Team-BHP > Shifting gears


View Poll Results: Stocks as a percentage of my net assets are -
0 - 25% -- I'm like the most conservative Indians. I love FDs. 291 33.53%
26 - 50% -- I have a few stocks. 385 44.35%
51 - 75% -- I'm an active trader. 130 14.98%
76 - 100% -- Hey, I'm an i-banker!!! 62 7.14%
Voters: 868. You may not vote on this poll

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Old 6th June 2020, 00:17   #4291
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Originally Posted by RahuKetu View Post
Alok Industries which was acquired by Reliance industries is gaining 5% daily for nearly past 12-15 days. Doubled in less than a month. I bought it nearly 10 years ago for 21 Rs. It went down to 3-4 Rs. One month ago it was trading for 6 Rs., Today trading at 23 Rs.



Finally, I have reached breakeven position after 10 years.

You are extremely lucky to have these in today's market conditions. I have been trying to get AlokInd for a few days now but have not been successful. Meanwhile my Vodafone stocks have gone up by 40%.
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Old 6th June 2020, 08:03   #4292
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Can you let us know which God you pray to? What Puja needs to be performed to achieve such an outcome?
I am a recently joined member who has been following smart cat for years now. You have been very enlightening and is a good teacher.

My present question is this. Stock markets are totally diverged from the real economy now. I understand that there are multiple factors for this including but not limited to
1. Stock markets are forward looking and are reflecting the economic conditions 12-18 months from now 2. Lots of businesses are becoming mono or dipolistic. Classic example in India being telecom sector.

What should a non professional market man like I do. I found out that my so called internet search and research of companies is turning out to be a lemon and that even so called clever sectoral funds can leave you in the red. My UTI transportation and logistics fund will not see light anytime soon.
Is it just wiser to invest in a couple of index and gold funds and forget about it. My time horizon is around 15-20 years.
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Old 6th June 2020, 08:24   #4293
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Originally Posted by Sree View Post
I am a recently joined member who has been following smart cat for years now. You have been very enlightening and is a good teacher.

My present question is this. Stock markets are totally diverged from the real economy now. I understand that there are multiple factors for this including but not limited to
1. Stock markets are forward looking and are reflecting the economic conditions 12-18 months from now 2. Lots of businesses are becoming mono or dipolistic. Classic example in India being telecom sector.

What should a non professional market man like I do. I found out that my so called internet search and research of companies is turning out to be a lemon and that even so called clever sectoral funds can leave you in the red. My UTI transportation and logistics fund will not see light anytime soon.
Is it just wiser to invest in a couple of index and gold funds and forget about it. My time horizon is around 15-20 years.
I am not a stock market expert but I have been investing for last 15 years There are some lessons which I have learnt which I would like to share.

Please note that this is only applicable for passive long-term investors and not active traders.
  • The key to long-term wealth is process and discipline
  • Asset allocation is more important than anything else.. individual stocks or mutual funds matter much less.
  • Don't allocate more than 60-65% in equities.
  • Rebalance your portfolio every year or when there is a sudden movement in markets. (more than 5% change in asset allocation)
  • Avoid lump sum investment in equities, always spread your investments over time.
  • Passive investing in mutual funds have worked better for me than individual stock picking



How to allocate across mutual funds -
  • Active large cap funds does not make much sense. Pick an aggressive hybrid fund or nifty index fund. This should be core equity holding
  • Pick a nifty next index fund
  • Pick a good actively managed midcap fund.
  • If you are up for it, I would suggest investing in an overseas fund like Franklin US opportunities or Motilal Oswal S&P index fund. Otherwise, invest in something like Parag Parikh long term fund which invests 30% or so in US market
  • Don't invest in sectoral funds
  • Don't invest in small cap funds.
  • Don't have more than 5 funds in your equity portfolio
  • Don't change mutual funds every 6 months or 1 year. Give at least 2-3 years to a fund.


The above advice doesn't need much time or effort. It requires one to be patient once you have decided on asset allocation and funds. Interestingly, I manage my wife's portfolio as well where I follow a very passive style. In my own portfolio, I have been more active and tried various things. Guess what - over the years, my wife's portfolio has given much better returns and that too at a fraction of time and effort. So, less is more. Best of luck!

Last edited by adimicra : 6th June 2020 at 08:26.
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Old 6th June 2020, 13:37   #4294
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  • Don't invest in sectoral funds
This is one point where I usually don't agree with the experts. I have been investing in FMCG sectoral fund and if I look at last 10 years performance in my equity portfolio, then this sectoral fund has been one of the top performers and since this is a defensive sector, it performs well even when market is falling. I think it narrows down to which sector you are investing in.
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Old 6th June 2020, 14:00   #4295
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This is one point where I usually don't agree with the experts.
Fully agree with you.

