Keep your investing identity small

This post was originally published on capitalmind.in Have you experienced being 100% unquestioningly sure about something, only to later have doubts? Cricket followers: Take a look at the image and answer the question Is the batsman in or out? Out? Because the stumps’ position suggests, the bails have dislodged a tenth of a second before this frame? Surely Not Out? Because there’s a sliver of bat grounded beyond the line? Probably Not Out? Because the batsman gets the benefit of doubt? Now, take a look at this image and answer the same question It’s the same image, with no additional

Read more

How to make better decisions: A critical life meta-skill

This post was first published on capitalmind.in When was the last time you regretted a decision you made? Maybe it was an impulse purchase on an untested ecommerce site that proved a nightmare to deal with. Or a decision to quit a job for another that didn’t pan out how you had hoped. Or maybe you were left wondering how you ended up paying so much more for your car than you originally planned. Investors nurse long lists of regrets. Exiting a stock to then see it double after. Piling into a stock or strategy seemingly at its top only

Read more

Common sense position sizing for investors

Good traders worry all the time about blowing up. So they cap their exposure to any single position. Most active investors have the opposite problem. They tend to be under-allocated to their best investments. How much to allocate to active positions deserves some attention. This post looks at a few common-sense rules about position sizing for investors.

Read more

Where is India’s Amazon?

This article was first published on capitalmind.in In 2019, Amazon made $281 Bn in revenue. Up 20% from 2018. That is the combined revenue of the top-5 revenue-earning Indian companies: Reliance, IOCL, ONGC, BPCL and SBI. A year later, in 2020, Amazon clocked $386 Bn, growing 37%. Put another way, Amazon added 1.4 times the total annual revenue of Reliance Industries as incremental revenue in 2020. Chart shows Amazon’s meteoric revenue growth since 1997: Yes, some of that growth in 2020 was aided by the pandemic but is not an aberration. Since going public 24 years ago, its annualized revenue growth rate is 41%.

Read more

The Observer Effect and how it messes with investment returns

There is a formal theory called ‘The Observer Effect‘ in science that is to do with how the presence of an observer determines the outcome of a phenomenon. This article is only loosely related, not as deep, and probably more fun. Think about a time when, on a lazy Sunday mid-morning, a distant out-of-town relative called out of the blue and said they happen to be visiting their son in your city, will be passing close to where you live, and would like to come over, today, in an hour! Please don’t go to any trouble. Or imagine, at work,

Read more

HSBC Focused Equity Fund: Should you invest?

[This post was first published on capitalmind.in] HSBC has launched an NFO (New Fund Offering) for a Multi-Cap Equity Mutual Fund. The NFO is open from 1st to 15th July 2020. We took a look to see if it makes sense for investors. Short Answer: Unlike Large Cap funds that produce similar returns and underperform low-cost ETFs, Multicap funds see significant performance dispersion. So it matters which fund you pick. Unless you have reason to believe the fund managers of this new fund bring a unique advantage to the table, you are better off with funds with a track record.

Read more

How to think about Asset Allocation in India – Part 1

Getting usual Asset allocation advice is like listening to in-flight safety demonstrations. The airline crew has to go through the motions, and you don’t even have to pretend to listen. 

That’s because the way we think and talk about Asset Allocation is broken. Asset Allocation is NOT about settling for lower return in exchange for lower volatility. 

In Part 1 of this two-part post, we examine the evidence how an actual and implementable asset allocation strategy outperforms an equity-only strategy. In Part 2 we’ll look at a few allocation scenarios and take a stab at what we think works best for most investors.

Read more

Time the Market. Sleep Better.

This post was first published on capitalmind.in As of 9th May 2020: Gold (+48%) has outperformed Nifty (-19%) by 67%. In one year. You can not time the market. But wait… Imagine if you had known this chart back in May 2019. Heck, back in Feb 2020 would’ve worked too. But you can not. Because timing the market is impossible. Which is why you should buy (or SIP) and hold. End of story? Not quite. To start with, let’s keep it simple and not pretend that we could have predicted Gold’s performance. But could we have gotten out of the

Read more