Do it yourself

Last week I shared my observations about the challenges currently being faced by investors ( see Anxious, stressed and desperate ). Many readers have expressed their agreement with my thoughts. However, they found it inadequate and inconsequential. They have written to me, asking for a prescription for remedy rather than mere diagnosis of the problem. My discussions with them indicate that many of these investors are not convinced about the sustainability of current stock prices and continue to expect a sharp correction. Regardless, they find the daily rise in stock prices alluring and difficult to resist. In this intense struggle between their convictions, expectations, beliefs, fear of missing out (FOMO) on a sharp rally (if their conviction is misplaced), and greed to make some quick money, some of them appear to have already surrendered to their fears (FOMO) and greed and invested in stocks which normally they would have avoided due to inferior quality of management, earnings and/o...

One of my close friends bought a plot of land in the outskirts of the city of Dehradun in Uttarakhand, a decade ago. The reason, he outlined, for this investment was that Dehradun is a good place to retire. It is peaceful & clean and has a much lower cost of living. Considering the rising level of pollution (air, noise and water) in larger cities, people would want to move to such places in future. The property prices would therefore appreciate considerably. After a decade, the price of his plot is up by some 300%. He is happy that he made a very good investment decision. When I pointed out to him that Dehradun is no longer the peaceful, clean and cheap city it used to be ten years ago. Therefore, his investment premise has mostly failed. Besides, the land prices in many areas of the NCR have risen equal to or more than Dehradun in the past one decade. The point to ponder over is if you earn a good return on your investment in spite of your assumptions behind making such inve...

  One of the most common narratives in all the investment advisory pitches is the impact of inflation on investors’ wealth. Inflation is often termed as termite that silently destroys investors’ wealth. Protecting wealth from inflation is therefore one of the primary objectives of almost every investment strategy. Over the weekend I examined more than twenty-five investment proposals, mostly focusing on elevated inflation and its impact on real returns. The common advice is to take higher risk by increasing the proportion of high yielding debt and equities. Discussions with investment advisors indicate the investment strategies aimed at protecting the real (inflation adjusted) value of the investors’ portfolios may be based on poor, and often wrong, understanding of the impact of inflation on investors. Most of them presented the official data of inflation and suggested investment products that may yield a return that is higher than the official CPI (Consumer Price Index) infla...

 I have always believed that “equity investment” is a serious business but mostly done in a casual manner. In past three decades I have observed that most investors take equity investment decisions based on factors that are not related to the underlying business of the company they are investing in. While this may be more true for the small household investors (Retail) and High Networth Individuals (HNI); the professional fund managers (Institutions) and large traders are also seen taking decisions based purely on factors like politics, geopolitics, and monthly or weekly data (trade, jobs, production), etc. No wonder the “breaking news” on TV channels causes more volatility in stock prices than the management guidance about the business of the company. I have seen many Retail and HNI investors spending less effort and time in taking equity investment decisions than they would normally spend on buying a shirt. And worst, they spend much less effort and time in taking a decision to...