Read how wealth can be created in stocks
Printed From: The Equity Desk
Category: Market Strategies
Forum Name: Words of Wisdom
Forum Discription: Have you found a golden rule to profitable investing? Share experiences, articulate your thoughts quote a book or a guru.
URL: http://www.theequitydesk.com/forum/forum_posts.asp?TID=81
Printed Date: 29/Apr/2024 at 7:57pm
Topic: Read how wealth can be created in stocks
Posted By: basant
Subject: Read how wealth can be created in stocks
Date Posted: 27/Jul/2006 at 12:46pm
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A 200 year history of stocks, bonds and gold In a study conducted in the U.S.A it was found that over a longer period of time Stocks outperformed all asset classes, followed by bonds then gold. Bonds were the most consistent while stocks and gold were erratic. Gold never did enough to beat inflation while bonds did only slightly better. The following table indicates how stocks have been the best performing asset class over the past two centuries:
Source: Ibbotson Associates and Jeremy Siegel, Key Observations: Ø One dollar invested and reinvested in US companies since 1802 would have accumulated a total nominal return of nearly $8.8 million by the end of 2001 Ø The inflation adjusted return of that dollar would have been early $600’000. Ø Inflation takes away $8.14 millions or 1.44% (8.32%-6.88%) of annual return. Clearly inflation is our biggest threat to creating wealth. Ø Treasury Bills fared slightly better by providing 3.5% and 2.9% of inflation adjusted real rate of return. Ø Over a period of 200 years Gold and the Dollar with real rate of returns at -.001% and -1.3% moved more or less in line with inflation. In other words you could not have become rich by buying these asset classes. Inspte of the data provided above why is it so that the typical Indian fancies gold, bonds and real estate to equities? There are no clear cut answers and some soul searching that I did led me into the following conclusions: 1) Since stock quotes are available on a day to day basis they manage to create maximum amount of fear and panic amongst investors. 2) Liquidity in stocks is another reason for people to get out early. Almost all of us have ancestral homes running into more then 50 years and sometimes going as high as 70 to 100 years. The reason why we held on to them was there were no two way quotes available from 9.55 to 3.30 on all week days. Compounding works O.K for shorter periods of time, but creates magic over the long term. No wonder Einstein called it the eighth wonder of the world. 3) Gold has become a symbol of emotional bondage we often relate to gold with a sense of historical nostalgia – the old wedding ring, the first bracelet that your father gifted you. These are things that we do not sell and the first stock that your father gave you was sold the moment it went up 20%. So the point that I am initiating this debate on is that stocks are the only way to long term prosperity and it would make sense for investors to take some risk create more space for stocks in their asset allocation model the next time they sit with their Financial Advisor. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
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Replies:
Posted By: prashantmohta
Date Posted: 27/Jul/2006 at 9:26pm
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it is possible to make money----and a great deal of money in the stock market.but it cant be done overnight.the big profits goes to intelligent,careful and patient investor,not to reckless speculator.the seasoned investor buy his stocks when they are priced low,holds them for long --pull rise and takes in-between dips and slumps in his strides.
prashant
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Posted By: Vivek Sukhani
Date Posted: 27/Jul/2006 at 9:34pm
| Mr. basant, you have presented an excellent article.thanks for the same. My uncle invested 10000 Rs. on Bajaj Auto in 1962 and today that 10000 has become a 2.4 crores. I am ignoring dividends.No gold, bond or would have created this much wealth.Real Estate may have been able to, however!!!! |
Posted By: basant
Date Posted: 27/Jul/2006 at 9:59pm
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Thanks and congratulations to your Uncle. Not to have bought the stocks but to have held on. You know it is more important to hold on to a winning stock position then to get into one.People make money in Real estate but nobody makes money by buying and selling real estate during the year (I have not written day) they do so over decades and that is possible because there are no two way stock quotes coming each day.
Now ponder over this, if an investor is asked to buy real estate he would load up with all the information and buy it from in the best possible locality and if the same investor is to buy an suto stock he would load up to Hindustan Motors or a LML - because they are low priced!!!. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: Vivek Sukhani
Date Posted: 27/Jul/2006 at 10:18pm
| I beleive we must organise some sort of an event on Balance sheet studying etc. Let the strength of our forum increase, I think you have a greater role to play in spreading educatyion.... |
Posted By: prashantmohta
Date Posted: 27/Jul/2006 at 10:45pm
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please dont misunderstand me.with due respect to our grand parents who have always gave us a lesson to store gold ,silver and other ornaments which seems to be futile.taking the song that it will come to help us in our bad times.this is a sheer ignorance,nothing else.we have to catch cycles in in every field to make money,not adamency.
this report carries lot of information and explain the myths of holding gold and silver for whole life for a particular indian.
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Posted By: basant
Date Posted: 27/Jul/2006 at 11:01pm
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You know when bad times come and go no one sells these jewellery because there is no one to sell it through you do not want to involve your personel jeweller because that affects reputation and then at any given point in time there will be an unmarried daughter/sister so the general consensus would be at least we will be able to marry her off. There is another facet to the problem a earring that was bought for Rs 20,000 will now fetch you Rs 15,000 the "bid ask" spread in jewellery is phenomenally high. Like I said you never think twice before sellig your stock because we think that markets could go down 10% or what ever. Why don't we do the same thing with jewellery when people want to sell because they feel gold to go down to $ 550 at that time all of us would say this is for the bad time. Imagine holding something for the bad time that is just about managing to get you inflationa adjusted return!!! ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: maag
Date Posted: 29/Jul/2006 at 12:46pm
| I agree but our social customs will never allow logic and rationality to supersede emotion and superstition.So nomatter what the logic is the end point is that we cannot put it into practice. |
Posted By: Vivek Sukhani
Date Posted: 29/Jul/2006 at 9:54am
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Gold is more of a store of wealth and cannot be construed as a kind of wealth which generates income. Stocks as well as bond reward you with some sort of income, namely dividend and interest.Investing in gold requires a very sharp eye, as gold prices jump upwards and downwards, very fast.So, you will get some peroids when returns from gold will be higher than stocks, but that peroid is generally small.
There are misconceptions associated with investment in gold. Jewellery, mind you is not gold. if you want to invest in gold, never keep it in the form of jewellery. You need to sacrifice your snob, if you want to be a real investor in gold.Gold is more like crude, that is the reason why commodity analysts track ot so closely. They move around in patches, and never moves smoothly. They move fast, or sleep down, but they never make a 5 p.c. p.a sort of consistent move, year on year.
Silver, makes more sense for a speculator though. It moves more fast than gold and also cracks very fast.So, in case you get your moves correct, they mave yoeld more than equities in the short term.
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Posted By: prashantmohta
Date Posted: 01/Sep/2006 at 8:29pm
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indian economy is growing very fast around 8%,compare to china which is at 10%.in 2001 china was trading at a PE of 40 which has now come to 15.if we grow at 10 + 5% inflation=15% it means economy as whole is doing well and almost all the sectors of the economy is doing well.so,well managed co.is expected to do well and will give definately 25% average. our fund managers are quite smart to give phenominal returns as they have given more than 60% three year down the line.it is better to leave the job to the managers as they are quite competent to manage our money.but sure we have to be patient and must get rid of our daily charmness or activity to find infosys everyday.
