Home » Tag: expected returns

Portfolio Rebalancing

TIP Guy 16 October 2009 education, process, risk management, strategy 14 Comments

howTwo readers of this blog left couple of intelligent questions in comment section on some of the articles. Both of these questions relate to what I term as rebalancing the portfolio (or profit booking). I wanted to wait until I posted articles on TIPBlog portfolio update and risk analysis. I wanted to discuss these two questions in the context of TIPBlog portfolio. It will help better understand the re-balancing and profit booking processes.

You may have read earlier post that discusses risk analysis. I made a comment that the portfolio has overexposure on few stocks like ONGC, LNT, etc. I also mentioned that I will not be selling any partial shares to bring down allocation. Many use the term profit booking for partial selling.

Continue reading rest of this article…

Overlooked Aspects of Dividend Investing

TIP Guy 25 August 2009 dividends, strategy 5 Comments

investingThere are many different styles, approach, and methods of investing. Many individual investors focus on trading (swing, positional, momentum, speculation, technicals etc.), while many others focus of investing (value, growth, blend, etc), and still many others on special situations (opportunistic, arbitrages, etc). In addition, there are quite a few individual investors that attempt at combination of trading and investing. Similar to glass being half full or half empty, I believe every style has its own pros and cons’ depending upon in what context one is looking at it. Individuals have to figure out what works best for them.


Readers are already accustomed to my approach of dividend investing. I am a long term buy and hold investor and prefer to buy my positions at fair values (fair value calculation methodology). The reason I use fair value is because, I do have enough expertise to determine the tangible book value. While I still use book value based on Graham’s method, it is not the only one on which I base my decision.

Continue reading rest of this article…

How to Execute Asset Allocation – Yale Fund Example

TIP Guy 23 July 2009 commentary, risk management No Comments

01319109We all investors try and maintain a diversified asset allocation in our investments. In my discussions with many folks, I have seen that many use different ways of executing this diversification. Many use combination of real estate, equities, gold, etc. In case of equities, quite a few enterprising ones long term portfolio in combination with trading portfolio. Many of us, including me, are aware of different types of asset class and investment vehicles. Unfortunately, for most of us individual investors, we fail to understand how to execute effectively. We really do not know how to engineer our portfolio such that it has optimum asset allocation for our risk profile. We think we allocate little bit of capital to all assets and we should be good to go without any worries.

Continue reading rest of this article…

NIFTY Expected Returns for Different Trading Time Scales

TIP Guy 17 June 2009 analysis, markets 16 Comments

monthly-dividend-portfolio-reviewI presented a long term view about expected return for SENSEX. I mentioned that the compounded expected return was 12.1%, while the arithmetic average was 16% per year.

Today, I am discussing the short term perspective using a NIFTY index. Similar calculations can also be done using SENSEX, but I believe NIFTY is a better representation. I calculated daily returns, weekly returns, and monthly returns for NIFTY from August 2002 to May 2009. In all three cases I have used average closing value on a given day, given week, and given month. The table below shows the summary for these results.

Continue reading rest of this article…

Expected Returns from SENSEX Index

TIP Guy 16 June 2009 markets No Comments

I conducted a poll on MoneyVidya site to get a feel of what users understand about the expected returns on yearly basis from SENSEX index. In the image below, you may see the question that I asked in the poll and four options that I gave to the users. The poll received 54 votes out of 2000+ users at that point in time. That is approximately 2% to 2.5% as a sample size. With this small sample size I do not think we can draw any conclusive results. However, I do believe that it is an indicator and demonstrates the directional trend.

Poll on MoneyVidya - Expected Return

Poll on MoneyVidya - Expected Return

Based on my calculation from Year 2001 to Year 2009, the compounded expected return for SENSEX was 12.1%. At the same the arithmetic average was 16% per year. Majority of the user in this sample size (52% or 28 users) said the compounded return for last ten years is between 11% and 20%. At least based on this small sample size, the majority of users on MoneyVidya site seem to have realistic expectation.

I performed this poll with a long term view of more than 2 years. So it is likely that many of user may wonder whether it makes sense to provide a long term perspective.

In my next post, I will discuss short term returns using NIFTY index.


Estimation of Beta-Based Expected Returns

TIP Guy 16 April 2009 process, tools 10 Comments

monthly-dividend-portfolio-reviewI use Beta-based expected return to calculate and understand potential capital appreciate (or cash flow) from a given stock.

In today’s post, I am discussing the concept of stock’s beta value and how it helps us understand stocks expected returns.

What is Stock’s Beta Value?

In its simplistic form, beta is a measure of any individual stock’s risk (or movement) relative to the overall stock market risk (or movement). I measure Beta of any given stock relative to the S&P CNX NIFTY. Here, I am trying to understand how a stock price behaves relative to the market and how to factor in the capital appreciation into my expected returns. We can calculate Beta either using daily return (i.e. daily pricing) or on monthly returns (monthly pricing). The results should be the same because it is the on relative basis.  Continue reading rest of this article…



~