Long term investing beautifully explained

 

Find one company you can hold for 10+ years
Use your savings in the year to buy that one stock
Find next company in the second year
Repeat the process
Do it year after year
Over a period, you would have built a great portfolio.

— D.Muthukrishnan (@dmuthuk) December 23, 2020

Best advice ever given in this correction

- SIP investment advice in this correction around 10000 levels has given a 30% return this year

- 10000 to 7500 and now to 13000+

- cannot remember last when we had such excellent gains

- I have been recommending investment in index funds for more than a decade

- no fund manager can beat the market so better to be the market

- you cannot time the market but you can be a disciplined investor at all levels.

The Ideal Company Doesn’t Pay A Dividend

....You in my view you should never invest in equities for income. You should invest in equities for the greatest total return that you can get. So that’s the growth of the share price plus any income and if you need to spend some money sell some of your holdings, which I know isn’t rational to some people but I assure you is the correct way to do this.

The ideal company doesn’t pay a dividend and if a company can make a 30% return on capital why would you want it to pay you a dividend? You by and large can’t make a 30% return on capital so you want it to retain the earnings and generate that return for you.

Read more at https://acquirersmultiple.com/2020/11/terry-smith-the-ideal-company-doesnt-pay-a-dividend/

Harvard: Why beating the stock markets (or index funds) is incredibly difficult

• Performance persistence is rare: Harvard’s endowment hasn’t always lagged the market. In fact, it produced a remarkable string of successes in the late 1990s and early aughts. Cumulatively over the 15 years through mid-2008, for example, it beat the S&P 500 by more than five annualized percentage points, better than almost every actively managed mutual fund and Wall Street institutional investor. While the odds of producing that 15-year market-beating return were very low, they were even lower that the endowment’s managers would be able to repeat that success. Rather than reacting smugly, we should take to heart that even the best and the brightest are unable to consistently beat the market.

• Overconfidence is an obstacle: One of the reasons that performance persistence is rare is that success breeds overconfidence. I have no inside knowledge about the managers running the Harvard endowment, but it would be difficult not to let a 15-year annualized alpha of over five percentages points go to their heads.

Read more at https://www.marketwatch.com/story/what-the-harvard-endowments-below-average-grade-can-teach-you-about-index-funds-and-your-investments-2020-10-09 

Why PMS does not make sense

 

Short term, medium term and long term

 

Why invest and forget is bad for the economy

Your broker makes no money.

The Govt makes no money.

Your tax accountant makes no money.

Your financial advisor makes no money.

This type of investing is harmful for the economy but good for you. https://t.co/DfjeKcQyw0

— Mr. Free | Earn while you Sleep (@LifeSkillGrowth) August 28, 2020

Companies with a solid grip on your everyday life

To stop SIPs or not

Many are asking whether they should stop SIPs. If you've emergency fund equivalent to one year of expenses, go ahead and continue SIPs. If not, better late than never, stop SIPs and build the required emergency fund.

Those who've lost jobs or have salary cuts, stop SIPs.

— D.Muthukrishnan (@dmuthuk) May 9, 2020

Those who sell products or services always say it's a good time to invest. That's their bread and butter.

As the economy is into recession, see your financial condition and decide. If you've surplus money not needed for next 10 years, then only go ahead and invest.

— D.Muthukrishnan (@dmuthuk) May 9, 2020

TITAN: what wealth creation looks like

Source: http://alphaideas.in/2020/02/05/what-wealth-creation-looks-like/

How nifty will change in the coming decade

Going by the historical trend since the Nifty was created, almost all the entrants into the Nifty over the next decade will come from 100 stocks currently just underneath the Nifty. In order to assess which of these 100 companies will find themselves in the benchmark a decade hence, it is worth first trying to assess how the Indian economy will change over the coming decade.

