Investology

Take financial advice from most Indian financial advisors with 2 sacks of industrial-grade salt. There is often an attempt to sell elevated returns from the recent past, with thorough disregard to 1. Whether these returns were skewed by certain stocks or certain periods, 2. Whether the fund manager took excessive risk to deliver such returns, or 3. Whether such returns were driven simply by positive sentiment (and not actual results). Therefore, performance headlines need to be intensely scrubbed because historical performance outcomes are meaningless unless such outcomes show repeatability. Your kids need to know not only the basics of personal finance but also about how to identify investment mis-selling when they grow up. ✊🏻✊🏻✊🏻

Our founding team runs one of the most consistent and best performing listed equity funds in India for well over a decade. We can certainly help contextualize investing in a fun and easy to understand manner for your children. Talk to us!

While (India’s securities market regulator) is now thankfully coming hard on social media influencers, the regulator thoroughly fails to appreciate that there are rabble-rousers everywhere, including several in mainstream media (see the image in this post) and security market professionals that are promising overnight riches. The gentleman giving the interview in the attached screenshot is a prominent director at a leading Indian brokerage house and gave some stock ideas that he claims will double by Diwali. All this at a time when Dalal Street is busy goading unsuspecting retail investors.

Our founding team runs one of the most consistent and best performing listed equity funds in India for well over a decade. We can certainly help contextualize investing in a fun and easy to understand manner for your children. Talk to us!

How to differentiate between ‘noise’ and ‘useful information’ is the essence of what does. We use real life lessons from our nearly 3 decades of global investing experience to help kids understand why most of the news that they get exposed to is ‘noise’. We then use stock market simulations to 1. Help them quantify the impact of what is left I.e. is ‘useful information’, 2. Help them decide whether it’s significant enough to care about, and 3. Whether to use this information to take any action. 👊🏼👊🏼📈📉

Our founding team runs one of the most consistent and best performing listed equity funds in India for well over a decade. We can certainly help contextualize investing in a fun and easy to understand manner for your children. Talk to us!

Price IS NOT the same as value, but in illiquid markets (such as in the private world I.e. companies that don’t trade on a public exchange), these two words are interchangeably used. ‘Price’ is the level at which a company is traded, while ‘Value’ is strictly the current sum of its future estimated earnings. Consider this —> Last year if a private company, on average, considered itself to be valued at say $100, venture capital investors (those who invest in young private companies), valued the same at around $68. That’s a gulf between estimates on either side. Do not fall for valuation estimates that are routinely posted in public media. Private companies remain massively overvalued and we do not agree with how they were being valued over the last decade. The chickens are now coming home. 🐓 🐓

Our founding team runs one of the most consistent and best performing listed equity funds in India for well over a decade. We can certainly help contextualize investing in a fun and easy to understand manner for your children. Talk to us!

Indian financial journalism is obsessed with ‘size’. So much so, that they often lose objectivity when they make blanket statements. Consider the following- A prominent news portal that is popular among retail investors had an article today that started with 👉🏼 “Active funds in the small and microcap space have been chasing micro-cap stocks as well. But such stocks are illiquid and volatile. Here are the most popular microcap stocks among active fund managers……”. There are two problems with this statements:

1. The article ends up mentioning companies such as Zensar Technologies (>$1 Bil in value), Jamna Auto, Neogen Chemicals (both >$400 mil in value) as microcaps. In no part of the emerging market world, any discerning investor will label such companies as ‘microcaps’. 🤯🤯
2. The article also lazily calls these names as illiquid and volatile. While liquidity is debatable, the implied suggestion that such names are risky needs a critical re-evaluation. Firstly, price volatility isn’t the same as business volatility. Price volatility often comes from who (institutional investors or retail investors) is trading these stocks and not from the business itself. Secondly, a more liquid name could end up losing you everything if business fundamentals are poor and therefore liquidity shouldn’t be associated with failures as lazily as it often is. The following names were all part of India’s blue chip index and were extremely liquid too 👉🏼 Suzlon, Unitech, Ballarpur, Yes Bank, IFCI, GMR, Crompton Greaves, BHEL, Reliance Communications, Reliance Power etc. were all components. Clearly, liquidity didn’t shield them from failing.

Our founding team runs one of the most consistent and best performing listed equity funds in India for well over a decade. We can certainly help contextualize investing in a fun and easy to understand manner for your children. Talk to us!

