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,

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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.

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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

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Motilal Oswal’s S&P500 Index Fund: Should you Invest?

This post was first published on capitalmind.in Motilal Oswal has launched an NFO (New Fund Offering) for its S&P500 Index Fund. The NFO is open from 15th to 23rd April 2020. We took a look to see if it make sense for Indian investors. Short Answer: The launch of a fund tracking a major US Index is a step in the right direction. But it’s not necessarily the best way for Indian investors to invest in the US. Let’s make sure we’re clear on the reasons. The S&P500 has outperformed the NIFTY more times than not over the last decade.

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Fundamental Analysis Tools for Investors in India

In the course of finding the most time-efficient way of analyzing companies shortlisted for investment, I’ve come across various tools available to Indian investors. This post compiles a list of some of the tools that I’ve tried either briefly or extensively along with some of their key strengths and weaknesses. Note that this list is far from comprehensive and also that digested analysis from any source is typically only a starting point and not a substitute for diving into past annual reports to gain context of the fundamentals. Overall note of caution on using any tool that aggregates data is to assume

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The complete list of 2020 stock recommendations

This has become an interesting annual exercise where I track stocks recommended at the end of the year by the various research houses from big investment banks to brokerages. After all, there are the folks with high-powered research teams equipped with bloomberg terminals. You would expect them to outperform the simplest way you could invest, i.e. buying the index. Recap of how the professionals did in 2019 Here’s how the professionals did. The 13 research teams I tracked recommended a total of 98 stocks (with overlaps). If you had invested equal amounts of money in their stock picks, you would

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Does Momentum Investing work in India

This post was first published on capitalmind.in In Short Contrary to how it might seem in financial media, momentum as an investment strategy has been around for the better part of a century. Empirical studies going as far back as 1801 have shown momentum works, not just in equities, but across asset classes. Momentum outperforms broader markets. Momentum outperforms benchmarks in India. We extensively backtest a momentum strategy against portfolios of randomly selected stocks, and against the benchmark indices. But the outperformance comes at the cost of higher volatility and higher point-in-time drawdowns in the short-term. Stick with it though,

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Does Buying Expensive Quality Stocks Work?

This post first appeared on capitalmind.in It’s the 1960s. New investors join the markets in droves. The number of shareholders crosses a landmark number for the first time in history.  Most of these new investors flock to mutual funds.  Assets under Management, having grown 7x in the last decade, are on track to grow more than 3x. A star fund manager breaks away from the firm that he helped make the face of the mutual fund industry to start his own. His NFO seeks to raise $25M, an ambitious amount for the time. He plans to charge as much as

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