Moved to Substack

Moved writing to substack, all existing email subscribers have been moved, and people who were following WordPress to read content on this site have to now follow this substack (there wasn’t an automated way to do it)

All old posts are already there & upcoming posts will be posted there as well, I was not able to move your comments  those will be archived safely

This site may be deprecated and repurposed, I am extremely grateful to you for reading this blog from 2011 and I hope I can continue to get your time once I start posting on substack

Happy Investing

 

 … Read the rest

How did I invest during Covid in 2020?

Covid has become a bad memory, thank god for it. In investing, we hear – Buy when there is blood on the street and to be greedy when others are fearful. Covid was a perfect example to evaluate what you actually did

Three years have passed and I thought it will be a good exercise to see if it’s easy to do the right thing when there is madness all around

A glimpse of the madness

Nifty dived close to 40% from 11,000  in the space of days, this is such a rare event that it’s difficult to think about it let alone stomach it

What was one of my first decisions –  I need to protect profit in one of my big profit positions Suven Life Sciences, My rationale was

Life science component though close to Mr. Jasti’s heart, it is pure play speculative bet and tough to put a valuation figure while the pharmaceuticals component is something the management may get rid off and then at ~INR 4500 crore market cap was richly valued

In hindsight this was not a great move as Suven Pharma went on to become stronger and stronger, I course-corrected and later recreated this … Read the rest

What can derail your momentum?

In 2014 I wrote, The 21 success principles – it is 2023 and they have stood the test of time

Today I wanted to share things that can derail your momentum and stop you from achieving your best

  1. Easy Money can blindsight you and will force you to stop working on yourself, try and avoid this trap
  2. Remaining in your comfort zone will limit your growth
  3. Doing things cause everyone is doing it, this is a sure shot way to live a miserable life
  4. Chasing the fad – Never works
  5. Health – be vigilant to not neglect it
  6. Bad habits – like eating junk, gambling they form easily and become a lifelong bane
  7. Real friendship is rare treasure it, In life most folks would be fair-weather friends know this
  8. If you are employed, better plan your career otherwise you are going to get a rude shock in 10 years
  9. if you don’t learn, you can’t get ahead in any sphere of life
  10. Learn to communicate or you would be paid less than your worth
  11. if you avoid hard things in life – Exercise, Transparent conversations and soon your life would be hard
  12. Average days would become Average months that would
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Leverage and Luck

“Give me a lever long enough, and a place to stand, and I will move the earth.” – Archimedes

In my 15 years as an investor, I have avoided leverage, it’s a huge multiplier both on the upside and downside like a double-edged sword. Part of the reason to hate leverage was a lot of bad outcomes I saw for people who used leverage.

After doing my own studying and encouragement from fellow investors, I made an exception – I used leverage for the first time to buy an asset – An investment property (real estate/ house) in 2021.

I have written many articles on not getting into property investment and sticking to shares, in fact, I have gone to an extent by creating a calculator which shows investing in equity will have superior returns to property all things equal.

The theory is theory and it is why practice varies, an investment property can be brought for $0 cash outflow, especially in Western countries. I will take you through my personal practical example and conclude on why you should re-think if you have a negative view on leverage and or property investing.

How can you acquire an asset for $0?Read the rest

Timing an Index Fund

Passive index investing is gaining momentum (pun intended) among millennials. One of the questions that popped into my head

what would be better to buy an index hold or buy and sell using some easy-to-follow quantitative rule?

I ran some numbers

  • ETF – ASX VAS, Invests in Top 300 companies in Australia, It’s our version of USA S&P 500 or NIFTY 50 in India
  • Time Frame – Last 5 years
  • Strategy 1 – Bold and Hold (100 units)
  • Strategy 2 – Buy 100 Units if Current Market Price goes above Simple Moving Average (SMA 20) and Sell 100 Units if Current Market Price goes below Simple Moving Average (SMA 20)
  • The first entry is the same for both strategies

If you are a color person then every time the blue line (price) goes above the red line (SMA 20) you buy and sell if the blue line falls below the red line you sell

The initial results are unbelievable, Strategy 2 beats Strategy 1 by 2X

Also following this quantitative technique one can almost perfectly be saved from the covid crash. Given I was interested in the initial results I wanted to understand what would be benefits in real life … Read the rest

Leeds , UK

Quant based smallcase worth adding to your watchlist

Came across another smallcase that is free and has a very good track record.

ARQ Prime is a long-only equity portfolio

ARQ Prime recommends stocks for investment based on a set of rules, free from human intervention or human bias. In the world of investing – it is called “Smart Beta”. ARQ Prime adopts the time-tested and proven rules for investing in stocks. ARQ scans all types of stocks to pick Winners: Value stocks, Quality stocks, High Momentum stocks, and Growth stocks across the market cap.

Their CEO talks about this product in an interview for moneycontrol , it does a weekly rebalance so that may put off some of you but is performance has been really good

 

 

 

there is not much info on stock selection criteria most likely it’s proprietary and not open source, but given its performance, it’s most likely based on momentum strategies.

Their website claims that drawdown is smaller compared to markets

Its strong risk management system cuts the losses early and allows profits to be big, thereby maximizing profits and reducing drawdowns/losses

Using the smallcase graph we can verify it managed drawdown better than the index, even the recent dip in 2022. … Read the rest

My Crypto Bets

A very happy Diwali 2021 to each one of you and I hope you and your dear ones have a fantatsic year ahead.

Before we begin please understand that Crypto is a very new,volatile and speculative asset class, it is not uncommon for prices of some tokens to rise 1000% and then drop 99% in matter of days and minutes

Picture source – Twitter @tanayj

Two more things

  1. All together these Crypto bets are less than 2% of my family’s networth so even if all of them of go to zero it will not create financial ruin for me
  2. I am constantly evaluating new projects and crypto moves at 10x speed compared to equity markets so many bets would be dropped off and many others would be added as my knowledge of the ecosystem improves

Now onto bets

Ethereum (ETH)

By the far the biggest network in crypto space the adoption has seen insane, Ethereum is a supercomputer. Ethereum uses blockchain technology to decentralize every piece of technology or app that we currently use. The much needed move to POS (proof of stake) upgrade is coming to network next year and to me it remains a top project to track… Read the rest

Think Independent

I am amazed by the divide crypto projects have created among the billionaires. In a recently concluded conclave, Rakesh Jhunjhunwala said cryptocurrencies have no future

I have a thing for authority bias and if someone who is very smart and whom I respect takes a stance generally that would be a great starting position for me, if you are like me then I think this is something that you should fix.

Why?

First, let’s understand that as investors we have three edges

  • Information edge – Your ability to get valuable information legally gives you an advantageous position on an investment
  • Time edge – Your ability to invest long term and behave like an owner
  • Analytical edge – Your ability to interpret the same information differently from others will give an insight which most would miss, Howard Mark, call its second-order thinking

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Dividend or Growth

Short post

The Oracle of Omaha has beautifully summarised how to adopt a dividend distribution policy through his shareholder letters

 

Unrestricted earnings that can generate incremental earnings equal above generally available to investors should be retained or else they should be distributed back to shareholders.

This model forces the management to be capital efficient and creates long term wealth for shareholders.  Buffett also advised to do a quick dollar retention test to identify if management’s decision played out well over long term or not. Read post on ITC to understand how to run this test.

One problem with this model like all other look-back models is that one has to wait for 4-5 years before realising if the management’s capital allocation decision played out or not. The only option with investors is to rely on past track record and expect that management will continue to make smart decisions.

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