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Posted By: omshivaya
Date Posted: 27/Sep/2006 at 3:11am
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Mix of equity and debt: Equity:
Reliance Vision/Growth Magnum Contra HDFC Prudence Debt:
LICMF MIP-G
Pru ICICI MIP-G Hope this helps! They are the best of the breed. Equal divisions of your money can be done in them. Just a suggestion, though I am no expert. I would stay out of sectoral funds strictly. My choice of equity funds above is based on 2 things:
1) "which funds recovered from the dot com crash fastest and which fell the least in the crash"
2) "the ones which gave returns among the top 5 funds" since 1999-2000. ------------- The most important quality for an investor is temperament,not intellect.A temperament that neither derives great pleasure from being with the crowd nor against it |
Posted By: vivekkumar_in
Date Posted: 27/Sep/2006 at 3:42am
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Check out the site called http://www.mutualfundsindia.com - www.mutualfundsindia.com . It ranks all the Mutual funds Equity, Depts, Balanced,tax saving(close ended), sectorals and you have options for sorting by performance since inception , last 3 years etc.. You could make your decision based on that.. Good point Om though.. when you say looking for how the fund reacted in a crash gives insight on its resilience.. Once you have done that the suggested split up is 40:30:30 between the 1st,2nd &3rd ranked funds.. This is a better approach that equal splits.. As for debt funds I don't know why anybody would want to buy Debt funds in todays scenario.. You could rather be in cash/bullion if you want to be in Debt funds.. ------------- Often we forget there's a company behind every stock,and there's only one reason why stocks go up. Companies go from doing poorly to doing well or small companies grow to large companies. P Lynch |
Posted By: omshivaya
Date Posted: 28/Sep/2006 at 1:17pm
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Hi vivek, thanks for your insight. However, I feel "debt" MAY become important when markets mature(maybe 2010-2015). Deb-part is only to take care of daily expenses etc. I have chosen the funds, based on "living off my money till my old age". At that time, a bit of "risk-aversion" is needed and good.
Also vivek, my research is based on http://www.valueresearchonline.com - www.valueresearchonline.com
Hope this helps! ------------- The most important quality for an investor is temperament,not intellect.A temperament that neither derives great pleasure from being with the crowd nor against it |
Posted By: basant
Date Posted: 28/Sep/2006 at 1:51pm
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Om Shivaya: I could create another hungama on this forum if I say that since equities outperform bonds should we not be 100% invested into equities. Why debt?
Joking..... ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: omshivaya
Date Posted: 28/Sep/2006 at 2:06pm
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Well, always ready for anything basant ji as you know me. kiddin'
But why not? Contradicting yourself now?
The objective is this:
1) Get "least-risk returns" from a fund to manage daily expenses.
2) To grow your wealth: risk can be taken here.
Any better option than debt here? I think you suggested the same in another topic we discussed earlier. If better option than a debt fund(the debt funds I have mentioned) is there, feel free to share!
------------- The most important quality for an investor is temperament,not intellect.A temperament that neither derives great pleasure from being with the crowd nor against it |
Posted By: basant
Date Posted: 28/Sep/2006 at 2:13pm
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It is a real tough one but difficult to implement. Make a dividend yield portfolio. You could do that to have an annualised yield of 3%. That leaves you short by another 3% - which can be recovered from c apital gains or liquidating a bit in times of distress. It will pay off.
The problem is you will not get money every month but once a year.
------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: omshivaya
Date Posted: 28/Sep/2006 at 2:17pm
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Yes, money once a year is no big problem. If you compare dividend yield to "debt", which seems more stable and likely to continously deliver over 10-15 years? I feel "debt". What is your thought on this? Though your latest view has given a good new insight Basant jee! ------------- The most important quality for an investor is temperament,not intellect.A temperament that neither derives great pleasure from being with the crowd nor against it |
Posted By: PrashantS
Date Posted: 01/Nov/2006 at 8:07pm
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Well i think we are going to grow from here... Reasons > Look at the reatail participation > Mutual funds have increased in numbers...domestic ones...that provides us lots of insualtion even if FIIS pull their money >Gorwing population wants fast buck.....particpation will improve... >COnsumption boom is here to stay..... >Average middle class earnings are increasing.... and many more...so i think every fall ina good stock is a buy...after all we all are looking at 10 to 20 years....so it is better than FD in banks... and one more thing i do agreee with basantji....that keep pulling out cash and buy little property....dont cocnetrate on one thing..... |
Posted By: basant
Date Posted: 08/Feb/2007 at 10:54am
Source: RBI 2005-06 Annual report
Just look at how much money Indians pay for low income generating assets. Bank deposits and Social securities. – over the next few years as financial awareness increase and we start believing that the stock market is a lot more then a gamblers den this increased flow could create havoc in the markets.
Our sentiments have also been bruised by the scams of 1992 and 2000. This leads many of us to believe that the end in the markets is always bad. I have read in many of the books that talk about US markets during the 1930’s about how that particular generation developed apathy towards the market. Finally we should believe that just because the market goes down it is not wrong but why and how it goes down should be investigated before drawing conclusions. In this connection SEBI and the exchanges have been doing a wonderful job and each of the steps they took were criticized whether it was dematerialization of shares or removing badla or introducing futures or the FM imposing turnover taxes! ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
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Posted By: kulman
Date Posted: 08/Feb/2007 at 11:14am
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Very true.... enormous untapped potential!
Maybe in 2010-11 u may have to keep a cap on TED memberships!? Or a fee based access perhaps? Likely that TV-18 & others PEs/Goldman would approach Basant jee for TED stake sale!
------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: SORUB
Date Posted: 08/Feb/2007 at 11:52am
nice topic banant ji,i think splitting our wealth between realestate and stock will be a good idea and treat both investment in same mentality...i think we have to rename stock market as supermarket  ..so that we buy stocks in discount...traders are there in every market...gold,silver,realestate,bonds..we cant get opportunities without traders...in my view most of us are long term traders..investors own the company..i may be wrong with the last statement but its my view.in intelligent investor 5years is a minimum hold,we think 1years as long term and there is no capital gain for it.correct me if i am wrong------------- K.I.S.S(keep it simple silly) is the most easy management formula i ever came across!!! but it is very hard to follow!!! |
Posted By: basant
Date Posted: 09/Feb/2007 at 12:11pm
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Very interesting thought "Supermarket so that we buy stocks in discount"! ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: SORUB
Date Posted: 09/Feb/2007 at 1:51pm
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got this idea when i was trying to find how to save and invest in google..
Cutting down on household expenses can help you stick to your budget. Here are some ways to make every penny count: *Save money on grocery bills by planning your meals ahead of time and using a grocery list. (PLANNING/STRATEGY FOR OUR INVESTMENT) *Buy items in bulk at warehouse clubs and discount stores(BUYING IN BULK WHEN MARKET IS IN DISCOUNT) *Save money on heating costs--lower the thermostat at night and while you're at work (SAVE MONEY ON BROKERAGE/OVER TRADING) ------------- K.I.S.S(keep it simple silly) is the most easy management formula i ever came across!!! but it is very hard to follow!!! |
Posted By: Mohan
Date Posted: 10/Feb/2007 at 12:37pm
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Just out of Curiosity....
Does anybody have any statistics about how many Indians are investing in Shares individually or thru Mutual Funds.
Comparing it the the number of people that are still not shareholders.
I wonder how many more Dhirubhais will India need to spread the equity cult
------------- Be fearful when others are greedy and be greedy when others are fearful. |
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Posted By: basant
Date Posted: 10/Feb/2007 at 9:21am
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Though there are no official studies to that it is said that about 4crore Indians are interested in the markets while there are about 50 lac active demat accounts. There does seem to be a discrepency into this since these two figures could not differ by that amount.The demat account figure is a certainity and as many as another 50 lac accounts are defunct. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: Mohan
Date Posted: 13/Feb/2007 at 3:51am
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Basantji, Let us assume that the 50 lac (0.5 crore) active demat account figure is the active number. Now if out of a population of 100 + crores, only 0.5 crore are active in the Market today, what kind of potential is there if The Active demat accounts go to 2 % of Population and people interesed in the market go to 10 % of population. Is this realistic ? Considering the education and awareness created by all the media. Don't you think ? ------------- Be fearful when others are greedy and be greedy when others are fearful. |
Posted By: kulman
Date Posted: 13/Feb/2007 at 7:43am
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Considering the education and awareness created by all the media. Don't you think ? ---------------------------------------------------
I object, My Lord!
