Tag: returns

Why Diversify?

shyam August 8, 2014September 9, 2014 0

One of the main benefits of diversification is that if you invest in a group of assets with low correlations to one another, then you are likely to get the highest return for a given level of risk. But has it really worked that way for Indian investors? Here’s what we found while we crunched some numbers using CNX 100 and GSec 8+ year total return index since 2003.

Correlation

Yes, correlations are low: 0.0624. And we have a scatter-plot to prove it:

Returns

Here’s how the yearly returns look like (%):

An 80:20 stocks:bonds portfolio would have had an average return of 21.43% vs 25.81% of a stock-only portfolio – a give up of 4.38% in returns – with lower volatility.

The question is, is it worth the trade off if you can stomach the volatility?

Related: BOND ≠ BORING

Categories Investing Insight, Your Money Tags bonds, returns

Bonds, Rates and USDINR Update

shyam July 28, 2014September 9, 2014 0

The Yield Curve

Lets put the current zero-coupon yield curve in context.

Jan 2011 vs. Now

Jan 2012 vs. Now

Jan 2013 vs. Now

Indian 10 yrs vs. US

After the initial Modi euphoria, the spread between Indian 10 yrs and US 10 yrs started to revert back to its mean:

Total Return Indices

Investors in the long bond are yet to recover from the July 2013 draw-down but this year is looking good. Long-bond might just be the place to be as the RBI is widely expected to get into easing mode later this year/early next year.

Cumulative Returns Since 2000

Short

Intermediate

Long

Cumulative Returns Since 2010

Short

Intermediate

Long

Bond ≠ Boring

Returns have been volatile for bond investors.

Can’t really sell “stability” here.

USDINR

A new normal past the euphoria and the hangover?

In closing

With inflation somewhat stabilizing and the NDA-II government wanting to kick start growth, bonds are getting interesting again. And when rates start moving, currencies cannot be far behind.

Stay updated on the latest news related to Indian interest rates here. Its curated.

Categories Investing Insight, Your Money Tags bonds, rates, returns, USDINR

Investment Theme Performance Roundup

shyam June 18, 2014September 9, 2014 0

WHAT IS A “THEME”?

A StockViz Investment Theme is a portfolio of stocks that follows a particular strategy. It is a convenient way for you to:

stick to a strategy
follow a preset rebalancing schedule
think in terms of your portfolio strategy rather than individual stocks
avoid common behavioral pitfalls
systematically track your P&L and strategy performance

WHAT IS AN INVESTMENT STRATEGY?

An investment strategy is a specific way of going about the process of investing. It identifies specific variables that define a stock. Variables can be anything: risk, style, sector, balance-sheet items, etc..

By mapping specific Themes to your account, you ensure that you stay pure to your strategy allocation. And that there is no “flying by the seat of your pants” investing.

HOW HAVE YOUR THEMES PERFORMED?

Theme	Commencement	Performance	NIFTYBEES Performance	JUNIORBEES Performance
Market Fliers	2013-Oct-28	64.79%	24.5%	35.1%
Magic Formula Investing	2013-Aug-19	68.67%	39.89%	48.38%
Enterprise Yield	2013-Sep-16	49.51%	30.24%	46.46%
Pharma 10	2013-Jul-17	8.36%	27.88%	35.85%
Pharma Growth	2013-Jul-17	13.01%	27.88%	35.85%
Private Banks	2013-Jul-15	28.82%	26.61%	33.45%
Quality to Price	2013-Aug-28	132.47%	43.5%	54.91%
Gold and Jewellery	2013-Jul-15	-0.34%	26.61%	33.45%
Alcohol and Tobacco	2013-Jul-25	8.84%	29.05%	38.35%
Industrial Value	2014-Jun-02	13.57%	4.27%	1.36%
Market Elephants	2013-Sep-02	28.51%	37.15%	49.96%
Balance-sheet Strength	2013-Sep-11	93%	28.88%	45.66%
For-Profit Education	2013-Jul-25	81.33%	29.05%	38.35%
Momentum 200	2013-Aug-19	42.34%	39.89%	48.38%
Financial Strength Value	2013-Sep-13	56.54%	30.06%	45.69%

Detail of draw-downs can be found here.

Performance Charts

WHAT SHOULD I DO NEXT?

You should open a demat account with StockViz and invest through our Themes.

Categories Investing Insight, Your Money Tags returns, theme

Public Sector vs. MNCs

shyam May 31, 2014September 9, 2014 0

On the NSE, you can find two indices: CNX PSE and CNX MNC. They have been around since Jan-1995 – providing a quantifiable glimpse into how badly Nehruvian socialism has fared in modern India.

Cumulative Returns

CNX PSE: +247.69%
CNX MNC: +619.05%

Value traps

There has been a lot of talk recently about reforming PSEs. The SEBI wants the 25% public shareholding rule to apply to all public sector companies as well. The earlier (UPA-2) government, finding no takers for PSE stock, got Goldman to form an ETF to put some lipstick on the sector. The Rajiv Gandhi Equity Savings Scheme gave out tax sops to get retail investors into “Maharatna, Navratna, or Miniratna” stocks.

As much as I would like to believe that things are going to be different this time, you can’t dismiss the fact that PSEs have only lost money for investors. Once the crutches come off, these firms will anyway have to go through gut-wrenching transformations to compete in the real world. That would be a better trigger to enter these stocks (if and when they happen) rather than now when all we have are promises.

Categories Investing Insight, Your Money Tags returns

Public Sector Banks: Is this time different?

shyam May 31, 2014September 9, 2014 0

A tale of three indices

The NSE has three financial indices listed that provides a rare window into how different parts of the financial sector has performed over the years.

Index	Inception Date
CNX PSU BANK	2004-01-01
CNX FINANCE	2004-01-01
CNX BANK	2000-01-01

Return profiles

Returns in the financial sector comes with some very fat tails. If one could consult an oracle on the timing of these big swings, there’s a pretty packet for them.