willingness to take risk. In many cases, at this point, I realize the person asking for advice on stocks has little idea of their current financial situation beyond how much they make each month. This short post will clarify and differentiate between three interlinked but distinct elements of the wealth-building process: Financial Planning and Investment Management (Asset Allocation and Security Selection). Financial Planning: “The Where” and

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Why I’m not selling everything…yet

January 19, 2018, 8:00 pm

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“So are you selling everything?” was a question I got recently. A fair question since this person had just finished scrolling through two of my recent posts, five charts that should worry equity investors and what that might mean for returns in 2018. Markets rarely stay at elevated Price-Earnings valuations for long periods. The NIFTY has been at PEs higher than current on only 35 days in 19 years of trading (yes, I counted) while NSE500 has spent just 19 days at valuations at or higher than current. You can find a more detailed analysis in my guest post on

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Learning from the latest market decline

February 6, 2018, 5:47 am

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Long periods of boredom punctuated by moments of terror This phrase is attributed to many different people said to be describing many different professions. From driving big-rig trucks, flying aircraft to modern warfare. And of course, it has since been co-opted by the investment profession and by the best investors, as a metaphor for the vagaries of the market. Personally, I think it’s a bit dramatic comparing warfare with the buying and selling of stocks. True to form, financial media in the US announced 5th Feb 2018 was “the worst point decline in history“. Phrased like that you can’t help

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How SimpleMoney can help track your portfolio

February 8, 2018, 11:34 pm

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This is a sponsored guest post by Pranshu Maheshwari, founder and CEO of SimpleMoney Taking stock of our personal finances by building a Personal Financial Balance Sheet is a very important step in boosting our financial health. But it can be immensely challenging for many of us because our money is kept across a range of locations: bank accounts, real estate, the financial markets, gold, under our mattresses. Just within the world of Equities and Mutual Funds, we often deal with multiple fund houses, stockbrokers, registrars and portals, leaving us with a collection of usernames and passwords. The persevering souls amongst

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Learning to invest vs Investing to learn

February 13, 2018, 3:10 am

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Learning to Drive You’re on a fairly empty side-street, your cousin, an experienced driver next to you, in the passenger seat. It is her 8-year-old Fiat Punto, but the make or model doesn’t matter to you, just that it’s a functioning car. You don’t know if you will enjoy driving, but you want to be able to. You don’t know if your cousin is the “best” driver around, but you know she’s been driving for a few years and you trust her. She instructs you step-by-step to first push the brake, turn the key in the ignition, press down on

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Do markets really move together?

February 21, 2018, 3:29 am

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Excerpt from my guest post on capitalmind.in exploring whether global markets really move together… It was going so well. Carrying on from a blockbuster 2017, the NIFTY had risen almost 6% in 2018 by Jan 29th. And then the jitters started. By the end of the 1st week of Feb, we were down almost 2% for the year, after a budget that added Long Term Capital Gains taxes for Indian stocks after 13 years. As of this writing, the NIFTY is roughly back to where it started the year, with expectations that more volatility will follow. One way to look at

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Should you buy stocks newly added to the NIFTY

February 25, 2018, 11:24 pm

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From April 2nd, 2018, the NIFTY will look different. Bajaj Finserv, Grasim Industries, and Titan Company will be included and Ambuja Cements, Aurobindo Pharma, and Bosch will be excluded. [link] This is not a rare or ad-hoc phenomenon, but a semi-annual ritual conducted by the organization that owns the NIFTY index, the National Stock Exchange, effective every April and September. Here’s what the index methodology document says about index reconstitution: The index is reconstituted semi-annually considering 6 months data ending January and July respectively. The replacement of stocks in NIFTY 50 (if any) is generally implemented from the first working day after F&O

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What is Money?

March 4, 2018, 12:32 am

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One of the challenges of trying to read wide and deep I’ve found is ensuring active engagement with the content. Without that, it’s difficult to take away the author’s key message and to assimilate that into my mental models. It is an important enough problem faced by people who like to read that Shane wrote a great post describing how to take notes while reading. I’ve tried various techniques in the past and in this post, I’ll highlight a technique I’m experimenting with, using mind maps to summarise my understanding of the content. The image below is from the beginning

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Fixating on Buffett is hurting your returns

March 5, 2018, 2:27 am

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It’s that time of the year when the world’s most awaited corporate communication comes out. My guess is if we take all publicly listed companies around the world (except one), and add up the number of times their management letters get read, that number would be dwarfed by that for Berkshire Hathaway and Warren Buffett’s annual letter to shareholders. At $300,000+ per Berkshire Class A share, it’s safe to assume only a fraction of those readers are potential buyers. All around the world, people from fund houses, financial media, popular investment blogs, investment advisories pore through the simply formatted, 20-page

