The first of the 52 boring Tuesdays of 2015 is here. My guess is that majority of you reading this post, would by now have already forgotten about your new year resolutions. ;-P
If that is true, then please remember that it’s only the 6th day of the year…and it’s not right to give up so early. Go ahead and do what you planned for!! It might be tough, but I am sure it’s worth doing. I myself am making it a point to go through my Resolutions for 2015 every few days.
With that dose of Gyan above, I leave you with three interesting articles to read today…
When she died in 1916, she was believed to be the richest woman in the world. People back then referred to her as the Witch of Wall Street. But after almost 100 years of her death, I guess it is time we start referring to her as the Grandmother of Value Investing.
Since childhood, we have been groomed not to copy others. But here is one man, who has taken copying to great heights. Having paid a Guru-Dakshina of $0.65 Million to his mentor Warren Buffett, Mohnish Pabrai is well on his way to become one of the most successful investors of all time. This article in Outlook Business about this Copy – Pasting Investing Genius, beautifully captures Mohnish’s story and is a must read for everyone.
What do you expect from shares of a company, which has almost never earned any profits? Nothing much…right? Wrong!! There is one such (really) big company. And surprisingly, its shares have been going up and up and up. Here is an interesting article about How Amazon gets away with never earning a profit.
That’s all guys…
By the way, if you have missed out on previous post, then there is some serious discussion going out in comments section of the case study I published a few days back. If you invest in mutual funds, then you might be interested in getting involved in that discussion. You can read the case study here.
And if you find some interesting articles which you want to share, please copy+paste the link to that article in comments or drop a mail to email@example.com. Don’t worry if your comment is not visible as soon as you post it. Anti-Spam filters detect hyperlinks in comments (which you are sharing) and automatically park it for my review. I will eventually be notified about your comment. 🙂
Hi, probably I can share my experience.
As far as I can think, the reason behind surprising results is the fact that half of the invested amount earns less than what stock market earned during period. e.g, Even if you start investing when NIFTY was around 1000 in June 2003, it runs up to market peek in 2007 and crashes to around 2700 in December 2008, the CAGR is 19% (even after crash). If you would have put 50% of invested amount in cash/FD earning lesser returns, you are loosing on the total returns even though that amount gets invested at 2700.
The most probable reason of your results being surprising seems to be the great bull run from 2003 to 2007. Had the market traded sideways or moderately bullish then your results could have been as expected. i.e., Equity + Crash fund returns greater than pure equity.
You could retest the results from June 2009 to December 2013 where market traded sideways. Probably this would yield better returns for equity + crash fund 🙂
Yes. I was under impression that I was reading tyroinvestor blog 🙂 So deleted the comment and reposted it. Don't know how it reappeared 🙂
not really boring tuesday, many of your resolutions will start from January with fantastic crash
Good writing on investing !! especially from long term point of view.
Hi Dev, Good post , yours is one of the few blogs I really enjoy….
I have been thinking about the problem you are trying to address here….
1) How to systematically keep reserve money to utilize when market is selling at bargain prize.
2) How to not burn the savings in 2008 , 2002 like situation.
These are two major problems any retail investor has.
1) I think one major problem with your model is your trigger point. You are using historical high value as trigger point which I believe is wrong anchor. Historical high is like 52W High / Low price of stock , buying a stock comparing 52W High and current price will give mediocre return.
I think appropriate trigger point should be NSE200 or BSE200 PE.
Your old post on PE ratio should be a good guide to choose appropriate PE. I like PE -15 as a good trigger point. Once trigger point is reached , I think money should be systematically transferred to Equity over 6 months period.
2) You haven't added any interest for reserve money for simplicity , I think it is highly distorting the conclusion.It would be interesting to discuss where to invest reserve money.
3) I also think there should additional trigger at PE 22 , which should warn investors to systematically withdraw money.
Amazing post!! Loved the one about Mohnish Pabrai. Looks like he will make it to the big league, if he hasn't there yet.
Also, the crash was something that could not be missed. Weren't there some real good deals!?
Mohnish is right up there in top 5% according to me..
And for the markets – The lower it goes, better it is for us (investors) 🙂
Have you read this book
The Only Three Questions That Still Count: Investing By Knowing What Others Don't by Kenneth L. Fisher
Nope… How is it? Recommended?
Or maybe this story does not tell us much.
based on the current market cap of 1.6 trillion rupees and current market price of 650 (23/03/2015), and the data that shows that 100 shares in 1980 would have become 1 crore shares now (using some rounding to do calculations), we get
– in 1980, 100 shares represented about .4% of wipro. (Total shares are 1.6*10**9/650, which is about 250 crore shares, of which 1 crore is about 0.4%). Total shares outstanding in 1980 were 25000. (Twenty five thousand shares only with a market cap of 25lakhs)
– since premji owns about 85% of the company, only about 15% was available for outsiders. At 0.4% each, how many people would have owned 15% – that is less than 40 people. At one share each, there would have been less than 4000 shareholders.
– in the example, in 1980, the share with fv100 also had a market value of 100. In the previous 35 years, 1945 to 1980, not much capital gains. (Almost zero!)
– in the next 35 years, 1980 to 2015, great gains.
– so, you need to find a very small company, and become one of the founding shareholders with about a half percent of the stock, hope that as a passive investor your holding does not get diluted while the company grows at rocket speeds for 35 years! Considering the population of India in 1980, about 650 million, this is like winning the lottery. Looks a lot like luck!
– alternatively, buy an etf in 1981, and get 300 times your money back after 35 years. Much more easy to imagine.
Testing the results from June 2009 to December 2013 or even 2014 is a great idea. I second his thoughts Dev. Would be great if you could do that.
Very smart ajay.u live in markets.for a less active person like would u suggest a Sip in a dynamic pe fund?
Dynamic pe funds are generally fund of funds and taxation is a big did advantage. Stick to a balanced fund as 1st choice.