Experts say, in India one should invest in consumer product companies because its a consumer driven market. In addition to keeping an eye on the financials, overall health of the sector and market conditions, I usually pick up shares that I can see in daily life. For e.g. ITC. Cigarettes - although I don't smoke, I can see them doing pretty well along with their other FMCG products.

Another thing that makes me curious is why do people (almost never) talk about buying stocks when the the market/economy is down. I am a long term investor but I also would not leave an opportunity to buy Reliance for INR 950 in the year 2020 (its trading at close to 1600 now). In the past 2 months I have seen only one market guru urging people to go all out and buy shares since most good stocks had actually hit their 52 week lows. To note: I am only talking about blue chip 'good' stocks with strong financials (e.g. Reliance/HDFC Bank/ICICI Bank/L&T).
I don't expect these companies to perish due to COVID; these are the biggest in India and for once, in many years the prices had come down to FY 2016-17 levels. So, I picked up their financials, ensured there are no red flags and bought a bunch of shares I could afford.

I genuinely feel if the financials are strong and the prices are going down its the 'market sentiment' at play. So, eventually, the prices will go back up again. I am a small investor (relatively) but this is something I believe in.

Last edited by Pancham : 6th June 2020 at 14:06.
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Old 6th June 2020, 14:04   #4296
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This is one point where I usually don't agree with the experts. I have been investing in FMCG sectoral fund and if I look at last 10 years performance in my equity portfolio, then this sectoral fund has been one of the top performers and since this is a defensive sector, it performs well even when market is falling. I think it narrows down to which sector you are investing in.
Every bet you take might or might not work out. What is important is the risk returns for any strategy.
I don't see any need to go sector specific. Till few months back, private sector banks and financials were the biggest wealth creators but look at what happened in the last few months. Same applies to consumer durables sector. FMCG tends to perform well in volatile environment but what happens if there is a huge bull run in the next 3-5 years? Will you shift money to another sector or watch silently as other sectors outperform? Think about what kind of investor you are and adjust your investment style to match your behavior. I dont want to active management of my portfolio whether it is stocks or mutual funds. There was a phase when I thought I am smarter than others but that has not worked for me. So I know what works for me and I will stick to it.

Its important to have a goal and reasonable return expectations. If your goal is to beat the market by a huge margin, then please ignore my advice. The strategy I have suggested is after lot of analysis which should reduce risk compared to market while providing similar rewards. Rest your money your call��

Last edited by ajmat : 6th June 2020 at 14:17.
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Old 7th June 2020, 09:45   #4297
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My present question is this. Stock markets are totally diverged from the real economy now. I understand that there are multiple factors for this including
Speaking from hindsight, it looks like the markets crashed because USA & all major economies started locking down businesses. And now the markets are recovering because all countries (incl India) have started unlocking their economies. Looks like the markets don't care about covid infections or deaths. All it cares about is businesses making money. It also helps now that there is "free cheap" money floating around in the world.

Quote:
What should a non professional market man like I do. I found out that my so called internet search and research of companies is turning out to be a lemon and that even so called clever sectoral funds can leave you in the red. My UTI transportation and logistics fund will not see light anytime soon.
Most half-decent stocks will eventually recover if you hold on to it for a long time. That's assuming you bought them at reasonable valuations. As I've mentioned a couple of times before, you should pick stocks only if you are interested in the process. Else, actively managed multicap mutual funds or index funds is a better bet.

Quote:
Is it just wiser to invest in a couple of index and gold funds and forget about it. My time horizon is around 15-20 years.
Adding Gold to the mix is a good idea. Allocate 10% to 30% of your capital to Gold. On its own, Gold has generated 12% pa returns. As a bonus, Gold reduces volatility of your portfolio - because Gold performs well when stocks are crashing. Take either the ETF/MF route or sovereign gold bonds route.

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Originally Posted by adimicra View Post
Rebalance your portfolio every year or when there is a sudden movement in markets. (more than 5% change in asset allocation)
I prefer more frequent (1 to 3 months) rebalancing for smoother and better returns, because stocks are very volatile. Transaction costs and capital gains taxes are usually negligible compared to extra gains (because of buy low/sell high) one can make by rebalancing frequently. But your 5% change rule in asset ensures that you will take advantage of crashes like in March 2020.

