Wednesday, October 11, 2017

View of an inquisitive average Indian investor

Yes, that is about me, the restless soul whose twinkling eyes forever stuck at the nifty graph! :)

2016-2017 have been quite a roller coaster ride for Indian Stock markets. Various factors have driven the Nifty to all time high and the bulls are not ready to hang their boots just yet. Having a sixth sense and lot of love for the markets (not to be confused as an expert, I am just an enthusiast in Investing) the current valuation makes me jittery. Keeping some extra bucks aside each month has been a practice for sometime, I am itching to invest it in the markets. However there are number of factors which is driving my mind towards fixed income space, here are few of them. 

Nifty 50 is trading above 25 PE. This is a dangerous level. In markets language, or whatever I can make if it is a valuation of 12-14 PE ratio is some how a fair valuation as an entry point. I am going sector agnostic. Every sector has its own metrics to decide on, for FMCG it is a little higher at around 18-22 PE. Trying for a better investing approach, I looked at individual stocks at specific sectors (I am talking about my favorites) are trading above 40 PE. All companies are good. But every thing has a fair price, premium for a better business proposition, but at the obnoxious valuation they are trading at, I feel its best to stay away till markets correct or company performance catches up with the current valuation. 

India is at its 'super feel good days'. Everything looks beautiful with new initiatives, disruptive steps by government, and continuous inflow of domestic institutiinal investors through mutual funds. Evergreen Indian consumption story is now selling double with Make In India tides. FII selling is not having any impact on the markets as domestic institution buying in every opportunity and pushing up valuations. Too much optimism may not neccesarily result into too much profit.  I am better off as a cautiously optimistic individual. 

GST not settled just yet, I believe this is an teething issue, and certainly believe, some of its impact should come on the coming quarterly results and market movements, giving some opportunity to buy in dips.


In the given scenario I often feel uncomfortable to buy new companies for my portfolio. But, my investment centric mind doesnt let me stop. I have figured out following few options to cautiously participate in the market yet staying away from being over zealous.


1. Continuing my SIPs in equity and hybrid mutual fund schemes. These are long term investments. I am continuing these for over 3 years to 5 years. Hence, the average cost of buying the units is pretty low compared to the current price. A dip in the market unlikely to blow away my capital.

2. Buying add on MF units on dips. Though overall marker remains highly priced, there are days when consecutively 2 or more trading sessions have been victim of profit bookings. I make some add on investments in my existing mutual fund scheme. I dont believe in bottom fishing, hence stick to a minimum amount and maximum 2 trades per month, discipline is the key for long term wealth creation. I even buy the nifty bees and junior Nifty, the Index funds on those days.

3. Investing in quality IPOs  - Given the optimistic markets condition, there have been an avalanche of equity IPOs this year. Being a small investor, I stay away from SME IPOs, as it has a huge monitory commitment (upwards of 1 lakh rupees for each). But I am always in look out for good IPOs. Few IPOs I applied for this year were BSE, CDSL, MBL, Dixon, Capacite, D-mart. Ofcourse I am not the only intelligent retail investor. Hence, most of the issues were super success with huge multi-times subscriptions. Hence, I was lucky to get three of the ten IPOs I applied for. No qualms to say, I made an average 60% profit on my investment and exited on the very listing day. One of the reasons of exit is IPOs are often highly priced compared to their valuation, so opportunity of cashing in on listing day looks safe to me.

4. I did invest in some debt funds. Interst rates going southwards, that was the only way to earn some extra bucks on cash. Fixed deposits rates are at multi year low, liquid and ultra-short term debt funds are at position to give 1-3% extra income on your idle cash. This money will be also used incase there is a significant correction in the market.

5. Though I dont recommend the stocks per say, but still these are learnings. Crisis many a times turn out to be an buying opportunity in equity market, if the stocks are like Infosys and JKumar Infra. Sudden news of shell companies being banned and erronously including JKIL in the list resulted in shedding a chunk of market cap on JKIL. It has given a brilliant entry point to the investors. Infosys management issues also has a similar story to tell. However I am not a certified stock analyst and their future growth potential needs to be studied well incase one makes a buying decision.

Investing is an art and science, and I am learning it with time. The insights and experience I share in hope that it eases some stiff negative and scary ideas about investing. Financial planning and managing money is fun.

