Category Archives: Market

My Learnings from Stock Market

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Greetings from PenguWIN,

I am sure every investor, especially those who have been investing for more than 3 years, would have their equity returns at all-time high. The compounded annual growth rate, CAGR, has risen to enviable levels, something which I haven’t seen in the past 18 years, since I have been investing.

From a long term perspective we can expect this number to be 11-14% which is Inflation plus our GDP(India’s Gross Domestic Product or aggregate value of goods and services at market price).

I wanted to share a few observations in this scenario:

  • Don’t get anchored on the fancy numbers that you see in your portfolio now and the reality in the long run, atleast the next decade would be 11-14%. No other asset class can come even closer to this, unless you are counting on black money

 

  • Interest rates are expected to be low. So, you can bid adieu fixed income returns, including Bank FD, Post Office NSC, PPF of more than 8% (8% itself is a little high). Post taxes and inflation this would be negative or close to zero. So, it would be difficult to almost impossible for investors, not to take any equity exposure. In the past there were planners who advised investors to move totally out of equity once they retire and survive with Bank FDs, Post Office MIS, SCSS, Annuities and so on. Those days are gone and unless you build a huge net-worth or corpus or would be receiving inflation adjusted pension from Government, chances are you will not have a peaceful retirement, without exposure to equity 

 

  • Financial Assets are relatively safe and have high liquidity. You don’t need to run behind your tenants, usurpers, courts or wait for years to monetize your assets. The trend that I see over the past few years is that the youngsters or many in my generation don’t have a liking for Real Estate as an asset class. Women in the same age group are not excited about huge amount of Jewelry or Silk sarees. Sleek and simple is the order of the day. If you leave an asset like golden belt (not sure what it’s called) that is worn by ladies around the hips with silk sarees, the chances are it will never come out of the locker or going to get traded for something of better use.

 

  • A few of our investors could not take the volatility that the equity markets provide. I normally say that equity investments are for over 5 years’ time horizon and blended or hybrid products can be looked at for 3 years. They listen to it, feel convinced and start the journey. However they keep losing patience whenever there are dips and need to be reinforced.  Nothing comes free and you need to be prepared for the roller coaster ride. 2 of our customers missed the current run, big time, though one has already started again in the last quarter. I wish I could have counselled them better and asked them to hold. The opportunity loss for them was huge. I had a similar situation in 2008-9 crisis when my wealth erosion was significantly high. But, I persisted and stayed quietly. No mentors or anyone to look up to during that period and it was DIY. I have never been let down since then and comfortably rode the numerous falls since then.

 

  • I keep reading that there are lot of youngsters who take inputs from various sites, applications and there are plenty out there. I have seen atleast 12 people giving market tips, teach stock market basis, defend a few stocks or say they are the next Infosys or HUL or Amazon or Google. Where is DSQ, Pentafour, Satyam, BaaN, Microland now? Where is Anil DAG now, who was given equal or close to (MDAG) that in 2007, the worst corporate story that I have come across in the entire world. How many people know that for a Flipkart or Zomato or Oyo there were dozens of companies that never saw the limelight. Without understanding our markets, people have started chasing Amazon, Google, Facebook FAANG and what not with websites enabling to buy international stocks

 

           Euphoria of New Fund Offers – 

                                                                                                          …..To be continued

Market Exuberance

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Greetings from PenguWIN,

The stock markets are rising every day and Sensex closed today, 11th Dec 2020 at 46,099. From the low of 25,981 on 23rd Mar 2020, this is an increase of 77.4%. The worrying factor is that the fundamentals of profit, sales and GDP are not in tune with it.

Foreign Institutional Investors (FIIs) have been flooding our markets with huge amount of money. This money is going into select Large Cap companies in the Index, Sensex and Nifty. The speed at which it is flowing is abnormally high in business that deliver growth. The flow is not the same across all companies as some are expected to do better without any surprises in earnings growth.

While I am happy seeing the portfolio go up and up, I do worry at the back of my mind as its irrational.

In equity investment we have to be prepared for the long haul and not get carried away by highs and lows, until we reach the long-term objectives.

Retirement, one of the most important goals for every investor (creating a good corpus to retire peacefully) may be 20 or 10 or even less than 5 years away and depending on the time frame, it’s extremely important to make sure that the corpus allocation is right rather than being too conservative or too aggressive. The farther away the retirement, the more the risk tolerance.

Please feel reach out to me if you have any questions.