Here's wishing one and all a healthy, safe and profitable 2009 as it will be the year of opportunity. Enjoy and relax with your loved ones and welcome the sunshine bringing the rays of hope and abundance !!
God Bless !
Hemal
Wednesday, December 31, 2008
Saturday, December 27, 2008
There is always a bull market somewhere
Do you know there have been returns of 42% p.a. even in 2008? Some of you might have already discovered this but yes Gilt funds (invested in governments bonds) have delivered the returns which equities do in a good bull market. Some examples... Funds like ICICI Pru Gilt Inv., UTI Gilt Advantage, Templeton I G-sec have returned 42%, 33.8% and 26.5% respectively.
The reason for this kind of returns have been the steep fall in interest rates after peaking of the inflation cycle. Bond prices go up with falling interest rates resulting in jump of NAVs of these funds. Normally, the yield (interest rates) of governments bonds fall faster than the corporate bonds and hence we have seen this spectacular performance mostly in Gilt funds. However, most income funds have delivered double digit returns and as the yields on corporate bonds catchup with government bonds there is a lot of potential for most income funds to improve on their performance.
Please note these high returns are only a short term phenomenon. As inflation is expected to fall around 3% by March this kind of returns on income / GILT funds should last for another 3-5 months.
Jim Cramer a famous investor and trader (host of Mad Money on CNBC US) said "There is always a bull market somewhere".
God Bless,
Hemal
The reason for this kind of returns have been the steep fall in interest rates after peaking of the inflation cycle. Bond prices go up with falling interest rates resulting in jump of NAVs of these funds. Normally, the yield (interest rates) of governments bonds fall faster than the corporate bonds and hence we have seen this spectacular performance mostly in Gilt funds. However, most income funds have delivered double digit returns and as the yields on corporate bonds catchup with government bonds there is a lot of potential for most income funds to improve on their performance.
Please note these high returns are only a short term phenomenon. As inflation is expected to fall around 3% by March this kind of returns on income / GILT funds should last for another 3-5 months.
Jim Cramer a famous investor and trader (host of Mad Money on CNBC US) said "There is always a bull market somewhere".
God Bless,
Hemal
Thursday, December 25, 2008
2008 : The year best forgotten
Indeed, 2008 is best forgotten especially relating to the financial markets. However, we as students of the markets had some very important lessons to learn. Some of them are summarized below :
1) Equities can be "violently" volatile in short term. Long term investing still works.
2) Equities can potentially go to zero (some stocks went down by as much as 96% ). Proper asset allocation and asset diversification is important.
3) We are living in extremely fast paced world and it changed in "just" 60 days. Track your
investments reguarly and religiously.
4) No economy or markets are isolated and hence insulated. Global Integration is the "dark"
reality.
5) Things can get worse than your "worst case scenario".
6) Gold is important. It can take 10-15% of your portfolio at all times.
7) Don't overextend based on paper profits. Frugal living guarantees long term peace of mind.
8) Ponzi schemes are still being run and biggest of them maybe the US social security system. Always be cautious.
9) Never be in denial. Sell when you have to sell.
10) The bull markets in India have never in its history lasted more than 5 years.
11) Booking some profits periodically is not a bad idea especially at the frenzy of the bull market. You know that when all around you start behaving as masters of the stock market.
More learnings are welcome from KV followers. The positive side of all this is we were witness to a once in a lifetime kind of event and we have these lessons to refer throughout our future investing journey.
Merry Christmas and a Happy Holiday Season !
God Bless !
Hemal
1) Equities can be "violently" volatile in short term. Long term investing still works.
2) Equities can potentially go to zero (some stocks went down by as much as 96% ). Proper asset allocation and asset diversification is important.
3) We are living in extremely fast paced world and it changed in "just" 60 days. Track your
investments reguarly and religiously.
4) No economy or markets are isolated and hence insulated. Global Integration is the "dark"
reality.
5) Things can get worse than your "worst case scenario".
6) Gold is important. It can take 10-15% of your portfolio at all times.
7) Don't overextend based on paper profits. Frugal living guarantees long term peace of mind.
8) Ponzi schemes are still being run and biggest of them maybe the US social security system. Always be cautious.
9) Never be in denial. Sell when you have to sell.
10) The bull markets in India have never in its history lasted more than 5 years.
11) Booking some profits periodically is not a bad idea especially at the frenzy of the bull market. You know that when all around you start behaving as masters of the stock market.
More learnings are welcome from KV followers. The positive side of all this is we were witness to a once in a lifetime kind of event and we have these lessons to refer throughout our future investing journey.
Merry Christmas and a Happy Holiday Season !
God Bless !
Hemal
Sunday, December 21, 2008
Don't fear an Indian subprime like crisis
With the headlines spooking all over with news of layoffs and salary cuts one fear doing the rounds is if India is susceptible to its own mini subprime crisis as a lot of young and salaried India have taken home loans. The answer is an emphatic no ! India's mortgage to GDP ratio is just 5% compared to 65% in UK and 70% in US.
Some defaults are not ruled out but the impact of that to the economy will be miniscule. Also, Indians in general are conservative and oriented towards clearing their liabilities early than the attitude in the west. For e.g. If an Indian get a sudden bounty of cash he is more likely to try to pay off some portion of loan and clear his liabilities while you might find the American vacationing in Bahamas.
The other reason to note is the Interest rate cycle has turned and in the next few months we should be looking at 8-9% (with potential to go down further) rates on home loans. That will bring down the EMIs substantially.
I am infact bullish on the real estate sector. The downward spiral in interest rates plus the correction in prices is a classic combination to drive up demand again. Remember, quality housing is a genuine need (and extremely underpenetrated);nuclear families are the reality of the day; rural to urban phenomenon in tier 2 & 3 cities etc. After Financial Services - Real Estate is the next mother of all sectors and usually follows the growth in GDP. DLF to me is a long term buy. Buffett said but quality companies when they and sector in which they operate are in temporary trouble.
God Bless,
Hemal
Some defaults are not ruled out but the impact of that to the economy will be miniscule. Also, Indians in general are conservative and oriented towards clearing their liabilities early than the attitude in the west. For e.g. If an Indian get a sudden bounty of cash he is more likely to try to pay off some portion of loan and clear his liabilities while you might find the American vacationing in Bahamas.
The other reason to note is the Interest rate cycle has turned and in the next few months we should be looking at 8-9% (with potential to go down further) rates on home loans. That will bring down the EMIs substantially.
I am infact bullish on the real estate sector. The downward spiral in interest rates plus the correction in prices is a classic combination to drive up demand again. Remember, quality housing is a genuine need (and extremely underpenetrated);nuclear families are the reality of the day; rural to urban phenomenon in tier 2 & 3 cities etc. After Financial Services - Real Estate is the next mother of all sectors and usually follows the growth in GDP. DLF to me is a long term buy. Buffett said but quality companies when they and sector in which they operate are in temporary trouble.
God Bless,
Hemal
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