Uncategorised | Portfolio Yoga

Choose your Battles

All Roads Lead to Rome is an old saying and in the financial markets all strategies are supposed to lead to the same result – Profits for the Investment (in time and money).

But not all strategies are created equal – what works good at one point of time may not be the best of the time for another strategy.

Don’t catch a falling knife is a valid advice for a momentum investor but a value investor thrives in such scenarios.

Value Investors scoff from buying companies that are seemingly no good on paper and yet get high valuations. Investors of Venture Capital Funds on the other hand love investing in companies only on the gut feel that this could be a game changer decades on even though today its shitty than anything available in the public markets.

Day Traders thrive in volatile markets when the rest of the participants are losing their minds but lose theirs when the market is calm with nothing much to do.

In the movie Avatar, Zoe Saldana who plays the role of Neytiri says to Sam Worthington playing the role of Jake Sully and I Quote “To become “taronyu” hunter, you must choose your own Ikran and he must choose you.”

Similarly for the markets – the ability to succeed only comes if you and method you choose are able to gel together.

I understand fundamentals but never can become a value based investor for my mind always wonders, do I really know all that I need to know. Quants appeal to me by helping me showcase historical instances when it succeeded and failed enabling me to quantify.

One doesn’t become a value investor by reading Buffett or Munger as he wouldn’t become a politician by reading the biographies of successful politicians. The roads they took are different from the roads you shall face. But if you need to start off somewhere, that is a good place to start.

In Facebook, everyone has the perfect life. On Twitter, everyone is an expert in everything. People who may not in real life have invested even 10% of their Networth in Equities can be seen as successful investors by creating a mirage.

Everyone has their own favourite views about the market. Some are perma bulls who see no risks at all while others who are bunched as perma bears see nothing but risks all around. Yet as its most likely the truth lies somewhere in the middle.

Success in markets is fleeting regardless of how high one went at one point of time. John Paulson, a hedge fund manager had his day in the sun when he made it big shorting the housing market in 2007 and then reaping it big. Today, he is having a tough time holding onto his clients as clients have rapidly left what is now seen as a leaky boat.

Quantum Long Term Equity fund, a fund I like and where we have a small amount of money invested is ranked the best among large cap funds on a 10 year period. But drill it down to 1 year and the picture changes entirely. It’s so close to the bottom that one wonders if they have lost the mojo.

While theoretically we should behave as our own fund managers, it’s tough to emulate them when the going gets tougher. If you believe you shall panic when the chips are down, your strategy should be different than one you would wish to follow for the chain is only as strong as the weakest link and here the weakest link is ourselves.

Success can mean different things for different people, in the financial markets, to me they mean being able to stay the course for the longest period of time even if I don’t come anywhere close to the winners.

List of Robo Advisors in India

Robo Advisory is picking up steam in India and yet I couldn’t find a list of the same. The rationale behind the list is to provide you with links of all active / yet to start Robo Advisors in India.

The list will be updated as and when I come across new ventures. If you know of any one I may have missed, please do edit the Google Docs and insert the url. Also do post the same in the comments column so that the table below could be appended.

Robo Advisor Site	Fees
arq.angelbroking.com	Trailing Comission
mf.zerodha.com/	Trailing Comission
mutualfund.paisabazaar.com	Trailing Comission
www.5nance.com/	Trailing Comission
www.advisesure.com/	Fee + Trailing Comission
www.arthayantra.com/	Trailing Comission
www.bharosaclub.com/	Fee Only
www.bodhik.com/	Fee (Recommend Only)
www.clearfunds.in	Fee Only
www.etmoney.com/	Trailing Comission
www.finaskus.com	Trailing Comission
www.fincash.com	Yet to Launch.
www.fisdom.com	Trailing Comission
www.fundexpert.in	Trailing Comission
www.fundsindia.com/	Trailing Comission
www.fundsvedaa.com/	Trailing Comission
www.fundzbazar.com	Trailing Comission
www.goalwise.com/	Trailing Comission
www.invezta.com/	Fee Only
www.moneyfrog.in	Trailing Comission
www.mysiponline.com	Trailing Comission
www.myuniverse.co.in/	Trailing Comission
www.orowealth.com/	Fee Only
www.piggy.co.in	Fee Only
www.prosperx.com	Trailing Comission
www.roboadviso.com/	Trailing Comission
www.robobanking.in	Fee Only
www.scripbox.com/	Trailing Comission
www.sqrrl.in	Yet to Launch.
www.taurowealth.com/	Stocks. No MF’s. Fee
www.tavaga.com	Fee Only
www.unovest.co/	Fee Only
www.vivekam.co.in	Trailing Comission
www.wealthtrust.in	Fee Only
www.wealthy.in/	Trailing Comission
www.wixifi.com/	Fee (% of AUM)

Google Spreadsheet (Link)

Prediction Impossible

A viral video that is circulating on the Internet is about well known anchor Udayan Mukherjee at a Investor regretting the fact that he as a television commentator (Anchor) has contributed to “leading people to a very short-termist, predictive kind of a mindset, for equity markets.” (his words in Quotes)

For any one who has followed me on Twitter, I am sure you would know that I am highly skeptical of Prediction. But does that really mean any and every Prediction is a game of dice and nothing more. As Philip Tetlock, the noted authority on Forecasting wrote in his recently acclaimed book “Superforecasting” and I quote

“We are all forecasters. When we think about changing jobs, getting married, buying a home, making a investment, launching a product, or retiring, we decide based on how we expect the future will unfold. These expectations are forecasting”

There are basically two kinds of forecasting. Implied forecasting and Explicit forecasting with a thin line differentiating them both. Most of the time, we forecast implicitly about every small thing in our normal life. Explicit forecasting is when we make bigger decisions – the decision to buy a house on loan is based upon our confidence that we will continue to earn in the future which will enable one to pay off that loan.