Awareness yes, but education by media? ???
 ------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: basant
Date Posted: 13/Feb/2007 at 9:25am
Not a big deal really but please Kulmanji's protests in mind. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: valueman
Date Posted: 31/May/2007 at 7:09am
The above RBI Report gives only the numbers related to Indians investing in liquid assets .But what about Indians investing in Real Estate and Gold ? Majority of Indians invest a major part of their savings and investments in these 2 sectors i.e real estate and gold . Shouldn't we factor these also ? Any comments from Bastanji and other senior members on this ? |
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Posted By: basant
Date Posted: 31/May/2007 at 9:32am
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Those investments are not known to Govt. agencies hence they are not going into that. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: valueman
Date Posted: 31/May/2007 at 10:45am
True But what is ur feeling ? I feel that many Indians are still looking at only Gold and RealEstate as major avenues for investment apart from Banks /Postal deposits etc . I still feel major part of funds are locked in Real Estate and Gold . Comments please . |
Posted By: basant
Date Posted: 31/May/2007 at 10:58am
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That money will never come out of gold - till there is one daughter in very household!!! ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: johnnybravo
Date Posted: 01/Jun/2007 at 12:52pm
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Gold is not bought from an investment attitude or perspective. People buy gold (mostly ornaments) and day by day the design and creativity in jewelery is denting gold's prospects as investment. If it were just investment people wouldn't have bought it on Akshay Tritiya or diwali come what may! I still know people who regularly buy gold ornaments on these 3/4 days during the year. Thats working out like a SIP investment in gold! |
Posted By: xbox
Date Posted: 02/Jun/2007 at 11:59am
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Gold is not bought from an investment attitude or perspective.
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Gold is bought from an investment attitude or perspective.People also buy gold (mostly ornaments) and day by day the design and creativity in jewelery. ------------- Don't bet on pig after all bull & bear in circle. |
Posted By: us121
Date Posted: 03/Jun/2007 at 10:08pm
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That's one of the best comment. I liked.
This is called knowing the pulse of India. ------------- ABILITY will get u at d top. CHARACTER will retain u at d top |
Posted By: omshivaya
Date Posted: 17/Jun/2007 at 9:01pm
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The 10 Commandments Of Investing The biblical Ten Commandments were intended to act as a driver's manual for the road of life. "Thou shalt not kill." "Thou shalt not lie." These are life's version of the stop-at-the-red-light-and-advance-when-safe rules of the road. In other words, they are all guidelines to keep people out of trouble. Because life's highways are full of potholes, blind turns and bad drivers, the investing world also suffers from scandals, scams and dishonest companies. Here are 10 commandments for the investing world designed to help keep investors - and their money - safe: ------------- The most important quality for an investor is temperament,not intellect.A temperament that neither derives great pleasure from being with the crowd nor against it |
Posted By: kulman
Date Posted: 17/Jun/2007 at 12:02pm
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Om jee seems to be back to his normalcy out of Maunvrat. Thanks for the nice post, anyway. ------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: aloksahi1971
Date Posted: 24/Aug/2007 at 10:15am
Business growth does come about but the growth may be in different sectors /industries.the benifit of land/building is that it is tangiable asset and appart from cost appreciation it also pays aregular yeild in terms of rent.This depends primarily on the location. Another point to note is that the propety cannot be sold at the tap of a button thus taking hasty and panicky decisions are avoided ------------- Born To Golf forced to work. |
Posted By: leo2007
Date Posted: 25/Aug/2007 at 4:54pm
| What will be the value appreciation for a building / apartment. If a person buys an apartment, say for Rs. 60 lakhs , will the value go up 10 % ( 6 lakhs ) every year ? . I doubt. For a building / apartment we should take into account the depreciation also as the building becomes old. The rental income , is less than the interest on FD. If we buy a house for our residence , it is understandable , since we need a place to stay. Otherwise it is better to invest in equity rather than invesing in building. |
Posted By: Vivek Sukhani
Date Posted: 25/Aug/2007 at 5:15pm
| well, I beleieve plots can be excellent investments at times. however, locating buyers and sellers is a cumbersome process mostly. however, in some cases doubling in 2 years is not uncommon..... |
Posted By: leo2007
Date Posted: 25/Aug/2007 at 6:04pm
| Buying a plot is a safer alternative. The price will go up as the demand increases, and we cannot manufacture land to meet the demand. Doubling the value will depend on the location of the plot . ' Investing ' in building/ apartment is not a good idea , according to me. I am a firm believer that equity will outperform realestate in the long run. |
Posted By: basant
Date Posted: 25/Aug/2007 at 6:12pm
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Plots have all sorts of safeguard problems. Encroachment is a big issue also banks do not fund open plots. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: leo2007
Date Posted: 25/Aug/2007 at 6:44pm
| Buying an open land,leaving it unattended for a long period may lead to encroachment problem. |
Posted By: kulman
Date Posted: 25/Aug/2007 at 7:55pm
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Well, there are some people for whom encroaching other's plots is a safer alternative to wealth creation!
------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: Vivek Sukhani
Date Posted: 25/Aug/2007 at 8:52am
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For me there are 2 ways of channelising wealth. 1.Equities 2.Fixed Deposits/Bonds I find other routes not quite impressive. Somehow, hate insurance to the hilt.Wont go for a mutual fund, as I am yet to come across a MF manager who has inspired me to beleieve that he is smarter than me in managing my money. Commodities in futures are hopeless, will like to play it physical whenever the urge becomes too high, otherwise indirectly by way of equities is fine with me. Real estate requires some muscular backing as basant sir has already said....when you have an easier way to make money why complicate matters....???????? |
Posted By: kulman
Date Posted: 25/Aug/2007 at 9:09am
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when you have an easier way to make money why complicate matters....???????? --------------------------------------
"There seems to be some perverse human characteristic that likes to make easy things difficult."---Warren Buffet ------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: Vivek Sukhani
Date Posted: 25/Aug/2007 at 9:18am
| Just as too much loyalty is a matter of dogs, similarly too much labour is a matter of porters..... |
Posted By: India_Bull
Date Posted: 26/Aug/2007 at 2:35pm
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On a lighter note, I always think why my forefathers were not aggressive in getting the piece of land for which I have to buy from someone very aggressive (how can he be the owner of the land and who has decided who is the owner and who is not ?) I have to pay hefty money. ------------- India_Bull forever Bull ! www.kapilcomedynights.com |
Posted By: kulman
Date Posted: 06/Oct/2007 at 7:48am
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http://www.dnaindia.com/report.asp?NewsID=1125783 - Paper wealth against real estate My next-door neighbour is a financially astute man. He has the knack for spotting both strategic and tactical investment opportunities and making good use of his investible surplus. The other day, we were having tea at my place, while watching that incredible movie, Lage Raho Munnabhai, on TV. As the story progressed to the eviction of elderly men by a mentally ‘bimaar’ villain, my neighbour remarked how he had been very lucky (and smart!) in his house purchase. While living in his own house in Mumbai, he had spotted a good investment opportunity in one of the suburbs and purchased a second apartment way back in 1995-96. A flat he had then purchased for merely Rs 10 lakh was worth over Rs 50 lakh today, after having earned him rent in the interim, and a tax rebate on the loan he had paid off in five years. He went on to say how he would invest in a new house or land once every 7-10 years, once his savings reached a certain critical size. What better way to make your assets real and tangible by having them as property instead of paper debt or equity, he asked. Spectacular returns? I could not but admire his foresight. But being the finance man I am, my mind drifted off to perform a crude calculation of his return on investment over this period. Rents in this suburb (as with most of the country) yield ~3% per year, which comes down to ~2.5% after taxes, society charges and costs of periodic upkeep and maintenance like plastering, painting, waterproofing, etc. His investment had roughly multiplied five times in 12 years - a good 14-odd percent annual return. Thus, in all, a handsome year-on-year growth of 17% or so — not a bad deal at all. I then turned to the alternative avenues his money could have gone into. The Sensex was at 3,000 then - it is at 17,000 today. So if he had invested the Rs 8 lakh in the stock market then, he might have got a return of about 17% here, too, besides a dividend yield of 1.5-2%. Some of the mutual funds that have been in existence since then have given ~25-30% annualised return. Thus, although his investment was good, it probably was not as spectacular as I had thought earlier. Yes, there is the tax