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Investment Buckets – An Update

TIP Guy 6 August 2010 index, strategy 4 Comments

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…

Index Investing – Can We Use Dividend Yield ?

TIP Guy 9 April 2010 index 7 Comments

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…

SENSEX Trends – Fair Valuation and Improved Earnings

TIP Guy 15 September 2009 commentary, markets 6 Comments

sensex--indexThe current rally has added 98% to the SENSEX relative to March 2009 low of 8160 points. The rally is going on for last 5 months, the question is, what is fueling this rally? This rebound will make us believe it is start of next Bull Run. Any prudent investor will try to figure out what has happened since March 2009 that justifies this rally. As always, at hindsight everything makes sense.

With the unprecedented level of stimulus from many different countries, the global economy is showing signs of stabilization. In addition, the rebound of Oil prices in international market seems to give boost to many countries. Accordingly, I believe Indian economy is also showing signs of stability. I think the biggest boost for Indian business sentiment and environment has been the continuity of the pro-reform government at its helm.

Continue reading rest of this article…

Income Portfolio – Quarterly Update 1H09

TIP Guy 20 June 2009 process 3 Comments

updateOne common question that I continue to receive is about the efficacy of long term investing. The notable factor is almost all of them use two specific examples to explain that long term investing is not a viable solution. These examples are (1) Stock market tanking in 2008; and (2) Satyam going kaput.

To begin with, it tells me that many do not understand what is investing. Folks who ask these questions do not understand long term investing. I keep wondering, how to best explain what is long term investing.

In general, first half of 2009 can be characterized as roller coaster ride. While we saw multi year lows, at the same time, we also saw historical one day rally. In my post bull running for red flag, I showed that majority of SENSEX companies are showing reduced earnings. And surprisingly, it is being rewarding by increase value. I continue to believe, there is no way any individual can predict the markets. So who bother wasting time on it?

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.


The Bull Running for Red Flag – Waiting to Get Hit?

TIP Guy 8 May 2009 commentary, markets 2 Comments

newsThe current rally has added 48% to the SENSEX relative to February 2009 low of 8160 points. Is this the start of next Bull Run? The market players and traders will make you believe it is in fact the start of next Bull Run. Any rational investor will ask himself one question, what has happened since February 2009 that justifies this rally. Has the global economy turned around? Has the Indian economy turned around? Has the earning of companies turned around? Or the general question can be has it even stabilized to say it is turned around? Some may argue that equity markets are leading indicators and hence things have changed for better.

The real economy across different countries and India has showed continued sign of slowing down. The US economy contracted by approximately 6% last quarter, European economy shows no sign of stopping the slide, and Japan has been in 18 year downward spiral. In addition, the export oriented economy of emerging markets continues to slow down. Russia is in tatters, Brazil is hit by reduce material demand, and Indian companies are looking ways to maintain profitability. China is attempting to spend its way out of this slow down.

In addition, I looked into the latest quarterly earnings of the 30 Indian corporations that are included in the SENSEX. Continue reading rest of this article…

Dividend Yields in Global Markets

TIP Guy 17 April 2009 analysis, markets 2 Comments

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…



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