Wednesday, December 20, 2017

Investors' dilemma

"The single biggest problem in communication is the illusion that it has taken place."
—John Milton (English, 1608-1674)
Word for the day
Bagatelle (n)
Something of little value or importance; a trifle.
Malice towards none
What is the road ahead for Rahul Gandhi?
After all Karnataka is looking no different than Himachal Pradesh. High anti incumbency sentiment and a surging BJP ready to exploit it.
First random thought this morning
Do you remember anyone asking or bothering how much you scored in your high school examination, once you settled in a job. 40% or 99% hardly make a difference once you cross the threshold in life. In their celebration, the Congressmen are perhaps ignoring the fact that the next opportunity for them in the state of Gujarat is at least 5yr away.
After going through some 30 speeches of Rahul Gandhi in Gujarat, I could not find any hint of a solution to the problems of common man, most notably a decent livelihood.
The Congress Party should try to win elections on an agenda, rather than aspiring to defeat BJP. This sadism would not lead Congress anywhere.

Investors' dilemma

The 2017th year of the Christ as a whole is not leaving much to complain with investors. However, since non-equity portfolio of investors (gold, real estate and fixed income), which historically has constituted larger proportion of their portfolio, has not done particularly well in 2017, and general outlook for 2018 regarding this part is not looking very bright either, investors are slightly jittery. The situation is complicated further by the dilemma they face, viz., whether to protect profit in equity portfolios by rationalizing the weight of equity or increase the weight of equity in investment portfolio by cutting allocations to other assets.
I shall be sharing my thoughts on investors' dilemma in next few posts. However, before I delve upon the investors' dilemma and share my outlook for 2018, it is pertinent to put 2017 equity returns in some perspective.
Benchmark Nifty has returned over 27% (yoy) gains in 2017, the best since 2014. The gains may look exciting given poor returns in previous couple of years. However, from a long term investor's perspective, the returns are very similar to that of 2016. 5yr CAGR return in 2017 is about 12%, the same as in 2016.
 
Important to note that long term Nifty returns (5yr CAGR) has been lower than the nominal GDP growth in 6 out of past 7yrs. Only in 2013 at 16% it was marginally ahead....to continue tomorrow
 
 

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