The Tortoise Speaks… – Page 9 – A blog which periodically revisits evergreen investment principles!

Why Should Companies be Well Behaved? – Part 1

On May 12, 2014

Normally when we think of a word, our mind creates a mental image of it. We realise if we associate some strong meaning / feeling with that word. The word ‘corporate governance’ doesn’t invoke any of those things. It’s a bland, technical word which only seems like a good filler in an otherwise boring conversation about stocks.

If we wish to really create a mental picture for good corporate governance, first we need to create a good picture of the business world in general. Good governance, in simple terms, is being treated fairly when not in power by those who are in power. It applies as much to governments as to companies.

How our use of language can twist reality

By Raunak Onkar

On January 31, 2014

In Behavioral Finance, Investing

By Raunak Onkar | [email protected]

We use language to think. The grammatical elements of any language help us express our thoughts better. That can pose a problem while thinking with incomplete information. In that case our emotional state can sway us into believing our own thoughts.

Take investing in stocks for example. It is a guarantee that no matter how well researched the investment idea is we are bound to have some gaps in understanding. We have no choice but to allow for some margin of error to protect us from any temporary setbacks.

One way would be to know our biases but that’s a theoretical solution. To reach a more practical solution we need something that is easy to test & which applies across all our thinking.

The art of Bad-vising

By PPFAS Mutual Fund

On September 30, 2013

In Investing

By Ankur Mahajan, [email protected]

“We’ve done a lot of stupid things but we’ve avoided a small subset of stupidity and that subset is important. It’s about avoiding the dumb things” – Warren Buffet

There have been a considerable number of arguments and an equal number of blogs and posts written about the plight of a retail investor. One of the prime subjects have been the many grounds where a typical investor conks out to make returns in the market. “Market makes returns, but the investor doesn’t” has become the slogan of the Aam Investor (on the lines of aam aadmi). And there have been umpteen reasons attached to the same. Some of them being getting carried away by greed and fear, investing after the bull run, redeeming during the bears, chasing fancies, investing without understanding, etc. While it is easy to blame the investor on the lines of an aam aadmi who pay taxes but abstains from voting, there is a compelling need to question the role of your advisor and his ability to avoid deviating from the fundamentals.

Why Nifty and Sensex may not be the right barometers to look at!

By Raj Mehta

On September 10, 2013

In Equity, Investing

By Raj Mehta, [email protected]

Last week, I met one of my friends who asked me an interesting question, “Why is it that Nifty and Sensex were up 25% in the year 2012 but I have lost money in my portfolio?”. Many times I hear people say Nifty is up 13% year to date or Sensex is up 12% but what does it mean to your portfolio?

CNX Nifty or Nifty 50 is an index of 50 stocks whereas S&P BSE Sensex is an index of only 30 stocks. The criteria for the constitution of this index is set in such a way that only companies with a large market capitalisation can enter these indices. Other factors which are more important like business sustainability, profitability, growth, management have not been considered. So this would include a possibility that “Hot sector companies” might find the place in the index whereas a well managed, dividend paying company might not be included. The criteria of selecting the index constituents shifts the bias towards large market capitalisation companies and the index is not well represented. For eg. ITC has a weightage of 10.68% in BSE Sensex currently but you might not have it in your portfolio considering the valuations that it is trading at. If today ITC moves up by 5%, then the index would move up just by its weightage in ITC but your portfolio return could actually be negative.

Can we really use FMCG techniques to market MF products?

By Jayant Pai

On September 3, 2013

In Equity, Investing, Mutual Funds

Jayant Pai , [email protected]

At a recent mutual fund seminar, there was the usual lament about how funds are failing to gain traction among ‘small investors’. While several causes were cited, they mostly boiled down to mutual funds failing to resonate or ‘connect’ with investors.

It was then posited that mutual funds should take a leaf out of FMCG product marketing strategies. The underlying belief behind this was that small investors are no different from small consumers. As long as you attractively package the idea to them and educate them about the utility of the product, they will bite.