Learning to invest vs Investing to learn

Learning to Drive You’re on a fairly empty side-street, your cousin, an experienced driver next to you, in the passenger seat. It is her 8-year-old Fiat Punto, but the make or model doesn’t matter to you, just that it’s a functioning car. You don’t know if you will enjoy driving, but you want to be able to. You don’t know if your cousin is the “best” driver around, but you know she’s been driving for a few years and you trust her. She instructs you step-by-step to first push the brake, turn the key in the ignition, press down on

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How SimpleMoney can help track your portfolio

This is a sponsored guest post by Pranshu Maheshwari, founder and CEO of SimpleMoney Taking stock of our personal finances by building a Personal Financial Balance Sheet is a very important step in boosting our financial health. But it can be immensely challenging for many of us because our money is kept across a range of locations: bank accounts, real estate, the financial markets, gold, under our mattresses. Just within the world of Equities and Mutual Funds, we often deal with multiple fund houses, stockbrokers, registrars and portals, leaving us with a collection of usernames and passwords. The persevering souls amongst

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Learning from the latest market decline

Long periods of boredom punctuated by moments of terror This phrase is attributed to many different people said to be describing many different professions. From driving big-rig trucks, flying aircraft to modern warfare. And of course, it has since been co-opted by the investment profession and by the best investors, as a metaphor for the vagaries of the market. Personally, I think it’s a bit dramatic comparing warfare with the buying and selling of stocks. True to form, financial media in the US announced 5th Feb 2018 was “the worst point decline in history“. Phrased like that you can’t help

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Why I’m not selling everything…yet

“So are you selling everything?” was a question I got recently. A fair question since this person had just finished scrolling through two of my recent posts, five charts that should worry equity investors and what that might mean for returns in 2018. Markets rarely stay at elevated Price-Earnings valuations for long periods. The NIFTY has been at PEs higher than current on only 35 days in 19 years of trading (yes, I counted) while NSE500 has spent just 19 days at valuations at or higher than current. You can find a more detailed analysis in my guest post on

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The difference between Financial Planning, Asset Allocation and Security Selection

I get a few emails every week asking for stock recommendations. So I ask a few questions to form the context of the person’s experience with various investment vehicles, track record, their ability and willingness to take risk. In many cases, at this point, I realize the person asking for advice on stocks has little idea of their current financial situation beyond how much they make each month. This short post will clarify and differentiate between three interlinked but distinct elements of the wealth-building process: Financial Planning and Investment Management (Asset Allocation and Security Selection). Financial Planning: “The Where” and

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The complete list of 2018 stock recommendations

When I started investing in equities, I used to be in awe of equity research reports. Immaculately formatted 5-page documents with their glossy charts and tables of financial projections followed by a confident Buy / Sell / Hold recommendation based on a precise target price. I figured those target prices were arrived at by hardcore sector experts working with proprietary excel models of such complexity they would probably crash any computer with conventional specifications. That awe lasted until I realized the “models” in use might as well have been random number generators due to their sensitivity to assumptions about an unknowable

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Five charts that should worry Indian equity investors in 2018

1. India among three most expensive markets in the world Souce: starcapital.de “Between 1979 and 2015 we observed an average Shiller-CAPE of 18.3 and an average price-to-book (PB) of 1.8 in 17 MSCI country indices. Based on the assumption that these average valuation levels approximately represent a fair valuation level, Southern Europe, and Emerging Markets are attractive whereas the US stock market significantly trades above its fair value.” The United States, Switzerland, and India stand out as the most expensive markets in the world at the moment when considered on Shiller CAPE (Cyclically Adjusted Price-Earnings) and Price-Book metrics. However, my

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Brace for negative returns in 2018

Predicting stock markets is a futile exercise. You only need to compare historical predictions versus actual market movements to come to this conclusion. When bulge bracket investment banks and powerhouse economists with their multi-factor models of staggering complexity get them wrong more often than right, should the rest of us even bother trying to predict markets? No, we shouldn’t. At least not to time entries and exits. In preparing for battle, I have found that plans are useless, but planning is indispensable – Dwight Eisenhower Replace “plans” with forecasts, “planning” with forecasting, and “indispensable” with “mildly useful”, and that’s how

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