CIRCA 2030 : BACK TO THE FUTURE.

(A fictional account of an Indian investor in the year 2030) Diary log 1st April 2030, Got up to a glorious day, had an early shower and got on to my self driving electric vehicle on my hour long commute to the office at 7am. Hot Coffee and freedom to read the E newspaper in the large screen display in my automobile are the luxuries that I relish on my rides in the morning. After Reaching office , I only travel twice a week to the office to attend some crucial meetings, rest is done from my home located 65 kms away from Chennai, in a 5 acre farm within which I grow my own vegetables, paddy and a small poultry for my eggs as well. Today the Sensex ( Bse 30 stock Index) touched a new mil

How much should one invest in Equity?

Let me explain, the 100 is meant to indicate the human lifespan, so this form of investment allocation is based on the fact that as you are younger you can invest more in equity because you have the capability to take risks and also have a longer horizon. As you grow older your propensity to take risks is limited and need for regular income is more, so more of your money needs to be kept in debt investments. As an example if you a 40 year old person, based on this formula , 100-40 = 60, Your Portfolio must be constructed as : 60 % in Equity Mutual Funds, Stocks and other forms of Equity & 40% in Bank Deposits, FDs, Bonds & other debt investments. I know scores of investors who have follow

ICARUS PARADOX

The story of Icarus is one of those legends of Greek mythology that fascinates audiences especially because of the character’s desire to go beyond human boundaries as well as for the tragic consequences this brought about. The myth tells us a story of a father,Daedalus and his son Icarus who were imprisoned by the king. The duo construct wings stitched together with wax as a means of escape. The father warns Icarus that he should however guard against flying too close to the sun as the heat could melt the wax. The escape is successful and Icarus is able to fly above the prison walls and soar into the sky. However in his enthusiasm he forgets his father’s warning and flew too close the sun.

Multicap Funds, a source of multiple interpretations?

Last week end SEBI announced a small clarification on how the portfolio construct should be in Multicap Funds i.e as the name suggests it must have a fair representation of Large Cap stocks, Midcap Stocks & Small Cap Stocks.. that is it defined that each of these categories must have a minimum of not less than 25% representation in the fund. Why was this brought about ? As Multicap funds grow in size, with performance and risk being two sides of the portfolio management construct, funds have chosen to move more towards Large Cap stocks and lesser in terms of Mid & Small Cap stocks. The reason being that predominantly the last few years large caps have done much better than mid & Small Caps a

Are you framing the question, as per the answer you needed to hear ?

The normal rule is we answer as per the questions raised. However sometimes we are also adept at framing questions that result in the answers we are seeking. These are biases in our decision making process that lead us to make errors in our judgement. Let me explain in an investment scenario… As investors we are constantly trying to figure out the next course of economic actions and progress as we have a vested interest in the same. Some of us believe that the current Equity market is a little high and therefore there is some sort of a correction that is due to happen in sometime. So we are constantly looking for data in the newspapers, TV channels that confirm our thinking. We read mostl

Importance of Emergency Funds

One of the tenets of good investing is to look at investing for the long term esp investments in equity related products need time to mature and deliver returns. Many assets be it Debt, Gold ,Equity , Real Estate investments all need a certain amount of time to bring their best. So investors who have goals that are long term say 10, 15 and 20 years find it appropriate to use these assets to build their portfolios that will generate superior risk adjusted returns to them over that period of time. However it is important that these investments must stay invested through that period to generate that kind of returns. What happens when you have an emergency for which you need money ? Emergenc

Beware : In Investing , averages can drown you.

The biggest misconception that Mutual Fund Investors do is looking at the Mutual fund fact-sheets and choosing funds solely based on their past performance, that is the equivalent to driving a car looking at the rear view mirror. Let us take as granted that the past is the only basis to judge the pedigree of the fund and the manner in which the fund manager has performed in the past is likely to give a clue about how he or she is going to be effective in managing their portfolios in the future, but that should be one of the criteria, not the only criterion. The next is about the average returns that the fund fact-sheets display. When you look at a fund with a 10 year plus track record,

Time in the Market more important then timing the Market.

There are two investors , Karan & Kamal, both are 41 years of age and have done identical investments over the past 20 years in Indian Equity Mutual Funds. However both have followed different practices. While the funds that they invested were Diversified Equity Funds of the same fund houses, the way they managed their investments were very different. Karan, by nature was a little less sure of Equity markets and edgy as he had an impression that it was akin to gambling and speculative, not really a science and not really a conscious wealth choice. So he would invest Rs 10,000 every month in SIP ( Systematic Investment Plans) , but at the end of the 5th year.. he would find reasons to pull o

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