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…
TIP Guy
9 April 2010
index
I have discussed why I use index-based investing for my portfolio and what index investing strategy I have adopted. In a nutshell, there are two reasons, viz., (1) It gives me a benchmark and floor to which I should compare my whole portfolio; and (2) I believe it tracks Indian economy. I presented my investing approach, which is different than SIP. The only reason I do not prefer SIP is because I do not want to mechanically buy at historically high prices. After posting those articles, I had a very good email conversation with Sachin, one of the readers of this blog. This conversation centered on investing approach. If I presented the conversation “as is”, then it would have very long and perhaps little confusing. Therefore, I am summarizing the gist of the conversation in two questions.
- Can we use dividend yield of the NIFTY index (instead of PE or PB)? e.g. DY > 2.1% invest 100%, DY >1.7 invest 80% and >1.2 invest 40%.
- My thoughts on split the monthly amount equally, one part to be invested as per relative PE, and second part as per absolute DY.
Continue reading rest of this article…
My objective of investing in index based ETF is to have a total return that is somewhat similar to the market performance as a whole. It also acts as my benchmark for other long term portfolios. As mentioned in earlier post, if I cannot beat the market by stock selection, I should just close my long term portfolio and invest everything in these index ETFs.
My initial thought process was I would be investing upto 30% of my long term portfolio into index funds. However, after spending some time reading and understanding the various available funds, I have come to realize that there is not much choice available to individual investors. This is not to say, I do not like ETFs. I am still a fan of ETF assuming that they are structured properly and have reasonable expenses. In general, most of the ETFs have low liquidity and high expenses. I do not want my investments to get stuck in the low liquidity funds.
As of now, I will continue to remain under allocated to index ETFs. I do not know what be would the targeted allocation. I will let readers know when I make a decision.
Continue reading rest of this article…
I have been trying to understand the options available for the index based investments that include index based mutual funds or exchange traded funds. In principle, I am fan of exchange traded funds because (a) they follow a given index; (b) no manager involvement; and (c) low cost structure. Index based fund investments are very good vehicle if an individual wants to avoid stock selection and just wants to follow the index performance. In general, for last 10 years, the NIFTY index has returned an average of 15.5% per year. This return excludes the dividend payments.
The objective for my investment in ETF index fund is to follow the index performance. It will also act as a benchmark for my long term investments. I invest in individual stocks for long term wealth generation hoping to exceed the market performance. At a very minimum level, I would like my long term portfolio to beat the market by some percentage points. If I cannot do that, then it would make sense for me to close my long term portfolio, and invest all my money in index funds.
Continue reading rest of this article…
Blogosphere is an interesting place where you find various bloggers expressing their viewpoints. I am listing some of the articles that I enjoyed reading.
These are some diverse set of articles from fellow bloggers and business magazines. I hope you enjoy reading all or some of these interesting posts.
My investing philosophy involves investing in high quality dividend paying companies at a fair value. I am willing to wait for 10 years or more. So many times I have been questioned on this investing approach and believe it or not, I just smile and move on. Not because I cannot respond, but because I am confident that I will have the last laugh. As an example, you may read one of my earlier posts on yield on cost.
Indian companies are not alone in paying dividends to its shareholders. Dividends are paid to common shareholders by corporations across the world, in different economies, different markets, and variety of industry segments. The characteristics of common shareholder dividends are not same. There are differences with respect to yield, frequency, how dividends are perceived, quality, and growth rates. In addition, for an international investor, effect of currency fluctuations is an added risk.
Today I am presenting the dividends yields and growth rates in three different parts of the world. It would very difficult (if not impossible) to either screen or identify every dividend paying companies in these markets. Therefore, I am using individual index and their yield to look at trends in any given market. While there may be varied arguments about quality and validity of such comparison, I still believe it is a good start to understand any given market and its policies vis-à-vis common shareholder dividends. Continue reading rest of this article…