break on loan repayment, but there is also the capital gains tax to be paid on profit in the event he sold the house. The risk argument I took the opportunity provided by a commercial break in the movie to run him through my thought process. Initially, he was a bit shocked by the numbers; he had only thought of returns as multiples of investment over the decade, not as annualised ones. But he recovered to argue that the risk was much higher in the stock market than in real estate. “Look at the daily volatility these days,” he said. But isn’t that a fallacy brought about by the fact that stock prices are reported daily, while real estate movements are not? Real estate prices, too, are known to fluctuate wildly - Mumbai had the great slump after 1995-96 and recovered only in 2003. Unfortunately, we do not have an index to track the daily real estate prices in the country. Real estate value, by its inherent nature, moves in a jerky and ad hoc fashion, but that does not make it any less volatile or risky. Moreover, his entire net worth is concentrated in real estate in and around Mumbai alone. An adverse movement there would destroy his wealth significantly. I reiterated to him that I was not trying to belittle his success at investing or showing real estate in a poor light, but merely trying to put it in context and see that other investments could also have yielded similar or better returns. Paper wealth vs. tangible wealth “You are probably right,” he said, “but I feel comfortable having a tangible real estate holding than a paper portfolio of stocks or funds.” This thinking is prevalent. And it is not so much about equity versus real estate - such people would be as wary of investing in a real estate trust as they would be in equity - as much as it is about ‘paper’ wealth versus tangible assets. The reasons are not hard to seek. Many of us have grown up at a time when equity markets were either non-existent, or were plagued by scams in the initial period of their development (circa 1992). On the other hand, ownership of a house has been considered a necessity almost since time immemorial, and there is nothing more comforting than having a roof over your head. Of course, this thinking got extended to investment assets as well - to houses that were not bought for self-use, but for appreciation. However, I dare say the equation has reversed in India in the recent past. Over the last 10 years or so, market regulator Securities and Exchange Board of India (Sebi) has been remarkably successful in streamlining processes and plugging loopholes in the system. Scams occur, but are few and far between, with Sebi handing down exemplary punishments to law-breakers. Investor education material on equities and funds is available in plenty, and the system has become efficient enough to bring transaction costs down by orders of magnitude. If anything, it is the real estate sector that continues to languish in terms of corruption and lack of efficiency. Land deeds in several places are far from clear. The quality of construction in a lot of apartments leaves a lot to be desired. Transaction costs in terms of stamp duties, taxes, registration charges and broker charges add up to a sizeable fraction of the property value over time. Yes, there are good builders and good properties, but these require extensive research to locate and transact. If one puts in as much research into equities and funds, they too would yield comparable or better returns over time. Implications for portfolio It was time for my neighbour to leave, and he admitted that this discussion was as absorbing as the movie. “Circumstances have changed significantly, and the paranoia about ‘paper’ wealth is probably unfounded,” he admitted, adding, he would henceforth use his acumen to research and invest his future surplus in shares and funds, now that he had sufficient real estate holdings. This, in my opinion, is the crux of the argument. Many of us sub-consciously think of ‘safety’ in tangible assets, and in the process end up concentrating almost the entire net worth in property. A more rational analysis would reveal the drawbacks of this approach and suggest a more diversified portfolio. It would tell us that in a growing economy like India, equities have surpassed, and will continue to at least match, real estate in performance and returns over the medium to long term. Something you, too, could munch over leisurely the next holiday afternoon. The author is a certified financial planner and a MBA from IIM, Ahmedabad. He is director, PARK Financial Advisors (www.parkfinadvisors.com), Mumbai. ( mailto:[email protected] - [email protected] ) ------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: CHINKI
Date Posted: 07/Oct/2007 at 9:30pm
|
Kulmanji, very good article. I think you have a habit of coming across very good articles which happens to someone who has habit of extensive reading.
No doubt you are one among them and best part of the whole thing is you share them here, helping all of us to get benefit of the same.  
All the investments in any sector looks good only and if only that sector is growing. I have some observations to make regarding real estate: - Unlike flats/houses, sites/lands appreciate faster. But it is easier to sell flats than sites - If the investments in flats/sites are made from investment angle, then it should be sold off after it has appreciated to some extent. Like we say in stocks, once a stock gets PE re-rated, thereafter the growth would be only through EPS. Similarly in real estate, after some time, the growth (appreciation) will taper off. - Like other sectors, in real estate also you can make good money in short period of time. For example, our investments in last two years, has fetched good returns : * 5 Lacs investment yielded 3 Lacs within 3 months * 25 Lacs will yield 20 Lacs in 20 months. This is inspite of real estate market cooled off due to increase in rate of interest for home loans - Unlike in stocks, people may some price for a flat/site, but there may not be a buyer at that price. While a stock can be sold immediately at the prevalent price immediately with the amount getting credited to your within two days, it is not the same with flats/sites * Needless to say that the dealings have to be done through reliable people/broker Finally investments in any field/sector can be done only with lot of research. ------------- TOUGH TIMES NEVER LAST, BUT TOUGH PEOPLE DO |
Posted By: xbox
Date Posted: 07/Oct/2007 at 5:43am
|
This reminds me one ex-manager, who use to circulate sweets every 8-9 months in the company. One day I asked him why he circulate so (as he was in mid 40s & no reason to believe any ?? celebration). He told that every time he purchases any flat/house, he circulate sweets. On some buttering, he told that he put some initial amount (varies from project to project) and take house lone for rest of purchasing amount, latter he rent it to some corporate (he seems to have good connextions) such that rent is almost equal to EMI and in 5-6 years house will be his own. Till that time he had 4 such house/flats.
Disclaimer: Location Faridabad and time 2002 or so.
Any member from Faridabad, pls suggest how much property rates have been appreciated in faridabad, since 2002 ?
|
Posted By: valueman
Date Posted: 04/Dec/2007 at 12:03pm
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Don’t link your lifestyle to stock market 2007-11-27 14:27:06 Source : moneycontrol http://www.moneycontrol.com/india/news/mf-experts/don-t-link-your-lifestyle-to-stock-market/12/15/314796 One of the dictionary meanings of the word notion is “A mental image.” When the stock market is rising, our notional wealth increases. Everyday we look at stock prices and calculate our wealth. Soon we start believing that growth of our wealth is real and long term. If the stock market rally continues for long – like it has happened this time - we start feeling that our wealth will continuously keep rising. This false state of suddenly feeling wealthy leads to change in lifestyle. In recent past, it has been observed that many neo-wealthy investors have suddenly increased their lifestyle expenses. Individuals who use to move in Maruti Alto have purchases Honda City. Families that hardly went out of town have gone to Singapore and Malaysia for vacation. All these expenses are not because they have had phenomenal growth in their own occupation. Most of these spending happen because there is increase in notional wealth. In year 2001 2002, reverse behavior was observed. This was the time when stock markets were in doldrums. Investors had lost heavily in tech bubble bust. General mood was so down that spending during festive season was also restricted. Those were the years when an investor would not look (READ: Calculating) at his wealth at all. S/he could not withstand daily fall in his/her wealth notionally. Sudden increases in lifestyle expenses and/or stopping of spending even during festive season are examples of extremes. Both the situations arise because we react based on growth or fall in our notional wealth. One of the perils of increasing your lifestyle during stock market boom is that we get used to comforts and luxuries in life. When economic situation turns bad we will then struggle to curtail our expenses. In fact in reality while markets are rising, we should control our expenses and let our wealth grow. By spending money unnecessarily we are making the ability of our wealth to grow impotent. On the other hand when equity markets are down, our wealth is not growing in real terms. Also goods and services are generally cheaper as general spending by consumer is less. Hence, it is prudent to spend money during these times. We all know stock markets are volatile. Both rise and fall in short run are not permanent. Usually in long run – more than 7 to 9 years – equity markets are likely to give returns that are way higher than inflation. However modifying lifestyle based on few months of stock market rally is highly injurious to financial and family life. By all means upgrade your lifestyle if you desire, but do not link life and lifestyle of your loved to indices. - |
Posted By: basant
Date Posted: 04/Dec/2007 at 12:40pm
Should not one do the reverse. Buy stocks when markets are down and spend when markets are on ahigh. I follow that strategy.
