The Index Effect on Inclusions & Exclusions in the Nifty 50

Cartoonist: Schwadron, Harley; – Sunday, 9 April 2017 The increase or decrease in the price of a stock pursuant to it being added to or dropped from a benchmark index is known as the index effect on the price of the stock. I have tried to quantify the ‘Index Effect’ on the inclusions and exclusions in the Nifty 50 benchmark index. The Index Effect Before I get into what is presented, a bit of background information is essential. India […]

Stock Market Seasonality: Will 2017 be an Outlier Calendar Year?

Cartoonist: Farris, Joseph; – Sunday, 26 March 2017 The returns for the calendar year 2017 (thus far) have surprised the most optimistic of market participants. Using Stock Seasonality, I have tried to answer the rhetorical question: Will 2017 be an outlier calendar year for the Indian Stock Market? Monthly Stock Market Seasonality For the uninitiated, Seasonality is the characteristic whereby data experiences changes that recur every calendar year.  Any predictable pattern in a time series that recurs over a one-year […]

SIP Investing: Active Funds v/s Index Funds

Cartoonist: Collins, Dan; – Sunday, 12 March 2017 I think the image above correctly describes the ethos in the minds of the Indian Mutual Fund Investor. Practically everyone now uses a Systematic Investment Plan (SIP) for investing in the Indian Stock Market. A Systematic Investment Plan (SIP) as an investing strategy has stood the test of time, and its efficacy is beyond doubt. However, I wish to highlight the fact that the asset class that is chosen is far […]

Mutual Fund Investing: Active Share

Cartoonist: Farris, Joseph; Saturday, 25 February 2017 In the world of Mutual Fund Investing, one can be an active investor by investing in an actively managed fund or a passive investor by investing in an index fund. How does one decide as to how ‘Active’ a money manager in an Actively Managed Fund is? That’s what ‘Active Share’ is all about. Passively managed funds are those that mimic the benchmark. Actively managed funds are the ones whose composition varies from […]

Investment Strategy: The Nifty100 Equal Weight Index

Cartoonist: Schwadron, Harley; – Sunday, 12 February 2017 How many of us have a strategy while investing? How important is it? I think that having an investment strategy in place is a precursor to the actual investment process and its importance cannot be understated. Investment Strategy: Why? In the extremely noisy world of investing products, there are multiple strategies. To be fair, there cannot be any one strategy that fits all. Each of us has to devise or tweak our […]

Is the Nifty 50 a Fair/Flawed Benchmark?

Cartoonist: Hesse, Peter; – Sunday, 29 January 2017 The obsession of the investing community with benchmarks has increased their importance. The Nifty 50 Index, disseminated by the National Stock Exchange of India (NSE) is the most popularly used benchmark for the Indian Stock Market. Nifty as a Benchmark The Nifty 50 benchmark index represents 65 percent of the float-adjusted market capitalisation of stocks that are traded on the National Stock Exchange of India (NSE). I think it is necessary to […]

Magic Formula Investing: Why Does it Work?

Cartoonist: Brown, David; – Sunday, 15 January 2017 A Magic Formula Investing post has become an annual ritual on Sentiments & Bubbles. Using the Magic Formula as an investing strategy was popularised by Joel Greenblatt in The Little Book that ‘Still’ Beats the Market Magic Formula Investing is a strategy whereby we end up buying shares in companies that have both, a high earnings yield and a high return on capital. In other words, we buy shares in good […]

Forecasting 2017: Are You Nuts; Why Not Throw Darts Instead?

Cartoonist: Morris, John; – Sunday, 1 January 2017 It does appear that forecasting has become little more than an excuse for sloppy thinking. Hence, it would be easy to conclude that we should ignore forecasts altogether. But just as we don’t throw out an ideology because it has been used disingenuously, we shouldn’t be too quick to dismiss forecasting skills. Burton G Malkiel in his seminal book A Random Walk Down Wall Street – The Time-Tested Strategy for Successful […]

Mutual Fund Investing: Have You Heard of Survivorship Bias?

Cartoonist: Bacall, Aaron; – Sunday, 18 December 2016 What does Survivorship Bias mean in the investing world and how is it relevant in the Indian context? Survivorship Bias – Definition Survivorship Bias is defined as the logical error of concentrating on the people or things that “survived” some process and inadvertently overlooking those that did not because of their lack of visibility. I’ll try and make sense of the above definition. Mutual Fund Schemes now account for the bulk […]

Investing Edge: Why You Should Index Invest?

Cartoonist: Hesse, Peter; – Sunday, 4 December 2016 In the investing world, can one be a Do It Yourself (DIY) investor? Of course, why not? All you need is an investing edge. What is an ‘investing edge’? In the book titled The Little Book That Still Beats The Market, the authors Joel Greenblatt has hinted at what is meant by an investing edge. In his words: “Choosing individual stocks without any idea what you’re looking for is like running […]