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.

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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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Forget Stocks for a bit. Get your Asset Allocation right

This article was first published on capitalmind.in You’ve heard of the three C’s by now. Courage. Cash. Conviction. You’re probably sick of them already. For the uninitiated, the three C’s are meant to galvanize the timid investor trying hard to avert her gaze from a screen dripping red. Don’t you know, they say, if your horizon is longterm, you can’t go wrong with equities? Equities outperform everything else out there. But great victory demands great sacrifice.  So build Conviction, be Courageous, and deploy that Cash! Three C’s. But where’s the cash? You wonder to yourself. Weren’t the same C’s called

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The complete list of 2019 stock recommendations

Deep sector expertise, vast networks of industry insiders, sophisticated spreadsheet models. The professionals have all these to do what every investor wants. To Beat the market. But do they? The equity research departments of AMCs, investment banks, wealth managers have already given their 2019 stock recommendations. Some foresee volatility in macro factors and therefore recommend staying with defensive sectors like FMCG, while others expect a capital goods revival, while some expect stocks with rural exposure to do well in an election year. This page tracks the 2019 stock picks of the major institutional investors along with their starting prices to

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What did they not tell us about long-term investing

This post was first published on capitalmind.in A picture is worth a thousand words No pain, No gain Money can’t buy happiness   Or the more contemporary: Privacy is a myth If you’re not paying for it, you are the product They are insightful phrases, originally by wise and often witty people. They convey one powerful idea in a short statement that would take most people pages to describe. Just that they have been used so often in literature and conversation as to have no more insight to offer. A test for whether something someone says is a truism is,

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Nobody knows Anything

Markets have been falling across the board. Some indices more than others. Auditor resignations, Additional Surveillance Measures, Trade wars, Oil prices, the list goes on… The live tracker of stock recommendations for 2018 by the major research and fund houses is down 12% for the year, with 72% of recommendations in the red. There is a general sense of “Oh crap!” about all that’s happening. It’s like that scene from ‘The Matrix Reloaded’ when Neo (the market) battles hundreds of Agent Smiths and they just keep coming and overwhelm Neo. via GIPHY Times like these, it’s natural to look for

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The curious case of HUL and how the markets play favourites

Hindustan Unilever just posted its results for the quarter ending March 2018. A healthy 14% year-on-year increase in net profit mostly attributable to a poor base quarter. HUL stock price promptly went up from around 1504 to 1574, a 4% increase in a couple of days. It is now valued at 65 times Earnings This means, If HUL’s profits stay the same and it paid out all of it’s profits to shareholders, it would take 65 years for a shareholder to recover her current buy price. For context, the NIFTY is at 27 times earnings. Chart shows HUL Earnings and

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Markets after FY2018: Bull or Bear

FY2018 was an ok year for Indian markets. The statement seems strange given what has been happening since late January. In spite of the correction over the last two months, we still ended the year up 10%+ on both the NIFTY and the NSE 500. Not quite the blockbuster returns we saw in Jan 2018 when both indices were at 20%+ returns for the financial year and certain individual stocks were giving double-digit returns in a matter of days. Things were so good that a random selection of stocks would have done fairly well over the last year [Read this before deciding

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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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Read this before deciding your 2018 investment strategy

What a week for the markets! Drama from the Gujarat elections injected volatility, but overall stocks rose dramatically through the week. 82% of stocks listed on the NSE rose during the week. To put it another way, for every stock that declined, nearly five rose during the week. The markets are up nearly 30% in the last year and some stocks have outperformed indices by several orders of magnitude. No wonder that the investment industry is India’s true sunshine sector currently. As if on cue, more than a handful of experts can’t stop but wonder aloud about the sheer brilliance of

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