Most of the time, Explicit forecasting is not something you tend to do every other day of the week. Longer the time frame, higher the probability that forecasting is more explicit in nature and naturally higher is also the risks that the forecast may not come out as one expected.

The risks we take are based on our calculations of how our predictions will work out and whether it is worth the risk. You will not jump off a building from its 50th floor even if you have tied a Net at the 10th floor which will eventually halt your fall. There are just too many moving parts that could go wrong and the thrill of a fall is not worth the risk it involves.

When it comes to finances though, we really do jump off from higher levels and that too without knowing whether there is even a Net at some level that will ensure that one is not reduced to a pulp of broken bones and wasted muscles.

Day in and Day out we are bombarded with information pertaining to both stocks we hold and hundreds of those we don’t. And the biggest issue is that financial media makes it seem so easy.

The other day I calculated that on a normal day, CNBC had broadcast 48 (Buy / Sell combined) trades during the market hours. Even a sane long term investor can get enticed in the hope of some quick bucks.

But blaming the Television Channels is wrong since end of the day, its business for them and they will only showcase what they believe the viewer wants. Given the fact that there are these days hundreds if not thousands of Analysts who survive by selling fear with the hope that at least a few of them will be interested enough to check out their paid services.

Investors are generally fearful and want guidance for which they turn towards the financial media which is filled with quacks out to make a big buck by playing on one’s greed.

I don’t watch business channels but I am pretty sure that its rare for any Analyst to come out there and say that he honestly doesn’t know what the long term holds and the best way to play the markets for the vast majority who have no clue on how to read Balance Sheets or write programs to identify stocks that are meeting certain characteristics is by just investing regularly in Nifty Bees.

Channels like CNBC have done a great service by bringing the markets closer to the investing public while at the same time they have done irreversible harm by having programs where stock picking is seen equivalent to a game of Dice.

Before the advent of Social Media, Television was the way to get access to news as soon as it hit the wires. These days though, you are more liable to hear things first on Twitter and only the be confirmed on Television.

As a Investor / Trader, I believe business channels have long lost the relevance it used to have. Websites like ValuePickr have made Analysis more crowd sourced and of a much better quality than even those put out by brokerage firms.

With the limited time we have, I believe that the worst way is to spend on watching the Idiot Box especially the financial media. If you were not convinced earlier, hopefully this video by Udayan convinces you of the futility.

Video Link

PS: My view is biased due to the fact that I neither have appeared on Television nor have anything to Sell. So, there you go 🙂

Under performing Mutual Funds

Various studies in the US have shown that very few mutual funds out there have been able to beat the benchmarks and its no wonder that there has bee a steady and strong rise in the participation by investors into simple ETF’s that track the market.

In India, the scene has been a bit different though with quite a few funds being able to generate returns well beyond what the benchmarks have provided. Out-performance in our case has more to do with picking stocks outside of the Universe of the benchmark and hence strictly speaking may not be comparable, but still the fact that they have out-performed what a investment in Nifty Bees (the largest ETF in India) has meant that ETF investing in India has not caught on as much as in US.

But is this out-performance fading away. A study by S&P Dow Jones Indices seems to suggest that over the last 5 years, more funds under-performed the large cap indices (BSE-100 in this case). Of course, 5 years is too short a time to really understand whether our fund managers too are no better than those in US. A better study would be over a period of say 10 or 15 years when we have seen both a strong bull and bear markets.

A critique of the study seems to be that it has not accounted for size, but for the investor, does the size of the fund really matter or does it matter as to whether he gets better returns for his investment.

Source Article : Study finds mutual funds are not for long-haul (LT @invest_mutual)

A new year, a new start

The Bombay Stock Exchange is the oldest stock exchange in Asia with it being established in 1875 but when it comes to Sensex, its just 29 years old. While trading in exchanges situated in United States were still trading using the pit, we moved to computerized trading. Even today, Initial Public Offers in United States is pretty opaque with only the chosen few getting hold of the shares before it gets listed on the exchanges, our here we have democratized it so deeply that everyone has a equal chance at allotment.

But when it comes to Financial Education and Research, we are far behind the rest of the pack. On one hand, we have one of the largest number of listed companies and on the other, the percentage of folks who invest in the markets both directly and in-directly is pretty minuscule.

While investing in stock markets is seen as similar to gambling on the race track, investing in Gold and Insurance is seen as Investment that can fetch good returns on the long run even though evidence to support that view is lacking.

Our financial universe is filled with intermediaries who are willing to sell you dreams of getting rich without having to bother either with the barest minimum of understanding, all for a small fee of course.

The basic objective of this site is to provide a way to construct portfolios based on your ideologies / your risk taking abilities as well as your requirements without having to pay an arm and a leg for that pleasure.

While we are strong believers in the John Bogle method of investing, we also believe that its very much possible to generate above market returns. This site will aim to research into methods and tools that can make it possible for the common investor.

Having said all that, do note that we are not registered Investment advisor and our posts are not a recommendation or solicitation to buy or sell any security or as investment advice. All contents of the website are provided for information and educational purposes only.

So, without much ado, Welcome aboard 🙂

Share this:

Share this:

Share this:

Share this:

Share this: