Invest Without Emotions
Chinese local governments owe $1,650bn in debt, close to 27% of China’s economy. Combined with central government debt and other liabilities such as bad bank loans, analysts estimate China’s overall explicit debt load is about 70% of gross domestic product.
Read more here: Extent of local debts in China laid bare – FT.com.
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Previously, we had discussed what to look for while buying stocks. Irrespective of whether you are fundamental or technical investor, there are some key metrics that you should follow to screen stocks. However, even though some metrics have complicated math, they can be completely misleading when it comes to their predictive power.
Measures like Beta, Analyst Recommendations, P/E and PEG typically have very little bearing to how the stock eventually performs. To read more about the 5 measures to ignore while screening stocks, hop on over to Smart Money here.
“Technical Analysis, which refers to the study of the action of the market itself as opposed to Fundamental Analysis, which studies the goods in which the market deals. We, as technicians, focus our attention on price because that’s the only thing that’s going to pays us, nothing else.”
“Fundamental guys study the cause of market movements; we choose to focus on the effect. All known facts, estimates, surmises, and the hopes and fears of all interested parties are integrated in this effect (price). The Fundamentalist always has to know why, but why doesn’t pay us.”
Must read: Why Charts? | The Reformed Broker.
India is confronted with a debilitating crisis of governance and an overwhelming challenge to improve the lives of the largest concentration of poor people in the world. “Until the number of malnourished children and illiterate women has been reduced by 90 per cent, there should be no horn blowing,” says Jean-Pierre Lehmann, founder of the Evian Group.
FT.com / Reports – Strong growth yet to improve lives of the poor.
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While discussing the buy & hold fundamental investing strategy, I had indicated that the a constant, fixed investment into a broad-based ETF would perhaps be the best way for new investors to build a diversified portfolio. The NIFTYBEES is perhaps the oldest ETF listed in the NSE: it has been tracking the Nifty 50 index since 2002.
How does a do-it-yourself SIP work? Well, its pretty simple actually. You just set aside a fixed amount every month (say, Rs. 10,000) and buy the same stock or ETF every time. To give you an example, say you started buying the NIFTYBEES on the first day of every month, since the time it was listed in 2002, it would look something like this:
As you can see, the lower the price, the more units you will actually buy and hence the name Dollar Cost Averaging: you are averaging your buying price of the unit over a period of time.
Now say you did this irrespective of whether the market was down or up, how much would you have gained till date? My calculations show that an SIP on the NIFTYBEES would have netted an IRR of 18%. That’s not bad at all! For the those who want to have a look at the actual cashflow and returns, they can hop over to the spreadsheet on Google Docs.
Happy Investing!
