Although , I am not in disharmony to whatever you are saying yet I am not in enire consonance with it as well.I didnt get what you meant by saying holding in such small numbers?
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Posted: 25/Jul/2006 at 9:07pm
I was working on some assumptions.
1) Let us assume that your current portfolio is Rs 10 lacs
2) Now these three stocks make up .07%, 3.3% and .05% of your portfolio.
3) That does not lead to any diversification only a mental comfort that you are invested in a larger number of stocks.
4) More importantly that also means that you get less money to buy genuine bluechips or emerging bluechips in your portfolio.
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Actually Mr. Basant, I think I am right when I said the money will double in 3.6 years. I am assuming that I will reinvest my proceeds(EPS) again into the company. Althought its only theoretically possible but then I beleive academically I am correct.
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Posted: 25/Jul/2006 at 11:35pm
Nowif that is true you are not expecting any dividends. Right, all through you were debating about how dividends formed an integral part of your strategy. See the idea is not to twist one ear of the horse and say they don't match. We have to think consistently not what suits each statement that we make.
By the way you would be surprised to know that dividends make 41% of all the profits investors make from shares. That means only 59% of our profits come from capital gains.
Now look at it this way if stocks having a dividend yield of 4% falls 25% you are still down by 21%. I doubt how many dividend yield investors think that way. Chambal Fertilizer is one stock that pays great dividend but no capital gains. Is it not better to buy the bond of that company? At least theoretically it is more secure then equity.
'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: 25/Jul/2006 at 11:49pm
Yes, dividends are tax free that gives equity investing an advantage over bonds. But bonds guarantee a greater safety of capital so there is a choice to be made. But I have seen from experience that there is no single strategy that works in this market a dividend paying stock can go bust in 5 years and a bankrupt company can grow feathers in 5 years.
Edited by basant - 25/Jul/2006 at 11:50pm
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Its the regularity of flow of dividends, thats important. As far as dividemd goes, I would prefer a plastiblends over tata motors. the very idea may seem weird but I feel more secure with a Plastiblend as far as dividend goes rather than tata Motors.
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