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18 Cognitive Biases that cause Investing Mistakes

March 19, 2018, 11:29 pm

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Courtesy of: Visual Capitalist

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Difference between ordinary equity and DVR shares

March 23, 2018, 11:27 am

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Ever wondered why there are two tickers (stock codes) for Tata Motors on the major Indian stock exchanges? Both trade at different stock prices. But what are DVR Shares? If you had to guess, you might say they’re shares of two different subsidiaries of the same massive Tata group. They have so many businesses, it’s hard to keep track. A logical guess, but it would be wrong. The chart above with stock prices for the last 3 months shows an obvious correlation (0.993) between the two, i.e. they mirror each other’s percentage price changes. Both stock codes represent equity ownership of

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Markets after FY2018: Bull or Bear

March 29, 2018, 12:50 am

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FY2018 was a good year for Indian markets. The statement seems strange given what has been happening since late January. In spite of the correction over the last two months, we still ended the year up 10%+ on both the NIFTY and the NSE 500. Not quite the blockbuster returns we saw in Jan 2018 when both indices were at 20%+ returns for the financial year and certain individual stocks were giving double-digit returns in a matter of days. Things were so good that a random selection of stocks would have done fairly well over the last year [Read this before deciding

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India Markets in Numbers – Top sectors by Market Capitalisation

April 2, 2018, 5:20 am

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This is the first in a series of short data-centric posts on the universe of publicly listed companies in India. The data spans 10 years of financial performance of over 1,700 companies listed on the NSE across 100+ industry sectors. The series of posts tagged #indiamarketnumbers summarizes key takeaways and trends in sector growth, profitability, and stock performance. None of these posts should be construed as investment advice. The Universe of listed Indian Companies As of March 2018, the market cap of 1,723 companies listed on the NSE is at 1,50,54,158 INR Crores (2,162.8 USD Billions). This accounts for almost all

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How to Get Lucky

April 4, 2018, 8:41 am

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It isn’t enough just to be good. You’ve got to be lucky, too. This is the central premise of Max Gunther’s book “How to get lucky”. I first came across this author when reading “The Zurich Axioms“, a set of investing rules followed by Swiss Bankers to manage risk and reward. It starts with this comforting idea that we fall short of our goals largely because of a lack of luck. That we deny the role of luck when successful only speaks to our susceptibility to survivorship bias. And yet, according to Max, luck, in gambling, career, love, friendships and even

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India Market Cap Growth: 2008 to 2018

April 8, 2018, 8:18 pm

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Continuing the #indiamarketnumbers series on data-centric posts on the India Market. India Market Cap Growth: 2008 to 2018 Chart shows total India Market Cap from 2008 to 2018 with the year-on-year % growth (orange line). Takeaways Total Market Cap of publicly listed companies in India has grown from ₹26 Lakh Crores ($400B in constant currency terms) in 2008 to ₹140 Lakh Crores ($2,162B) over ten years, a growth of 5.4X Over the last ten years, markets have shrunk in three years, the biggest fall of 29% happening during the 2008 financial crisis. 2012 and 2016 saw marginal negative growth. Other than 2013,

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India’s top sectors over the years

April 10, 2018, 9:10 pm

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India Sector Market Cap Rankings Graphic shows sectors that have been in the top 10 sectors by aggregate market capitalisation in India over the last ten years. Top 10 rows in the table correspond to the rank as of March 2018. The final ‘CAGR’ column shows annualized growth rate in market cap over the same period. Takeaways 20 different sectors have been in the top 10 largest sectors by market cap at some point from 2008 to 2018 implying significant churn in investor interest However, the current top 3 market cap sectors, Banking, IT Consulting & Software, Pharmaceuticals in addition

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Fixating on Buffett is hurting your returns

March 5, 2018, 2:27 am

≫ Next: 18 Cognitive Biases that cause Investing Mistakes

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It’s that time of the year when the world’s most awaited corporate communication comes out. My guess is if we take all publicly listed companies around the world (except one), and add up the number of times their management letters get read, that number would be dwarfed by that for Berkshire Hathaway and Warren Buffett’s annual letter to shareholders. At $300,000+ per Berkshire Class A share, it’s safe to assume only a fraction of those readers are potential buyers. All around the world, people from fund houses, financial media, popular investment blogs, investment advisories pore through the simply formatted, 20-page

The post Fixating on Buffett is hurting your returns appeared first on The Calm Investor.

18 Cognitive Biases that cause Investing Mistakes

March 19, 2018, 11:29 pm

≫ Next: Difference between ordinary equity and DVR shares

≪ Previous: Fixating on Buffett is hurting your returns

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Courtesy of: Visual Capitalist

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