Quote:
Originally Posted by Simhi View Post
This is one point where I usually don't agree with the experts. I have been investing in FMCG sectoral fund and if I look at last 10 years performance in my equity portfolio, then this sectoral fund has been one of the top performers and since this is a defensive sector, it performs well even when market is falling. I think it narrows down to which sector you are investing in.
I don't mind going almost "all in" on a certain sector either. But I don't do that for "future prospects". I will pick up stocks from a certain sector if valuations are extremely cheap. For eg: in 2017/18, I had up to 40% in IT sector because nobody was looking at those stocks then. Now, I have almost 35% in PSUs (not PSU banks) because it is the most hated sector.

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Originally Posted by Pancham View Post
I genuinely feel if the financials are strong and the prices are going down its the 'market sentiment' at play. So, eventually, the prices will go back up again. I am a small investor (relatively) but this is something I believe in.
Buying cheap financials and debt heavy companies during an economic crisis is relatively risky though. During serious economic downturn, financials can go down and not recover ever. If you are buying cheap during crashes, make sure it has zero or close to zero debt.

Last edited by SmartCat : 7th June 2020 at 10:41.
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Old 8th June 2020, 00:10   #4298
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Meanwhile my Vodafone stocks have gone up by 40%.
I purchased at 5.6 INR per share nearly a week ago.
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Old 8th June 2020, 09:52   #4299
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Originally Posted by SmartCat View Post
Adding Gold to the mix is a good idea. Allocate 10% to 30% of your capital to Gold. On its own, Gold has generated 12% pa returns. As a bonus, Gold reduces volatility of your portfolio - because Gold performs well when stocks are crashing. Take either the ETF/MF route or sovereign gold bonds route.
Thank you for this advice.

I invest only in mutual funds and do not have a demat account. And I have stayed away from gold all these years. Now I would like to have a small % invested in gold.

What are the options in MF to have an exposure in gold? Do MFs track gold price the same way an ETF would track? Is there any disadvantage in MF's compared to ETF in terms of expense ratio etc.?
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Old 8th June 2020, 10:05   #4300
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I purchased at 5.6 INR per share nearly a week ago.
I had purchased Voda at 3.2 and exited at 4.7 .
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Old 8th June 2020, 11:22   #4301
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Thank you for this advice.

I invest only in mutual funds and do not have a demat account. And I have stayed away from gold all these years. Now I would like to have a small % invested in gold.

What are the options in MF to have an exposure in gold? Do MFs track gold price the same way an ETF would track? Is there any disadvantage in MF's compared to ETF in terms of expense ratio etc.?
you can safely invest in Gold MF like Kotak or HDFC. The tracking error is not much and returns are in line with gold price movement. Sovereign gold bonds are another good option but it's a 8 year lock-in. I prefer to invest via MF. And I would advise 15% in gold, not more.

On another note, the stock market is more or less entering bubble territory. So, one should be careful particularly if you are entering at this point (not talking about SIPs)
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Old 8th June 2020, 12:07   #4302
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Watching Borosil & Vedanta from couple of days before making a purchase. Borosil had almost 10% increase in the last few days. Is it a good time to invest in it considering it might grow or did it reach the saturation point with no gain going forward....

PS: Sorry for the terminology if they don't relate to stock market jargon
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Old 8th June 2020, 13:28   #4303
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Watching Borosil & Vedanta from couple of days before making a purchase. Borosil had almost 10% increase in the last few days. Is it a good time to invest in it considering it might grow or did it reach the saturation point with no gain going forward....

PS: Sorry for the terminology if they don't relate to stock market jargon
Vedanta is a risky proposition. It is expected to be de-listed and did not do that well in recent quarter.
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Old 8th June 2020, 14:04   #4304
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Your views on Reliance? With so many Jio updates happening on a weekly basis, I would like to know future prospects of RIL stock.
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Old 8th June 2020, 14:48   #4305
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Alok Industries which was acquired by Reliance industries is gaining 5% daily for nearly past 12-15 days. Doubled in less than a month. I bought it nearly 10 years ago for 21 Rs. It went down to 3-4 Rs. One month ago it was trading for 6 Rs., Today trading at 23 Rs.
Finally, I have reached breakeven position after 10 years.
I too have a similar story. I had bought some shares of Alok Industries some 10 years back. This was based on some recommendation of ten paisa dot com.
But then, like you said it went down to 3-4 Rs and later i stopped tracking. But when checked few days back, i saw it had risen and i too had a similar thought, breakeven after 10 years
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