This post is meant to address a deep-rooted misunderstanding around liquidity (I.e. ability to easily buy and sell) small companies.

Liquidity isn’t a static measure I.e. it changes over a period of time. Therefore, in several cases of smaller companies, one shouldn’t be overly concerned about current liquidity. Instead, focus on the business and assess if it’s valuation is attractive I.e. it doesn’t do justice to the underlying business. As companies grow, analysts start discussing them more and liquidity increases. So don’t let current liquidity dictate your stock selection.

Our founding team runs one of the most consistent and best performing listed equity funds in India for well over a decade. We can certainly help contextualize investing in a fun and easy to understand manner for your children. Talk to us!

It’s now routine for financial journalists to pump up ‘big’ in face of readers. For instance, the ‘biggest’ or the ‘richest’ managers etc. Factually however, the biggest and richest managers are rarely among the ‘best’. It’s therefore critical that headlines such as these be construed accordingly. Don’t get starry eyed when choosing your investment manager. 🚫🚫❌

Our founding team runs one of the most consistent and best performing listed equity funds in India for well over a decade. We can certainly help contextualize investing in a fun and easy to understand manner for your children. Talk to us!

Don’t chase fads! Over the last decade, nearly everyone you know likely jumped on the ‘start-up bandwagon’. Angel Networks, Venture Capital, and Private Equity funds mushroomed, and money was forced to look for start-ups to be invested in. Consequently, valuations of these start-ups moved well into irrational territory. Just because ABC buys a company from XYZ at $500 million, it does not mean that the value of the company is $500 million. It’s simply the price, and price simply is a reflection of sentiment of buyer and seller at a point of time. It does not always reflect true value. Once these start-ups got listed in the stock markets, their prices expectedly fell off the cliff.

Price always converges closer to intrinsic value, and that’s what one should focus on.

Our founding team runs one of the most consistent and best performing listed equity funds in India for well over a decade. We can certainly help contextualize investing in a fun and easy to understand manner for your children. Talk to us!

Nearly all large Indian banks and financial institutions would sell you whatever is easy to sell. Essentially, investments are often peddled as if they were Coca Cola or Sprite I.e. sell highly visible funds and institutions under the garb of ‘reputation’. In reality, often the best fund managers do not engage with these supposed “Wal-Marts of the Indian Investing world” and sell either directly or through very select distribution channels. Therefore, it becomes important that one does her/his own research to check out veracity of whatever is often peddled by large Indian financial advisors. We can help you sift out noise from critical messaging and not get influenced by investment PR.

Our founding team runs one of the most consistent and best performing listed equity funds in India for well over a decade. We can certainly help contextualize investing in a fun and easy to understand manner for your children. Talk to us!

They often say that in investing ‘Past performance is not an indicator of Future performance’. This is again only partly true. If a track record of an investment manager is solid and runs for more than say a decade, it’s foolish to not pay serious attention to it. Conversely, a track record of any period under 7/8 years, in our view, is more likely to be influenced by 1/2 great years that overly skew the record. That is not to say that one shouldn’t invest in managers with under a decade of track record. However, you cannot rely on such track records to make investment decisions.

Our founding team runs one of the most consistent and best performing listed equity funds in India for well over a decade. We can certainly help contextualize investing in a fun and easy to understand manner for your children. Talk to us!

It might be a bit overwhelming to choose investment managers, especially since many financial advisors don’t offer competent advice. Often financial advisors tell the clients to NOT CHASE PERFORMANCE 🏃🏽‍♂️🏃🏽‍♂️. That in fact isn’t bad advice (because poor performance is often preceded by solid performance), but it’s only partly true and makes a poor generalization. While Investors should certainly not chase ‘short-term’ performance (I.e decide based on how an investment manager has done over say just the last 1-2 years), ‘long-term’ performance (I.e. how a manager has done over say 7/10 years) should heavily influence your decision making. Do not take any advice that excuses long-term mediocrity.

Investors should be OK 🧘‍♂️🧘‍♂️ with poor performance. They should be expected. No one performs well all the time. What is critical however is that long-term performance should be solid. Long term performance is usually solid when 1. Investment manager outperforms more often than he/she underperforms, and 2. Outperforms with larger margins and underperforms by lower margins.

Our founding team runs one of the most consistent and best performing listed equity funds in India for well over a decade. We can certainly help contextualize investing in a fun and easy to understand manner for your children. Talk to us!