TIPBlog Portfolio Update: 2010 Year End

The Year 2010 can be summarized as continued optimism, scams, change of guard at IPL, food rotting in warehouses, revolutions in middle-east, deflection from fragile European economy, etc. As an individual investor, should I care about macro economics? or Should I care what a bollywood celebrity’s dog does? They are all interesting stories, beyond which it has no value. This post summarizes TIPBlog portfolio update and measures progress. Earlier updates are listed under progress updates.

The 2010 year end status update is as follows: Continue reading rest of this article…

Investment Buckets – An Update

Contrary to general belief, the process of studying and learning does not end when you graduate out of college. It is a continuous process. If you stop learning, you will fail to adapt to the changing environment. You know what happens to stagnant pool of water? Same way, in true sense, long term portfolio or building a long term process, you need to adapt. As you learn more, you need to make changes. During the early phase of TIPBlog, I presented different investment buckets that I use or planned to use.

To refresh, these buckets are not asset allocation. How can that be? A true asset allocation should not have co-relation or may have very low co-relation. The ones that I show on this post, are all co-related and hence, not asset allocation. All are equities! When we talk about asset allocation, what it means is savings, FDs, bonds, equities, gold, etc. They are investment vehicles that are likely to provide true asset allocation benefits. Out of all these, I only focus on writing about equities on TIPBlog. Continue reading rest of this article…

Value Investing Landscape

Do you know how to differentiate between value investing and growth investing, or for that matter value investing with any other form of investing? I will leave this for readers of TIPBlog to ponder over it. However, I would like to say one thing; I do not know how to differentiate. I invest with an objective to grow my capital. It does not matter where it comes from. Hold on, don’t pass a judgment yet.

Let us take an example. Late last year, Buffett bought a whole rail company, Burlington Northern Santa Fe. On per share basis, the price paid by Buffett was (1) 31.5% premium to prevailing market price at the time of announcement; and (2) Approximately, 15 PE ratio at the time of announcement.

At first glance, these two matrices will tell you, “that was not cheap!”. That’s because in today’s world of instant gratification, we have come to believe PE ratio and/or current premiums are only ratios that determines value. We have dropped the meaning of value to few parameters. Small time investors like you and me would jump to take 31% premium and declare victory. But 20 years down the road, Buffett is likely to be basking in glory. Continue reading rest of this article…

TIPBlog Portfolio Update: 1H 2010

UpdateThe 1H2010 can be summarized as return of optimism, in economy, in stock markets, stabilization of global economy, and fears about euro zone. As an individual investor, should I care about macro economics, or should I even worry about what happens to Greece or to euro currency? Ambani brothers patch up and there are stories its good for markets and business! To me, being stalwarts in India Business world, instead of setting an example, it was idiotic for them to even fight and drag each other into courts. These are good academic discussion, but I doubt it is going to help in your own portfolio. I am taking stock of my portfolio.

My last progress update was for year end 2009. This post summarizes TIPBlog portfolio update and measures progress for 1H 2010. Continue reading rest of this article…

Goals and Strategy: Source of Mess Up in Personal Portfolio

1133804_sign_success_and_failureAs a do-it-yourself investor, I enjoy the process of investing much more than finding my next company I will invest in. Admittedly, the process is much more challenging than finding the winning stocks. Yes, you read it right! Investing process is very difficult in many different contexts. Managing the portfolio requires wearing different types of hats. Sometimes you have act and behave like a leader, sometimes play the role of manager, and on many occasions you work like an employee.

Most of the investors spend a significant amount of time in looking at the quantitative part of the company analysis. We arrange data in different formats, different time scales, compare with analyst, check out google to see what others have to say, etc. In short, search and screen multiple stocks, collect data, and present observations and results. This is all about execution and is similar to what an employee will do. Is that really important?  Have you asked yourself:

  • Why this specific type of analysis?
  • How you determine earnings per share?
  • Is it only necessary to look at last one year or last three year or more?
  • Do you include dividends?
  • How do you decide multiples?
  • How do you decide value? Continue reading rest of this article…

BONDs Provide Solid Foundation in Investment Portfolio

Thirteen years ago, when I graduated and started working, my dad had couple of suggestions. Papa ne kaha, “dekho beta, you have graduated and will be earning on your own”, he continued, “you have to develop your own thinking and your own future. We have mentored you enough, now you are on your own”. [At that point in time, I did not realize what he meant by this. Anyways] He also said, “meri sirf do baat yaad rakhna”. And following are those two words.

  1. You will earn a lot of money in your life. You will not be alone. Everybody does it. The important thing for you would be to figure how to keep it. Samajh rahe ho. Keep it, and not let it go waste.
  2. Never forget my generation’s government bonds. They are wealth builder.

As it always happens, I have never made an effort to follow my dad’s advice. But now when I look back, I realize that sub-consciously, I have followed both of his recommendations. Continue reading rest of this article…

TIPBlog Portfolio Update: 2009 Year End

UpdateWhat a year 2009 was? At the beginning of the year, the stock market was trying to find how deep the abyss was. Every other participant in the equity market was trying to run away like there was no tomorrow. Fast forward to second half of the year. The story changed and now the stock market is trying to find its peak. It was in true sense a roller coaster ride.

When the equity market goes up like it did in later part of the year, it gives a false sense of confidence in our abilities to pick stocks. Irrespective of what one thinks, any company stock you had touched in second of 2009, it has zoomed. It really did not matter which company stock it was! Lately, I have seen quite a bit of emails trying to point me towards how the stocks that I negated (or did not pick?) have zoomed up and made them money. I do feel happy for everybody who made good money in 2009. I wish you had shared those winners with readers of this blog. We all want to make money here. Right? Continue reading rest of this article…