------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: kulman
Date Posted: 04/Dec/2007 at 12:49pm
|
....modifying lifestyle based on few months of stock market rally is highly injurious to financial and family life.
-----------------------------------------------------
Very true & important!
------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: basant
Date Posted: 06/Dec/2007 at 4:43pm
Always nice to hear that.Dish Tv did give you a tough time though but Alls well that ends well.
India is in a sweet spot right now but over a period of 200 years stocks have outpeformed real estate. See the logic works like this. Suppose real estate prices keep going up so the rent would also go up. At the end of the day the business has to be viable for the rent. It is like the Ricardian theory of rent (if someone has read economics in college). The Property price/Rent is not high on their own but robust businesses are making the property price/rent high by paying more because they can afford to.
So to think that property prices would keep going up without a robust business (stocks) could be a debatable point and a business should earn greater return to pay for those properties.
When we hear of a deal for Rs 30 crores in a city it is an indication that people are getting wealthy and hence willing to pay higher for a piece of land/house.
Also the first home is never an asset that is what i indicated. It is an asset with a lifetime lock in period the asset categorization starts from the second home.
But if played well leveraged properties are the biggest multibaggers.A 10% down payment in a property with a 50% appreaciation is a 5 bagger in no time.
------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: omshivaya
Date Posted: 06/Dec/2007 at 4:44pm
|
Chinki jee, any good bargains that you know of for someone who wants to afford a home(3-4 bedroom) in a decent and civilized locality. I dont mean usual prices...I mean can you help get some good bargains? It is not for investment, but for living purposes of a respectable family.
'Coz many people may want to buy some home/flat in next 4-5 years' time  ------------- The most important quality for an investor is temperament,not intellect.A temperament that neither derives great pleasure from being with the crowd nor against it |
Posted By: omshivaya
Date Posted: 06/Dec/2007 at 4:52pm
Sounds like a good business plan. We can apply it in the future as a team, who knows!!  ------------- The most important quality for an investor is temperament,not intellect.A temperament that neither derives great pleasure from being with the crowd nor against it |
Posted By: smartcat
Date Posted: 06/Dec/2007 at 4:54pm
Yes, you have mentioned this before. But this logic holds good only for commercial and retail property development right? Residential property values could grow at a higher rate than normal businesses (stocks).
I don't know anything about this Ricardo guy's theory - but are there any cases in history where real estate (rent) as a constituent of expenses for a business goes up over a period of time?
In India, it seems to be happening to retail. When the retailers like Shopper's Stop/Pantaloon entered into the picture in 2003, they had assumed that real estate would constitute a particular % of their overall expenses. But rentals went higher than the growth of retail businesses (in metros) - so the retailers are now living with higher rentals and accounting for it in their business model.
|
Posted By: basant
Date Posted: 06/Dec/2007 at 5:07pm
Residential property has to be serviced either out of salary or profits that businessmen make so if businesses grow at alower rate how will these rent/prices be serviced because the feed is coming out from business.
Can you spend more on your household expenditure for a long period of time then what you make from your work? We can do it for sometime but not for long.
retailers are passing on the cost of higher rentals in their sales because they can pay higher rental for one or two years not for long. Trent stopped expanding because paying such rentals were not viable. PRIL signed all properties before so was saved from this; Reliance Retail and Birla are not reporting mumbers and want to take market share so this can happen but not for a longer period of time.
------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: CHINKI
Date Posted: 06/Dec/2007 at 5:12pm
|
Dish did gave lot of heartburns not because it was going down. I had sold other stocks ( as initially I had more 75 stocks in my portfolio) and diverted that to NW 18 & Dish TV.
To my surprise, all these stocks which I sold started moving up (some even upto 100%) while these two moved in the opposite direction. I was only thinking IF I had sold these stocks late and bought Dish when it was around 60. Anyhow these are learnings which will come handy in future and it is good that these things in the initial years of investment. May be after 10 years or so, you will not get perturbed by any stock price movements. Gone are the days when people used to have only one home/apartment where they used to stay if they are in that place or give it on rent when you are working in a different place. People invest minimum in two (one for living and the other from investment angle). While NRIs have invested in more than four purely on leveraging (Home Loan). These are the one of the reasons why the prices are going northwards in Pune, Bangalore or Hyderabad. People have now found that putting money in Real Estate is also one way of Investment. As you have mentioned, people have made 5 times within a year. Everything is possible provided you do your homework. Om Shiva: PM your e-mail id. ------------- TOUGH TIMES NEVER LAST, BUT TOUGH PEOPLE DO |
Posted By: joslinjose9
Date Posted: 03/Jun/2008 at 6:59pm
|
http://www.rediff.com/money/2008/jun/03bspec.htm - http://www.rediff.com/money/2008/jun/03bspec.htm ------------- fear of lord is the beginning of wisdom |
Posted By: snehaldani
Date Posted: 03/Jun/2008 at 9:07pm
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Thanks for the nice link, Joslin Jose. ------------- Snehal P.Dani |
Posted By: RahulB
Date Posted: 05/Jun/2008 at 7:35pm
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Basant jee - I really liked your quote "But if played well leveraged properties are the biggest multibaggers.A 10% down payment in a property with a 50% appreaciation is a 5 bagger" Keeping in mind, the recent correction in real estate prices and your logic of leverage, there is a temptation to increase exposure real estate. What is your advice on correct balance between real estate (second home/commercial property) and stocks? |
Posted By: basant
Date Posted: 05/Jun/2008 at 8:17pm
|
Property prices are not something which I have any knowledge on but a leveraged property (10% down payment) will outperform stocks even on moderate appreciation because one is not (normally) thrown out of a position since property prices do not fall 40% in 3 months.
The unique thing with property is if it falls 20%-25% then the sellers automatically disappear leading to a vacuam and hence prices stop falling. This is in relation to india not so much in US where people are leveraged and have to sell for anything! ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: deveshkayal
Date Posted: 05/Jun/2008 at 8:21pm
|
All the news that prices have corrected in Mumbai is untrue. Yesterday, an agent said there are ready buyers at the price prevailing one-two months back. But I am not sure whether it makes sense to buy property now when stocks are available at 6-12 months low ! ------------- "You don't need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beat the guy with a 130 IQ. Rationality is essential"- Warren Buffett |
Posted By: RahulB
Date Posted: 05/Jun/2008 at 1:14am
|
Till few
months back, I was keen to invest all new funds exclusively in stocks esp. with
attractive valuations after market correction. However, my dad made me
calculate returns on our real estate investments. To my surprise, the
annualized returns were in the range of 23-27% (without any leverage) for all
the four different investments. The time frame varied between 3-20 years. This made
me start thinking about doing a leverage investment (10% investment) in real
estate with 3-4 year time horizon by picking the right assets at reasonable
price. Logic being that one can get a three bagger straight away if the
property price doubles in five year and in case the price doubles in four years
this can be a five bagger. Like all other high return investments this has its
own risks but the downside is relatively capped. I have not made
up my mind but have done some inquires; which clearly show that real estate
prices have corrected in several cities. For example: -
In
NCR (esp. Noida & Greater Noida), several builders have started offering
significant discounts to listed prices. Some of them are even offering to cover
EMI payments till possession of property -
In
|
Posted By: investor
Date Posted: 05/Jun/2008 at 10:59am
|
I think title of this thread should now be changed to "Read how wealth can be destroyed quickly in stocks only!!!" ------------- The market is a place where people with money meet people with experience. The people with experience get the money while people with money get experience! |
Posted By: satya
Date Posted: 07/Jul/2008 at 1:47pm
|
It is all good to read about the 1929 depression when the Dow fell 90% and did not revisit that level for two decades.
