What Ho!» Investing

Warren Buffett at the Annual Shareholder's Meeting – May, 2009

gautamsatpathy — Mon, 04 May 2009 15:08:06 +0000

It is said that in economics, there are no free lunches. And where better to apply that aphorism than the recent spending spree of the US government. Warren Buffett too has made numerous grim warnings that efforts such as the Treasury’s US$ 700 bn Troubled Asset Relief Program and the US$ 787 bn fiscal stimulus plan passed this year by Congress (US) will have to be paid for, one way or another. And with political leaders in the US showing little inclination to raise taxes, one sure way to pay for excess spending is to inflate the value of the currency says Buffett. He is of the belief that inflation is sure to rear its ugly ahead in a big way in the near future. And as per Buffett, the biggest losers in a surge of inflation would include holders of bonds and other fixed-income assets.

Speaking at his company Berkshire’s shareholders’ annual meet that was attended by around 35,000 people, Buffett along with his partner Charlie Munger also said that the most important lessons of the recent financial turmoil are that companies should borrow less and build a system that imposes severe disincentives for failure. The two also said most of America’s biggest banks are not too big to fail, but consumers shouldn’t be worried about bank failures because of protections built into the system. Buffett jokingly remarked that if the system were set up so that an executive would be shot if the company fails, then the company would definitely borrow less.

On being asked whom to lay the blame of the crisis, Buffett aptly replied – “I think that virtually everybody associated with the financial world contributed to it. Some of it stemmed from greed, some from stupidity, some from people saying the other guy was doing it.”

On the US economy, he said, “The economy may have suffered a huge jolt, but when the patient gets going again, he’ll be setting tremendous records. That patient is a terrific athlete.”

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Top Notch Advice For Investors – Survive Stock Market Corrections

gautamsatpathy — Sun, 09 Mar 2008 19:49:25 +0000

PLIFS published en excellent post yesterday about how to survive a Stock market Correction.

I finished reading it a few minutes ago wishing I had penned it

I would rearrange some of the points though.

Stop listening to analysts – Correct. Numero Uno. No arguments there
Stop Staring at your portfolio every 30 minutes – Right. Note to self – Stop this habit!
Be patient. Kind of already covered in point number 2. I feel this one is redundant.
Understand market cycles. This point is marked number 6 in the original post. I would put it at number 3.
Speak to actual investors with experience. Right. But it should come after my number 4, understand market cycles. Every investor should learn all they can about their investments and how these investments can behave under different conditions. Without at least a basic understanding of such things there is no point in talking to experts. Without proper knowledge, everything somebody else says is nothing but a crazy tip.
Stop following crazy tips. True. Oh so true.
Follow the Guru. Okay I suppose. Though I would frame it is little differently. “Learn from the Guru” rather than just follow him.

A very interesting read. Well done PLIFS.

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Sundaram BNP Paribas Mutual Fund – Online Transactions

gautamsatpathy — Mon, 25 Feb 2008 19:18:35 +0000

Sundaram BNP Paribas Mutual has put up a new web page for online transactions. In it they promise to provide a Direct Payment Gateway for online Mutual Fund Purchases, thereby enabling investors to avail the new No Load option given to direct purchases from the AMC.

A welcome move! I look forward to using the service when it is available.

Till then you will have to put in a hardcopy request the traditional way to avail the No Load option. This means filling out the form, signing a cheque and driving down to the nearest Sundaram or CAMS office.

For Hyderabad the Sundaram office is at:

V V Vintage Boulevard
F.No.203, 2nd Floor,
Raj Bhavan Road,
Somajiguda,
Hyderabad 500082
Ph: 040-23393669/23390815/23397600
Fax: 040 23390815

And the CAMS office at:

102, First Floor
Jade Arcade
Paradise circle
Secunderabad – 500 003
1901-425-2267
040-3918 2471, 73
Fax : 040-3918 2472

Do remember that CAMS is open only till 1.00 p.m. on Saturdays. I think they open for business at 10.00 am.

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ICICI's PruTracker – Analyze Scheme Performance

gautamsatpathy — Thu, 14 Feb 2008 02:07:42 +0000

ICICI Prudential Mutual Fund is one of India’s leading AMCs. They manage a lot of money (AUM) and are innovative in their product offerings. They also have a good track record of technology use. Their web site was one of the first to offer direct purchase of Mutual Fund units as well as portfolio tracking.

The PruTracker is a good product though it lacks some fundamental features, particularly on the usability side but that is another post

Of late I have been using their web site a lot and thought I would write about my experience. Late yesterday night I stumbled upon their Analyze Scheme Performance page. This page lets you select a Mutual Fund from ICICI Prudential’s stable, give a date range and select a Performance Measure for analysis. Available measures are:

NAV History
Dividend History
Performance Simulator
Comparison vs Benchmark

I decided to take the Performance Simulator for a spin.

