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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…

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…

Reflecting on My Investment Year 2008

TIP Guy 27 February 2009 commentary, education 5 Comments

Reflecting back on Year 2008, I think it will go down in history as a very significant turning point in the global economy. I also think that, due to events in Year 2008, other developed economies and emerging economics will evolve in different way. By different way I mean with reference to how it interacts with US economy. For the last few decades US economy was the engine of growth for global economy. US economy with its ingenuity, entrepreneurial business environment, innovative mindset, institutions, and rule of law was the global consumer. The other economies were happy being the supplier. Moving forward, this status will be challenged depending upon how US policy makers deal with the aftermath of events in 2008. While US business environment is still very much entrepreneurial, it remains to be seen how it will adapt to the new economic environment. History shows it has always adapted. Time will tell if it does this time also? By no means I am professing dooms day scenario, all I am saying is things will be different than what/how it used to be. How different, I do not know. Continue reading rest of this article…

Dividends are Necessary for Me to Buy a Stock

TIP Guy 23 February 2009 commentary, dividends No Comments

The way I define dividend-based companies are one that consistently pay dividends and/or consistently grow dividends. There are multiple schools of thoughts on how companies should use income generated with primary business activity (i.e. selling a product and/or services). Should the company pay back certain amount profits to shareholders or invest back into the business for further growth? To me, it depends upon the company, its business plans and objectives. Whether I prefer it or not depends upon what are my investment objectives. Continue reading rest of this article…

Various Participants in Financial Industry

TIP Guy 20 February 2009 admin, commentary 10 Comments

What do I think about Financial Advisors/Planners/Brokers, mutual funds, portfolio managers, etc?

My primary source of income is my engineering career and as everybody else, I work hard to earn it. So why not work hard to use my hard earned money to invest it the way I want, the way I like, and not get biased by somebody else. I know what is important to me and what has relevance to me. I fail to understand how can an outside advisor tell me what is good for me. The whole investment industry works on fees and commissions, and hence the likelihood of swaying away from your own investment goals is very high. Additionally, the historic data seems to suggest that majority of the mutual funds (or portfolio managers) are not able to beat the general market indexes. So why should I pay fees, commissions, loads, etc. for this under performance. Why I shouldn’t just buy the low cost index fund? I read an article sometime back (forget to bookmark it) that one investor had significant reduction in value of its mutual fund holdings, but had to pay short term capital gains tax. While devil is in the details, but I thought that was little contradictory to me. To me, if one charges a fee for the service, I expect some level of quality behind that service. Perhaps financial advisory/planning/brokerage is the only industry, which does not stand behind its product (or service). Would you buy anything when the service provider or seller tells you upfront, that he cannot stand by it or held accountable because of such and such risks? Sorry, I don’t buy such products.  Continue reading rest of this article…

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