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

This question begets another one - why not? If one goes by AMFI  data, nearly 26% of equity investments done through mutual funds route get redeemed within 1 year.   Pros I can think of investing in equity mutual fund for at least 1 year: You can still find solace in the fact that your gains (or losses) will be classified by income tax department as long term once you cross 365 days of holding. Other than psychological boost of being classified as a long termer, your tax rate will be lower than most of other income sources There is slightly more than 40 percent chance of securing high returns of above 20%. Contrast this with 10 year holding period – probability of securing 20% annualised ROI is just about 18 percent Not to forget, the highest annual performance delivered by Nifty 500 TRI stands well above 100% while for 10 years, it is about 25% annualized. Investing with one year horizon may get you bragging rights for landing with extraordinary returns   And...

Or to put it in simple English - Is The Market Overvalued, Fairly Valued Or Undervalued? It is nearly impossible to call out the market valuation status as too many variables are involved. But no harm in peddling an opinion, especially if one thinks the said opinion is backed by some scientific explanation. So here I go. Most popular way of valuing markets or any security: The P/E (Price to Earnings) ratio. It has its pluses and minuses but let us not complicate life further and for the time being go with the belief that P/E ratio is the appropriate way to value the market. Invert the PE ratio and you get earnings yield (EY henceforth). A P/E ratio of 20 gives EY of 5%. Nifty 500’s closing P/E on 30th September 2023 was 23.45. That gives markets earnings yield as 4.26%. Though this doesn’t give the faintest idea whether market is undervalued, overvalued or appropriately valued. Until you bring in some benchmark. See, there is no running way from comparing one thing to the other...

Simple answer: SIP  it as long as you can A bit more complex answer: For the long term. Never mind there is no standard definition of long term. Ditto for “Good Returns” too!!! Super complex answer: It depends on how much notional loss you can assume yourself being ok with. Yes – until you sell, loss (or gain) is all notional. Like the home you live in has gone up maybe X times the price you paid but all the gains are notional till you decide to sell it and move over to a cheaper place. But I digress. Back to SIP period. If one want’s to keep it real plain and simple, there is merit in going by excellent advise rendered by investment guru Benjamin Graham is his book “The Intelligent Investor” where he quotes results from a researcher as: “In Lucile Tomlinson’s comprehensive study of formula investment plans, the author presented a calculation of the results of dollar-cost averaging in the group of stocks making up the Dow Jones industrial index. Tests were made covering 2...

Now that you are done with quickly deploying money in debt mutual funds in last few days of FY 2022 - 2023 to take advantage of indexation benefits which stand withdrawn from 1 st April 2023 onwards, what would you do with any money coming your way which you do not want to put in growth (risk) investments like equities? If you go by news, the money would move back to bank deposits now that fixed income investment area has been tax-levelled. We’ll see in a while what numbers say. Though for me, bank deposits beyond the insurance amount are a strict no. That said buying GILTS from RBI Retail Direct portal does deserve a serious thought now. But first let’s look at some subjective benefits of keeping money in bond funds. I could think of two: -           Liquidity. Bond funds are very liquid, while I cannot say for sure whether direct government bonds will be that liquid as I have never sold a GSEC in secondary market. In fact, not bough...

Now that FY 2022 – 2023 is comfortable behind us, here’s an evaluation on how things went for various investments (or asset classes if your prefer) last FY. No 1 position goes to GOLD. Yellow metal delivered nearly 14.5% return if you bought it through very liquid fund of fund (FOF) route. Holdings via SGB route may have done better considering there is an interest component also, but for now we will consider returns from FOF as sacrosanct.   Next best performer:   The much bashed cash equivalent, basis overnight mutual funds yielded around 5.35%. Even though positive, there’s a huge gap from returns delivered by gold, the best performing investment.   Long term bonds, basis 10 year constant maturity Gilt Funds yielded 3.45%.   Nothing great, but lot better than listed equity investments – which yielded just 0.09%, going by Nifty 50 index mutual funds.   If you want to be a contrarian, you know where your money should be going for the current ...

  Conventional wisdom in India: Gold jewellery is an investment. Though quite a many folks (I included) treat jewellery as consumption item and only bullion and various digital forms of gold as investment. If things were that black and white. Keeping the argument between physical gold - gold jewellery and gold bullion. Let’s set aside the digital forms of gold as of now. Assume you have enough digital assets and now want to possess little bit physical gold. Do numbers favor jewellery or bullion as investment? Bullion will mostly win hands down. UNTIL… We bring in the wearability factor of gold jewellery. One can don, correction - flaunt jewellery multiple times, for many years to come while bullion only serves as a collectible, to be stored in some locker. Maybe one can look at the bullion once in a while and marvel at the dazzle – but that’s about it. You can never don/display it like jewellery. But wearability, or the show off factor comes at a cost. Issue at hand – ...

  Assume you have decided to sell an investment. Another assumption here is the said investment is a volatile asset – it’s price can go up or down next year. Only thing holding you form taking the plunge -  the price. You have decided upon a price and will not sell until you get it. You have the capacity to hold. Never mind there is a possibility of the asset price going down instead of appreciating. A certain "price fixation"is probably the most unappreciated part of any sell decision.  But circling back to the quest for realizing a particular “price” - one mostly fails to consider the number which should be key to “hold for the price” or “sell now” decision -   “The Carrying Cost” . Or, in simpler words – the opportunity cost of holding the sale proceeds of a “fluctuating” investment in a fixed return, risk free kind of asset. Let’s say you own an investment property – debt free. You have decided you will not sell it below INR 1 Crore. And you don’t mind wai...