Basnat Sir, what happened to those people who had retired in 1929 and thought that they will make monthly Systematic Withdrawal from MF for next 20 years after staying invested for long period through SIPs in MF.
They would have very tough time ahead.
|
Posted By: PrashantS
Date Posted: 07/Jul/2008 at 4:39pm
they say mkts react 6 months in advance...an year back i met someone in delhi who knows in and out of real estate and he was telling my uncle the best is behind us ...things will get tough in real estate...lets see time will tell |
Posted By: shivkumar
Date Posted: 07/Jul/2008 at 4:52pm
|
One buys residential property to acquire a roof over ones head. If one must necessarily invest in property it must be with a strategic objective in mind. For example someone who had purchased a residential flat in Navi Mumbai in the early 2000s would be sitting on a multi-bagger with prospects of appreciation in the coming years as well. There might be many areas like Navi Mumbai and the Pimpri-Chinchwad (near Pune) across the country. But the investor in property look at things with a strategic perspective and choose emerging localities. As Robert Kiyosaki in Rich Dad, Poor Dad points out you make your profit from property right at the time of the purchase and not when you are selling it. On the other hand people who invested in properties across Mumbai, Delhi and other places will see a slow and steady erosion in their asset values unless something dramatic happens to increase purchasing power among potential buyers. Such a scenario is unlikely when oil at $ 145 per barrel is boosting inflation and taking interest rates to stratospheric heights. Demand contraction in the coming months will gradually force developers to reduce prices or throw in more freebies. Sellers of older properties would then have to bring down their asking rates below that of new developments and kick off a downward spiral that will stabilize only when interest rates come down to single digits. |
Posted By: Invest_in_India
Date Posted: 07/Jul/2008 at 4:55pm
You're absolutely correct Basant Sir, It was the peak time when I bought a 3BHK in Bangalore 1.5 years back by paying 15% down payment to the builder.Lot of people suggested that time that property rates will come down by 20-25% in the coming year & blah blah...but still I bought it... Now after almost 1.5 years I can see that the price has actually not fallen instead the price of my apartment has gone up by 30+%. ------------- Cheers, Raj "Que sera, sera, Whatever will be, will be; The future's not ours to see. Que sera, sera, What will be, will be. Que Sera, Sera!" |
Posted By: satya
Date Posted: 01/Oct/2008 at 12:13pm
|
Basantjee in todays market when big corporations are falling, how do u think about this strategy see link. http://www.moneycontrol.com/india/news/mf-experts/learn-to-invest-equities-without-iota-risk/11/40/358726 - http://www.moneycontrol.com/india/news/mf-experts/learn-to-invest-equities-without-iota-risk/11/40/358726 |
Posted By: chic_1978
Date Posted: 01/Oct/2008 at 5:42pm
|
nice article ------------- happy & wise investing |
Posted By: basant
Date Posted: 01/Oct/2008 at 7:04pm
Contradictory. If that is the return of SIP why not do a STP. SOmetimes I find that these are old wine in new bottle. WOuld have been better to read about such strategies when stocks were expensive not really when stocks are cheap especially when you are having a 6 year view.
------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: atulbull
Date Posted: 02/Dec/2008 at 1:08pm
The ten roads to great wealth
PV Subramanyam KEN Fisher says there are ten roads to
great wealth. But, what are these Ten Roads? And, what will work for you? Source: http://wealth.moneycontrol.com/columns/financial-planning/the-ten-roads-to-great-wealth-/11671/0 - moneycontrol ------------- Price is what you pay.Value is what you get. |
Posted By: hallmark
Date Posted: 02/Dec/2008 at 7:17pm
|
basantji's energy and passion keeps me going.
i have with a vengeance downloaded books from esnips
and reading them
the institutional imperative concept from the real warren buffett
one should do what one is suited to his or her personality-jack swager
markets are complex adaptive systems which are unpredictable in the short term, many patterns work at any length of time, new patterns take over fom the warren buffett portfolio
looking at stocks as businesses-
and many many more.....
buffett being able to say what is 99*99 in an instant
and calculating rate of return instantly for appreciation from 10,000 to a million in a jiffy
he is extremely good with numbers.
|
Posted By: ashishbarot
Date Posted: 04/Dec/2008 at 3:47pm
Profit from the Great Panic of 2008By Research Desk | Dec 2, 2008 Many times in the past, Value Research has published articles in response to investors' need to response to a particular market situation. In every one of these articles, regardless of whether the markets have looked good, bad or ugly, we've given exactly the same advice. Not only that, the whole point of our advice is that it has always been the same.
The Value Research Way - Investors should not need to time the market. Therefore, the only valid investing approach is one that is always the same, regardless of market conditions. Any investor who has followed this advice is sitting pretty today, largely unaffected by the Great Panic. The market value of your investments may be down today, but since you don't need any of it for many years to come, that doesn't matter. Long before you'll need the money, it would have had a chance to start growing again. Today, the natural response of many investors to what we're saying is that right now, they've lost money. They say, “The returns may come back in the future, but what about the losses that I've made today". Those who say this are right in their arithmetic, but completely wrong in their assumptions. The only way to avoid the occasional crash is to be able to see the future, and if you could see into the future then you wouldn't be reading this any way. The whole point of investment approach that we are advocating is that it eliminates the need to see into the future. The Past Proves the Point During this period, many mutual funds have comfortably beaten the Sensex so the Rs 66 lakh is a rather conservative figure. In a median fund, the 10 years would have seen your nest egg reach about Rs 1.04 crore. And this, during a decade which has witnessed two huge market crashes! That's after absorbing the hit of the worst panic that anyone has ever seen, when the market is at a long-term low point. Once any kind of recovery commences, the value is very likely to shoot up. If this isn't a perfect demonstration for the value of our slow-and-steady way, then nothing can be. Over such a long period, the so-called 'safe' fixed-income avenues do so much worse than supposedly 'unsafe' equity, that the there's no contest at all. Over this same period, you could have earned an average of no more than around 8 per cent per annum in fixed income investments. The same inputs would leave you with just about Rs 44 lakh, which doesn't cover even the inflation rate adequately. The moral of the story: Despite the crashes, equity is the far safer option over the long run. The real danger to your financial well-being is not market crashes, but from the insidious affect of inflation. Crashes are Your Friends Let's assume that the crash never happened. The Sensex reached 5,600 in March 2000 and then stayed at that level till October 2004. If that had happened, then your Rs 20,000 a month would be worth Rs 55 lakh instead of Rs 66 lakh! That's right. For the long term investor, the crash of 2000 was worth a lot of money. How did you make more money because the crash? The answer is obvious to anyone who understands the basic arithmetic of what's happening here. The crash enabled you to buy cheap and thus eventually raised your total returns. If you are investing steadily for the long-term, then intermittent crashes help you make more money, not less. And that is how you will eventually profit from the Great Panic of 2008. Stocks are now cheap, and are probably going to get cheaper. The longer and deeper this crash, the more money you will eventually make. If you know what's good for you, you should be praying that the Sensex falls to maybe 6000 or 7000 and then stays there for a few months or years before coming to life again. And that's the secret of equity investing, the real moral of the story: For the long-term investor, equity is not good despite the occasional crash. It's good precisely because it crashes. Volatility is your friend. Volatility is what will make you rich. ------------- You do not require an invitation to make profits. |
Posted By: MissingLink
Date Posted: 04/Dec/2008 at 9:07am
|
I always fail to understand when people say the following:
======================
- Investors should not need to time the market. Therefore, the only valid investing approach is one that is always the same, regardless of market conditions.
