Mutual Fund Investing: Active Share

Cartoonist: Farris, Joseph; cartoonstock.com 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; cartoonstock.com – 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; cartoonstock.com – 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; cartoonstock.com – 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; cartoonstock.com – 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; cartoonstock.com – 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; cartoonstock.com – 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 […]

Stray Thoughts: Demonetisation – Make India Great Again

(Image Courtesy nytimes.com)(Sunday, 20 November 2016)   And, for a Monday morning, a few stray thoughts and a few general observations and a few points of view: Like the Indian Stock Market has been in a tailspin since the demonetisation of high-value currency notes was announced by the Prime Minister on the 8th of November 2016. Bulls got punched in the mouth twice, once as a result of the demonetisation and again as Emerging Markets (EM’s) cratered in response to […]

Is Benchmarking a Curse or an Opportunity?

Cartoonist: Rosandich, Dan; cartoonstock.com – Sunday, 6 November 2016 Do you benchmark? More often than not, the answer to this question will be in the negative. Reality is a bit nuanced. Investors do end up getting caught up in the benchmarking process, albeit inadvertently. Benchmarking  Benchmarking is the act of comparing our investment performance with that of a standard. I have written on benchmarking before. But I have never spelled out how it works in the market. I need to […]

Algorithmic Trading: Is the Stock Market Rigged?

Cartoonist: Bacall, Aaron; cartoonstock.com – Sunday, 23 October 2016 Algorithmic Trading refers to the use of electronic strategies for enhancing the speed and execution of orders on the stock exchange. What is Algorithmic Trading?  A trading algorithm (ALGO) is a set of rules that are used to enter and exit a trade. Instead of manually entering buy and sell orders, a computer program (Algorithm) is used to trigger the same. For this post, I have used the term ALGO to […]