We see three noteworthy changes taking place in India over the next decade:

• The continuing formalisation of the economy and the concentration of profit share in almost every sector in the hands of one or two companies.
• The formalisation of savings, away from physical savings, and toward financial savings.
• The continuing formalisation of retail and, more generally, of distribution channels in India.
• Let’s delve deeper into each of these changes.

1) India is already an economy with extraordinary levels of profit share concentration in many key sectors. For example, in paints (Asian Paints, Berger Paints), premium co...

Read more at https://marcellus.in/blogs/how-the-nifty-will-change-in-the-coming-decade/

10 Things (Foreign) Fund Managers Say and What They Actually Mean

“What we have witnessed is a 10 standard deviation event”

“This didn’t show up in our backtest”

—


“The rise of passive investing and quantitative easing has materially distorted how markets function”

“Performance hasn’t been great”.

—

 “Cognitive diversity is incredibly important to us” 

“We have one woman on the team”.


Read more at https://behaviouralinvestment.com/2019/12/04/10-things-fund-managers-say-and-what-they-actually-mean

Investors also keep losses small

The role of P/E multiples in determining investment returns

Two of the most common fallacies of investing in the stock market are:

• P/E multiple of 10x is cheap and P/E multiple of 50x is expensive
• During time periods when P/E multiples of great companies compress, share prices of poor quality companies will outperform those of great companies.

Let’s do a quick statistical analysis to test these two points. As shown in the exhibits that follow, the BSE100 universe in India has had no significant correlation between starting period valuations (as at the beginning of the concerned period) and subsequent long-term returns, no matter which phase of the stock market one looks at.

Read more at https://marcellus.in/blogs/the-role-of-p-e-multiples-in-determining-investment-returns/

Pay Up, But Don't Overpay

Did the fellow who paid 68 times earnings for Nestlé India in 1992 overpay? If he had, his long-term return should have been poor, right? But that didn’t happen. It didn’t happen because even at a P/E of 68, the growing earnings stream the company would deliver over the next two decades was not being fully factored in that “crazy” price. So, perhaps the fellow who bought it at that price was not that crazy after all.

It seems to me that Indian stock markets have systematically undervalued Nestlé India by ignoring its long-term growth potential. But, you ask, how much more can Nestlé India grow? I will let you dwell on this by providing you with a few data points.

Read more at https://www.outlookbusiness.com/specials/the-name-is-buffett-warren-buffett/pay-up-but-dont-overpay-1502

Why the tide that lifts Sensex and Nifty leaves small, mid-cap stocks untouched

Even though there may be nothing fundamentally wrong with a number of small and mid-cap stocks, they continue to be victims of a SEBI norm with regard to restructuring of equity schemes of mutual fund that has killed buying interest in them.

Recent data shows that more than 77 per cent of the total investments by mutual funds and insurance companies is concentrated only in India’s top 50 listed companies (those in the Nifty index).

Mutual funds, insurance companies and other domestic financial institutions (FIs) hold stocks worth more than Rs 20 lakh crore (nearly $300 billion) on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE), out of which the share of investm..

Read more at https://www.thehindubusinessline.com/markets/stock-markets/why-small-mid-cap-stocks-dont-rally-like-sensex-nifty/article29755521.ece

Identifying Capitulation: How to Tell We've Hit Bottom

There are two important features that identify climax selling. The first is the rapid acceleration in the speed of the market fall. Like a Stuka dive-bomber, the market first rolls over slowly and then plunges in a vertical dive. This is fear at work.

The second feature is a massive increase in volume. This is panic. Ordinary people are desperate to get out of the market. Generally the funds and institutions got out of the long-side of the market many months ago.

Read more at https://www.cnbc.com/id/27154015

Biggest beneficiaries of the cut in corporate tax rates

"The biggest beneficiaries of the cut in corporate tax rates are companies with a combination of high ROCE + high reinvestment rate + high tax rate."https://t.co/k2j52u40GO

— D.Muthukrishnan (@dmuthuk) October 1, 2019

The only to reliably make money in the stock market

Source: http://alphaideas.in

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