Here is a low down on few more ideas you can look at at this point of time, are - 

1.If you have an existing investment in the market with a high profit in the book, and feel the PE is stretched beyond comfort level.You may look at booking partial profit if not full (assuming the equity investment is more than a year old,and the return is tax free). Parking this money in liquid funds/short term debt funds is wise, untill you see a good bet. If you are savvy investor, you can consider parking someportion in the FMCG stocks (I call them Evergreen).

2. If you have accmulated cash, and you may also park the cash in liquid fund, and using STP (systematic transfer plan) invest in equity mutual funds.

Would love to hear what are you doing in your investments given the current market conditions. Share your ways of inveating. Look forward to hear. If you like the post, do share and comment.  

Friday, October 6, 2017

Be disciplined and grow rich!

Building a good habit takes time, nurturing and care. Determination and discipline takes you a long way. One of such habits we have inherited from our wise elders is 'savings'. I must also accept that the world has changed incredibly in last few decades and so the way we save money has also seen a major shift. 

In this ever changing world, the savings have shifted from real estate and gold to PPF and mutual funds, for few lucky ones its private equity and bitcoins! What I would like to focus in this post is not the tool but the discipline by which wealth can be created and enjoyed. A discipline of regular savings, discipline of curbing frivolous expenses can not only make you richer, it also makes you a responsible  and a content individual. The following 5 habits would definitely make you richer next year, if you follow them with sincerity, wether or not you get a salary hike! 
Spend as much is required 

The famous investor Warren Buffet, who has created huge wealth almost equivalent to GDP of a small country is frugal. He stays in 3BHK apartment since last 30 years. And he openly endorse the concept of 'being frugal'. One of his famous quote is "if you buy something you donot need, soon you ll have to sell something you need".

When you itch to buy that iphone latest series, just ask yourself, is it worth it to spend 80 thousand on the gadget. What would be its resale value. How long are you going to use it? What is the purpose of the phone. What is the value is it adding to yout life and what are the 5 important areas you need to spend on where those 80 thousand will make a big difference.

Follow a discipline in saving
How about chucking that hollow calorie filled grilled sandwich you eat daily for Rs. 50. Just shifting to a health snack of a fruit or a box of munchies from home would save the whole money. Do you travel that walkable distance from home to railway station for Rs. 18 each side making it Rs. 36 daily while commuting to office. Does your extra cup of sugary cutting chai cost you 20 bucks a day? If you calculate, cutting some of your unhealthy habits and walking that extra mile would save you a neat 100 bucks daily. 22 wotking days make it to about Rs. 2200. Do you know a one NCFM certification in financial markets cost you less than this. And you can add that in your CV too! 

And saving 2200 bucks per month would make you richer by Rs. 26,400 a year.


First Save then Spend 

In some personal finance book I read this- first pay yourself. You are definitely wrong if you think I am talking about shopping. 'Pay yourself' here signifies securing oneself financially. Protecting with future income, insurance from risks and contingency for uncertain situation. You should also take out some money for personal upliftment, skill development and nurturing yourself. You are your biggest asset.Investing in yourself will yield you much more return than any external investments.

NPCI - Enabler of the Indian cashless dreams  


Give back to the society 
The most common traits of the richest people in the world are they are also biggest philanthropists, be it Bill Gates or Warren Buffet or Mark Zukerberg, all of them have pledged large part of their fortune for noble cause for humanity and world at large. 

You may argue and you are right at that. You are not Mark Zukerberg. But you have a way. And a great way. The money you saved cutting your everyday expense, can be used in some productive way, like providing for needy, sponsoring education for maid's children, helping your maid with some medical expenses etc to name a few which can be done way within your means. The immense satisfaction it gives, can fill you with whole new enthusiasm of growing rich to give it back! 

Recycle

Wealth is not only bank full of money. Wealth signifies sustainable and balanced life, where needs are fulfilled at ease and there is always more than required. Recycling is one way of doing it. Recycling goods doesnt only help saving environment, it also can help reduce a chunk from your monthly budget.


Earning big money is onething. But rich is whose expenses are much less than income. You can only become rich when your expenses are in control. A person who is earning a million dollar and spends the whole money is not riche than someone who earns 10 thousand and saves 2 thousand.

Your water tank will never fill if it has a big hole at the bottom.  It is about managing money and not only earning. 

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