ICICI Prudential FMCG Fund (Click picture for full size image)

What you get is analysis for a single lump sum investment on the start date and an analysis of a monthly SIP between the start and end dates.

Performance Simulator
If you had invested Rs. 1,000.00 on 31-03-1999 (dd/mm/yyyy) in the chosen scheme, then the value would have become Rs. 4,663.00 on 13-02-2008 (dd/mm/yyyy). The corresponding dividend amount paid would have been Rs. 0.00 . Your gain/(loss) would have been Rs. 3,663.00.

Systematic Investment Plan (SIP) Simulator
If you had invested Rs. 1,000 in the SIP option of the chosen scheme (on a monthly frequency), starting on Mar-1999 , then your value would have become Rs. 4,11,486.00 by Feb-2008 a return 28.83 % ( CAGR ). Your gain/(loss) would have been Rs. 3,03,486.00 , on a total investment of Rs. 1,08,000.00.

Note that this screen defaults to the launch date of the fund for start date and today’s date for the end date.

The information returned is useful to some extent. It tells you how the fund has performed over the time period selected. Note that this is real performance (based on certain assumptions) and not a projection.

I then decided to try out a couple of other ICICI Prudential funds I invest in.

ICICI Prudential Power Fund (Click picture for full size image)

ICICI Prudential Infrastructure Fund (Click picture for full size image)

The Analyze Scheme Performance functionality of the PruTracker is a good way to understand performance and compare similar schemes over the same period of time. For the sake of this article I have used the same three funds as above for performance comparison.

Now, FMCG, Power & Infrastructure are all Equity Diversified funds but have very different objectives, investment styles & portfolio capitalization. As a result you cannot compare their performance against each other.

Caution: Do not use this information to make investment decisions. As noted above these funds are totally different from each other and this is not a valid comparison for investment decision making. This is done here for illustration only.

The first thing is to ensure that the comparison is for the same time period. The Infrastructure fund is the newest (launched Sept 9, 2005) and hence I used that as the start date for all there funds. Left the end date as Feb 13, 2008 (yesterday) for all three funds. See the results below:

ICICI Prudential FMCG Fund – Sept 9, 2005 to Feb 13, 2008 (Click picture for full size image)

ICICI Prudential Power Fund – Sept 9, 2005 to Feb 13, 2008 (Click picture for full size image)

ICICI Infrastructure Fund – Sept 9, 2005 to Feb 13, 2008 (Click picture for full size image)

Results:

	SIP Amount	Total Investment	Value	% Return (CAGR)
ICICI Prudential FMCG Fund	Rs. 1,000/-	Rs. 30,000/-	Rs. 38,629/-	22.17%
ICICI Prudential Power Fund	Rs. 1,000/-	Rs. 30,000/-	Rs. 41,759/-	29.56%
ICICI Prudential Infrastructure Fund	Rs. 1,000/-	Rs. 30,000/-	Rs. 54,126/-	56.14%

The results are interesting and when used to compare similar funds can provide good information for investment decision making.

You can also use the Value Research web site to analyze these funds:

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Bye Bye Entry Loads!

gautamsatpathy — Wed, 23 Jan 2008 19:32:19 +0000

See the screen shot below for my most eagerly awaited Mutual Fund Account Statement

Notice the NAV & the Price in INR columns. The last transaction dated 14/1/2008 is the sweetest. No Entry Load!

I have already canceled most of my ICICIDirect SIPs. So far I have been able to take care of only a part of my portfolio by creating SIPs offline. The rest will be completedby the end of Jan 2008.

Hip! Hip! Horray! No Entry Load!

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ICICIDirect's New Message On Mutual Fund Purchase Page

gautamsatpathy — Mon, 21 Jan 2008 23:32:33 +0000

The new direct sales no-load criteria for Mutual Funds in India came into effect on January 4, 2008. Under this investors are not charged an entry load if they purchase directly from the AMC. The operative word is “direct”.

I have seen a lot of discussion on this issue on our internal mailing lists at work and elsewhere on the web. A lot of people seem to be confused about what “direct” means. The word was taken to mean “online” by a large section of people. The experts quickly pointed out that there is a distinction between purchasing mutual fund units on the web site of the AMC vs. buying the same units from a brokerage house like ICICIDirect.

Anyway, I recently logged into the ICICIDirect web site to purchase units in a short term floating rate fund from Chola and I noticed that they have posted a new message on the Mutual Fund Purchase page (see screen shot below).

Notice the paragraph highlighted in blue? It clearly states that they are brokers and hence are entitled to their pound of flesh.

I noticed this on Jan 15, 2008, a good 10 days after the new rules came into force and am not sure when they posted this message. On Jan 4? Or later after their customer support was flooded by mistaken but nevertheless angry customers complaining about the entry loads charged on their purchases?

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