- Never invest large lumps of money in equity. Do it gradually, SIP style
====================
Never time the market... BUT always invest on the 5th of every month the SIP way !!!!
Greatest paradox !!!!!!!!!
All those dumb comparisions of the so called SIP start at 2001 and end at 2007 !!!
How about an SIP from Jan 2008 till date? ------------- Missing a train is only painful if you run after it! Not Matching the idea of success others expect from you is only painful if thats what you are seeking. -- Nassim Nicholas Taleb |
Posted By: India_Bull
Date Posted: 04/Dec/2008 at 11:04am
|
How about an SIP from Jan 2008 till date? ----------------------------------------------------------- Newspapers will talk again about SIP benefits in 2012- (Jan 2008-Dec 2013) ------------- India_Bull forever Bull ! www.kapilcomedynights.com |
Posted By: arunshah2k
Date Posted: 04/Dec/2008 at 11:08am
Well, all sort of examples and real life people who have made money have one thing in common - holding period. I doubt anyone would have made serious money without holding stocks for less than 10 years. In this case, even SIP can give returns only in a 10 year period where multi-bull/bear cycles have occured. |
Posted By: satya
Date Posted: 05/Dec/2008 at 12:41pm
|
Article on long tem investing. http://www.thehindubusinessline.com/iw/2008/11/30/stories/2008113050370700.htm - http://www.thehindubusinessline.com/iw/2008/11/30/stories/2008113050370700.htm |
Posted By: deveshkayal
Date Posted: 19/Dec/2008 at 10:53am
|
http://www.moneycontrol.com/india/news/market-outlook/rakesh-jhunjhunwala-raamdeo-agrawalwealth-creators/371778 - Rakesh Jhunjhunwala, Raamdeo Agrawal on wealth creators "What Indian investor lands up doing is buying multinational companies who have the worst corporate governance in this country, Satyam is nothing"
"So it was a bad thing that they would go and keep pumping capital. Putting good money on a bad thing"
"Improving? I don’t know maybe next year there will be no oil subsidy, I don’t know what the government is saying. As per my calculations if today Oil is 45/bbl, Indian Basket is 40/bbl, oil companies today are making a profit after providing for subsidy of at least Rs 50,000 crore at 47 to the dollar. What was said in June that there was a loss of Rs 2.45 lakh crore. So, Rs 3 lakh crore is going to come in, this country is going to be saved, this has such consequential effects, sulphur has gone from USD 800 to USD 90. I don’t think there will be a fertilizer subsidy more than what they have provided for in the budget in this year"
"I don’t think that people will produce oil if it stays at USD 25 per barrel. I don’t know why it is taken for granted that oil will remain at this price for ever"
"But no one is predicting. 88 million barrels is the daily consumption and they are going to cut 4 million, no one is predicting a fall of more than one million next year. So it’s peculiar we don’t know anything of the commodity market we should ask the Mr. Jim Rogers, he knows best"
"Take a company like Blue Star it is available at a stunning price in relation to what it has done - contracting, project, core air conditioning, heating etc it has compounded seven years return on capital employed of 37%, it has grown profits in excess of 27%. It has never had in the last 10 years a year in which absolute profits have grown and there has been no dilution in the last 10 years"
Bhattacharya: Yes I do have a ownership
"People talk about deflation, lower inflation – they compare us with ------------- "You don't need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beat the guy with a 130 IQ. Rationality is essential"- Warren Buffett |
Posted By: basant
Date Posted: 19/Sep/2009 at 10:22pm
|
Over a longer period of time stocks always outperform Bonds which would
outperform real estate and that would outperform Gold. The logic goes
like this. If a business cannot earn enough to pay off its debt holders then no one would lend to a business so a business should outperform debt (bonds); a person takes debt to buy a home and tries paying off that EMI by working somewhere or doing his own business so the returns from that business should exceed the EMI component of his payoff or else no one could have serviced home loans; If real estate does well for ever then all factories will have to be closed down and that land converted and sold off to property developers that does not happen so business should outperform real estate also and the same logic applies to Gold which is a pure inflation hedge. So why is it that many people lose money in stocks but not in FD/ real estate? the answer lies in the valuation at which we buy stocks. FD except for that minor interest rate variance is for all debatable purposes capital protected (though one can lose a lot playing in the Bond market but a Bond held till maturity does not disturb the capital provided the issuer is solvent which in case of a Bank is guaranteed by the RBI up to Rs 1 lac). So the losses from stocks are not because of business (EPS, cash Flow) per se but at the valuations that we buy them at (PEs). Also there are no commentators scaring us to sell FDs and Houses just because Nikkei opens 400 points lower! the BSE Sensex has returned 18.64% compounded for the past 30 years since its inception. What more proof do we need? ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: omshivaya
Date Posted: 19/Sep/2009 at 1:11am
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Great reading these gems again and again and again Basant jee. Thank you!!! ------------- The most important quality for an investor is temperament,not intellect.A temperament that neither derives great pleasure from being with the crowd nor against it |
Posted By: amitdip
Date Posted: 22/Dec/2009 at 1:02pm
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There is one difficulty with eternity, human life in biological form, as we know, is limited.
Here is the most mind blowing fact in recent times. Some years may be wrong but I can double check and am approximately right that, "If one had invested 1 million US $ in 1830s or so in Dow Jones Index/ equivalent index and held on until 2002" that money would be 8 trillion $ or about 70% of US market cap at the time or thereabouts. So if you can convince your next three to five generations to keep money in Nifty fifty/ BSE sensex you will control major holding in it in couple of hundred years ! |
Posted By: amitdip
Date Posted: 22/Dec/2009 at 1:05pm
| Sorry, to complete it, 1 million $ of 1830 isnt that big a sum, it was equivalent to 15 million $ in 2002 which many many business people have. |
Posted By: basant
Date Posted: 22/Dec/2009 at 1:41pm
Strong and Interesting argument but are yu sure about the DOw Jones index numbers of that time? ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: rapidriser
Date Posted: 22/Dec/2009 at 7:20pm
$1 million growing to $8 trillion from 1830 to 2002 is a CAGR of 9.68%. Definitely a fantastic return over that period, but not so great nowadays with the type of inflation we face.
However, http://www.mdleasing.com/djia.htm - this link says that the DJIA was first conceived in 1884. So where did the 1830 figure come from?
Also, starting from 40.94 in 1896, the Dow has grown to 10,414 in 2009. A much lower CAGR of 5.02%.
------------- When all else is lost, the future still remains. - Christian Nestell Bovée |
Posted By: amitdip
Date Posted: 22/Dec/2009 at 12:26pm
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I'll come back to you with more accurate and precise facts, is the reason i mentioned equivalent index, since Dow Jones is not as old as 1830s.
Regards
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Posted By: amitdip
Date Posted: 22/Dec/2009 at 12:32pm
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I'll come back to you with 1830s index is the reason I wrote equivalent index.
