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Measuring Progress – Yield on Cost or Dividend Yield

TIP Guy 12 March 2009 commentary, dividends, strategy 19 Comments

Individuals need to set a goal in order to succeed at anything, including our individual investments. Logically, the next step is to determine how we are going to measure our progress. In the realm of investments, most the individual investors (if not all investors) look at annualized returns and compare it with benchmark index. Here in India investors either use BSE’s Sensex Index or NSE’s Nifty Index. In addition, based on multiple discussions I have with individual investors, many investors use percentage based capital appreciation or depreciation which is devoid of time concept i.e. no time scale is involved.

For example, investors love to say “I made 150%, 200%, or 2x or 3x, or 0.5x times my money”. I cannot comments whether this progress measurement is right or wrong because I do not know individual’s objective and/or risk profile.

Ironically, of the many folks I have talked to in last ten years, more than 95% of them have always increased their original capital. Well if that’s the case then who is loosing it? If nobody is loosing, then why the market is more than 50% down from its peak. I am digressing from the subject, so coming back to the topic of measuring our progress…… Continue reading rest of this article…

Corporate Actions That Make You Go Hmmm…

TIP Guy 9 March 2009 commentary 7 Comments

Hmmm… I am so dumb that some Mr. Sachs can sway me or fool me from my own ability to think? Let us see….

I have owned ONGC stock since 1999 and that is because it has been meeting (and exceeding) my buying objective. I will get rid of ONGC the day it fails to meet my purpose and my portfolio objective.

Recently, Goldman Sachs down graded the rating of ONGC stock with the target price of below Rs. 600. I do not have any liking for ratings given by these so called investment firms or advisors. I flush these rating down the drain before even I can bat my eye lid. However, in this particular down grading, I was flustered (to put it mildly) with the type of the comments and observations that were made against ONGC. The negative observations were: Continue reading rest of this article…

Main Themes in El-Erian’s World Market Collision

TIP Guy 7 March 2009 book review No Comments

In this book, Dr. El-Erian focuses on the changes taking place in the world economy. It is a big picture executive summary of the evolution taking place in world of finance across the globe. The author attempts to emphasize these changes by saying that these are signals and not noise. He then goes on to provide a framework for future investments and/or asset allocation.

At hindsight, this book may appear to be chaotic hodge-podge of multiple topics which does not provide any benefits to the average main street investor. It may seem to be oriented towards institutional financial managers; however, there is a lot one can learn from this book. As every coin as two sides, this book also has its positives and negatives. Putting the negativity aside, I viewed it in the context of broad overview and framework alone and not as a workbook for investments. I think that was author’s objective.


In this book, El-Erian is discussing three major themes in world financial markets, which are: Continue reading rest of this article…

Book Reviews

TIP Guy 7 March 2009 admin No Comments

Being an avid proponent of do-it-yourself investing, whenever I read any financial or general economics book, I am continuously attempting to put the subject matter in the context of my personal investing process or personal investing decision making process. I am trying to figure out if it should have any influence in my investment process. Of the many books that I have read in recent past, there are two books that really made me think, what a lesson for individual investors. These two books are:

  • “When Markets Collide – Investment Strategies for the Age of Global Economic Change” written by Mohammed El-Erian.
  • “Unconventional Success – A Fundamental Approach to Personal Investments” written by David F. Swensen.

In next post and/or in near future post, I will be:

1. Summarizing the main themes of the book;

2. Presenting my interpretation from dividend-investing perspective; and

3. Discussing whether it has any influence on my investing process (if any).

So stay tuned!

Common Investing Mistakes of Individual Investors

TIP Guy 4 March 2009 education 1 Comment

What are the most common mistakes that individual investors make during their investing lifetime? Before you continue to read this post take a pause and think for a moment. I am sure you have come up with the most common one (or perhaps many common mistakes). Now read on and compare what I have below.

The mistakes that we individual investors make can be grouped into two most common mistakes (1) False impression about performance expectations; and (2) Misunderstandings about securities market. Continue reading rest of this article…

Portfolio Risk Management – It’s More Than Just Asset Allocation

TIP Guy 2 March 2009 asset allocation, risk management 4 Comments

Every financial literature and tutorial has drilled into our brains that asset allocation is one of the basic fundamental tenets of portfolio management. Financial publications, peer-reviewed literature, and books have observed that asset allocation is the significant contributor to the total return. This contribution factor  varies anywhere from 50% to 95% depending upon how the data is analyzed with reference to timescale, markets and asset coverage, dividends, inflation, and what not parameters.

What intrigues me is following two issues:

(1) Look at any historically successful and well known investors in US, e.g. Buffet, Lynch, Ross, Pickens, etc., and one will find that none of them followed asset allocation principles. In fact they were highly concentrated in few businesses or companies. E.g. Buffett’s portfolio shows 10 companies represent 85% of the portfolio. Continue reading rest of this article…

Dividend Payout Factor – What It Means to Me?

TIP Guy 1 March 2009 commentary No Comments

In one of my earlier posts, I discussed whether a given company should pay dividends. I presented my thoughts and observations on the rationale that developing business does not provide dividends, while mature businesses are more inclined to give dividends to shareholders. I also mentioned that both sides of the arguments are correct and individual investors need to look at from their own investment objectives and risk profile. Continue reading rest of this article…

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