A helping hand from numbers leads to objective opinions and confident decisions!!!

  I read a very nice blog on bear market recovery here . While you can check out the blog in detail as every word written is good piece of wisdom, here is the gist: -           If you just refer to nominal returns, you will be looking at a distorted picture. To get an idea of real (pun intended) situation, look at inflation adjusted returns -           For example, if one sees in nominal ROI terms, total length of worst bear market, the dotcom bust was 5 years***. This period includes markets downward leg, to the recovery time to breakeven status -           However, once you bring inflation into picture, the same period stretches to 13 years***. That’s more than double the time for breakeven in nominal ROI terms That said, it is very rare for people to start thinking in real terms. It simply is “out to sight”. For me, the true realization...

In my role as a mutual fund distributor, for equity funds, I have taken to only professing index tracking mutual funds. Various studies across years have shown that most of the active mutual funds do not match up to ROIs given by passively managed, index tracking mutual funds. However, it is commonplace to hear converse arguments in Indian context – statements like “India is not an index market” or “It is still sometime before index mutual funds beat active mutual funds”. Mostly, these are generic statements, backed up by opinionated data. SP Global does bring out performance scorecard every six months for Indian mutual funds also. A detailed study of this document is very revealing and trashes the argument that “India is still an active fund market” That said, I feel even SP Global's SPIVA study compares performance of active funds with respective index. To get a real world feel, one should compare it to index funds which even though low on expenses, do have costs. And then,...

Image source: Atherenergy.com Discussion with self: Me: Let’s buy an electric two-wheeler “The Number’s me”: Why? Me: For pottering around. Ok, for using it for certain tasks where I don’t want to take my car “The Number’s me”: Like? Me: Forget it. I know where you are going. You will say numbers justify driving the car or any other vehicle one own’s to the max and not buying new set of wheels “The Numbers Me”: You can simply say u want to buy the scooter to justify your penchant for buying the latest fad or you like to ride a two wheeler and feel the wind in your hair. Just don’t try to make it appear as if it makes financial sense. That’s it. I said it. Numbers mostly will not be in favor of getting a new set of wheels if you already own one and are the only one who rides / drives. What goes into this number work: -           Cost of two wheeler, depreciated over say 7 years, with 25% remaining as resale value -  ...

How does one know whether that wonderful property you want to call home is valued right and is a good buy? There are no standard parameters – other than few thumb rules like if you buy property at 10 to 15 times going annual rent, you are getting a good value. On the face of it, it seems these thumb rules are not of much help in Indian context. I can’t speak of other countries but here, using this criterion, it seems one will never be able to call himself an owner because most of the property deals never come close to this criterion of “value”. Case in point – I recently sold the only residential property I owned. If I consider what the buyer paid to me and the government (levies like stamp duty, registration cost etc) – it went for quite close to 30 times annual rent. Deals at such price are very common / normal. What is going on in the property market here? All the folks out there can’t be out of their minds in putting so much value on being an owner rather than being a renter. Fac...

Do you believe in doing the numbers before you form an opinion and take decisions about matters wherever monetary considerations are involved? I feel most of us do – some may do back of the envelope workings, while few prefer digging deeper. I fall in the later part and don’t mind firing up MS Excel and let the numbers help me arrive at an opinion. Then, armed with an “objective opinion”, I procced with “decision making”. Arguably, subjectivity cannot be totally ruled out of any decision, though once you have numbers on your side, your confidence levels about the decision you have taken get a boost. Or let’s simply say – you feel good about the decisions you have taken as numbers driven opinion gives you a good shot at arguing your case, especially if your decisions don’t seem getting the desired results. That’s what this blog is all about. Sharing how numbers lead me to “opinions” and then to “decisions”. A word of caution – don’t take my word to for the sake of it: though I will be...