Buying the best bunch of companies in any century 21st, 22nd, 23rd, (company that can increase price of its products along with increase in inflation) will give you greatest returns, more than real estate, debentures, gilt edged securities. So whether inflation is 2% or 12% in 2020s, 30s, 40s it become immaterial. I think that return of 5.02% does not include dividend. How that miracle of numbers happened is that no family continued to invest for last 180 years otherwise that family would be a Mafia of Mafia in financial wealth
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Posted By: tigershark
Date Posted: 22/Dec/2009 at 5:32am
sensex returned 19% since 1979 till date.that was the yr i joined medical school paying rs 50000!
------------- understanding both the power of compound return and the difficulty getting it is the heart and soul of understanding a lot of things |
Posted By: amitdip
Date Posted: 22/Dec/2009 at 6:58am
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I'll begin with my history with stocks, I've wanted to invest in equity markets since 1997 when I completed graduation but alas, that was not to be. I used to stay awake till 3am at times browsing for low PE ratios stocks of all listed companies in economic times. With my limited knowledge I though of investing in G E Shipping for its low PE but never bought it I invested only 50,000 Rs or so in 1999 in IDBI Bank after my first job and left it to parents, they swapped it with other shares etc. I left india in 2000, did not have trading a/c so i missed out on the whole India bull run and came back to stocks again in year 2006 and that too in NZ/Australia/UK with say 4 months of salary, and lost everything by 2007 :) Fortunate to have not invested big sum. I invested mostly in real estate. Then I started investing in India from 2008 begining and this has so far turned out well... Now for the answer, excerpts from the book: ------------------------ I stand corrected, there wasn't an equivalent index of Dow Jones, the returns are computed by investing in the whole market, i.e. all listed stocks, in weightage of their market caps, whether they survive or not. Which makes me think that returns would be better had they been contentrated in top 100-500 companies. Here is the summary from book: Years of return computed : 1802 through 2001 for US markets Real post inflation yield on stocks 6.7% to 7% over this 200 year period Its dramatic if you factor in changes that happened, agri to industrial, to service to technology based economy. Change from gold to paper money standard, world wars.. Rate of real rise between 1946-1965 - 10% Rate of real rise between 1966-1981 - -0.4% Rate of real rise between 1982-1999 - 13.6% Rate of real rise between 1982-2001 - 10.5% Stocks have taken on average 10 years to double your purchasing power compared to 100 years for T Bills. LT Govt. bonds have 3.5% real returns from 1802 - 2001. In 1958 yields for the first time in 60 years were lower in stocks than LT Govt. bonds and stayed that way for next 50 years, person who wanted to be conservative would have just waited. Above is true for German, US, Japan and UK market in terms of returns in Govt Bonds vs. Stocks from 1920s In 1871 two actively traded stocks were Bank of New York and Bank of United States, Alexander Hamilton and his secretary at Treasury manipulated the price, thus was born antecedent to NYSE circa 1892. By 1802, 300 companies had listed stock but less than 10 had frequent trading. Initial listings being transportation, canals, wharves, bridges, then financial companies. Stocks always beat bonds if holding period is more than 20 years even if you buy at peak. Best % / Worst % returns if Holding Period is 1 Year Stocks 66 / -38 Bonds 35 / -21 T Bills 23 / -15 Best % / Worst % returns if Holding Period is 2 Year Stocks 41 / -31 Bonds 24 / -15 T Bills 21 / -15 Best % / Worst % returns if Holding Period is 5 Year Stocks 26 / -11 Bonds 17 / -10 T Bills 15 / -8 Best % / Worst % returns if Holding Period is 10 Year Stocks 17 / -4.1 Bonds 12 / -5.4 T Bills 11.6 / -5 Best % / Worst % returns if Holding Period is 20 Year Stocks 12.6 / +1 Bonds 8.8 / -3.1 T Bills 8.3 / -3.0 Best % / Worst % returns if Holding Period is 30 Year Stocks 10.6 / + 2.6 Bonds 7.4 / -2.0 T Bills 7.6 / -1.8 Coming to original answer: --------------------------- Investing in whole market from 1802 to 2001 Stocks 1 $ ==> 8.8 Million $ Bonds 1 $ ==> 13,975 $ Bills 1 $ ==> 4,455 $ Gold 1 $ ==> 14.6 $ Thus, 1 million $ is equal to 8.8 trillion $ i.e. 70% of entire market cap of US. 1 million $ in 1802 is equivalent to 15 Million $ in 2001 US money buying power. Rapidriser, I can confirmed that Dow Jones does not include dividends Wilshire 5000 is broadest index available with 6200 firm (NYSE has 10,000 stocks if you exclude 20,000 penny stocks) S & P 500 has 84% of market cap of WILSHIRE 5000 S & P 500 in 1957 had roughly 90% value of all NYSE shares S & P 500 in 2001 had roughly 80% value of all NYSE shares We underestimate power of real estate in upcoming townships, there is a town in South Delhi, a middle class suburb, Malviya Nagar, same applies to GK too with more than 10 - 20,000 plots My guess is that more than 10,000 plots were sold in Malviya Nagar in 1960s, and refugees from Pakistan, my maternal grand parents including bought 200 square metre Plot was for 8000 Rs in 1960s, today each plot is about 4 crore Rs - thats 5000 bagger. So every ignaramus is crorepati with real estate in 3-4 decades, same cant be said because of potential for bad investments in stocks. Conclusion: Stocks are more conservative than bonds, person investing in bond is speculating with purchasing power of money. Stocks have power to turn 1$ into millions by forbearance of generations. Regards Amit |
Posted By: rapidriser
Date Posted: 22/Dec/2009 at 7:37am
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Hi Amit
Thanks for the details. Very interesting.
Logically too stocks must beat bonds. If a business does not generate higher returns than the cost of borrowing money, then no one would start a business.
According to me, growing population and improving incomes will ensure that Indian Real Estate too will outperform most other investment avenues. The retuns will be better in Tier-2 & Tier-3 cities like Mysore, Nagpur & Baroda.
------------- When all else is lost, the future still remains. - Christian Nestell Bovée |
Posted By: freddie
Date Posted: 12/Feb/2010 at 2:58pm
| Wow.. who wouldn't want to know how to create wealth from stocks. |
Posted By: yogishkamath
Date Posted: 31/Mar/2010 at 1:27pm
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Everybody with a pulse can make a good investment in property. It requires no special skills or knowledge or the ability to remain calm when everybody around you is apocalyptic. Of course, there is more money in stocks but the rewards are skewed. The top 5% (Teddies and their buddies, one hopes ;) ) make most of the money. The average joe loses money by buying and selling at precisely the wrong times. |
Posted By: C.C.Gemini
Date Posted: 14/May/2010 at 7:22pm
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Mr Vivek your uncle was able to make crores, as One Bajaj share was Rs 10/- in 1962.I would like to know thru Mr Basant,that in today's world with this book building process and premium, is it possible to acheive what your uncle got. ------------- CCge... |
Posted By: basant
Date Posted: 28/Nov/2010 at 5:29am
It is a sheer case of sacrificing volatility for returns. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: rajnsharma
Date Posted: 28/Nov/2010 at 6:16am
Totally agreed. Returns in real state are definitely lower than in stocks. |
Posted By: atulbull
Date Posted: 01/Feb/2011 at 4:23pm
Apple Inc: The Greatest Turnaround in Corporate HistoryBy Max Olson | January 18th, 2011Some fun facts about Apple’s turnaround:
Apple Sales/Income Timeline http://www.futureblind.com/wp-content/uploads/2011/01/AppleSalesIncomeTimeline.png"> Apple’s unit volume for non-Mac products: http://www.futureblind.com/wp-content/uploads/2011/01/AppleUnitSales.gif"> ------------- Price is what you pay.Value is what you get. |
Posted By: subu76
Date Posted: 01/Feb/2011 at 11:02pm
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I often wonder about what one should do to identify the next Apple when it starts off the gravy train...no solid ideas at the moment
Afterall, just one such stock is all that one needs for a lifetime of successful investing
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