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Traversing The Portfolio Theory

  It’s definitely diversity but not a hodge-podge that helps you sail through all the unforeseen tempests. Diversification across various classes of stocks based on industries, size, value vs. growth etc. within a portfolio helps an investor to minimize risks through summing up different risk behaviours of different stocks while keeping contribution of their respective return unaffected. So an investor has a freedom to construct his portfolio in a manner that risk is minimized and return is maximized. So early as in 1952 Harry Markowitz changed the whole mindset of all investors who used to measure their success by the performance of each of their stocks separately.   He made it clear that one should not concern if some of the stocks did not show up well over a period of time subject to that it is compensated by the rewards of others. In brief, it is not the individual stock but the whole bunch of different stocks called portfolio that should be under purview. Markowitz showed ho
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REIT Vs. Real Estate investment

  A quantitative analysis is the need of the hour   Average daily dollar trading volume of REIT according to a reit(dot)com was $7.2 billion in April 2017, up from $3.7 billion in April 2012 and $2.9 billion in April 2007. Why people in India have taken almost half a century to find an appetite for REIT needs to be analysed. The phenomenon that was a buzz in US since 1960s came to India in 2007 when REIT was introduced by SEBI in India. We took so much of time in concluding that the lesser risk, more safeguards and enhanced liquidity are better than the opposite. To make a comparative study of investments in REIT and direct investment in similar real estate property basket and to come out with some quantitative model is the need of the hour. Datastream, UBS estimates as on 22.6.2020 In the above Spider graph by Datastream, if all the legs in the graph are speeding out wide means that region is cheaper. Though three of the above graphs are of real estate performance one is particula
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Investments - an analogy to household affairs / Shivam

The other day, while surfing the internet randomly, my eyes caught hold of a quote from Benjamin Graham, the mentor, and teacher of legendary investor, Warren Buffett. Graham says, "the investor's chief problem - and his worst enemy - is likely to be himself. In the end, how your investments behave is much less important than how you behave."   His words gave me a feeling of clutching at the last straw while drowning. Let me explain. I have been getting several calls from a number of depositors/ investors asking for advice regarding their deposits/investments in a market that appears to have changed due to COVID 19. The callers were people from different professions— right from homemakers to civil servants, technocrats, businessmen, finance professionals, and even seasoned bankers. To my utter surprise, some of my callers were so-called financial advisors, whose very job happens to be advising common people about investments. Even more shocking was their confession that
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Fencing against Cryptocurrency

Stability of the financial sector can be potentially threatened if the private parties are allowed to toy with currencies – this is the view of RBI as well as the Central Govt as per the report published in FE on Mar 4, 2021. Let us look into the nature and working of private cryptocurrencies that have alerted government to such an extent that it thinks to introduce a bill against them. The source code of cryptocurrencies specifies how many units can ever exist and this limitation feature makes it more and more valuable with every addition in the currency. So it has an in-built deflationary tendency vis-à-vis the government administered currencies of the world that are typically inflationary. Bitcoin introduced in 2009 by Satoshi Nakamoto (a pseudonym) is the most popular cryptocurrency with a cap of maximum number being 21 million coins. He was also the first person to mine a block. Once miners (computer-tech persons) are able to complete the verification of 1 MB (megabyte) worth of
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Virtues of a monster

Inflation is most often a planned phenomenon. it has several benefits and therefore it is not a total evil and is a desirable device in hand of rulers. But this device is to be dealt very delicately otherwise it will take no time in turning into a monster. A moderate level of inflation helps a country to meet the growth targets. And this is in line with this that the RBI has expressed it’s willingness to favour the 5-year’s inflation target set in 2016.  the retail inflation in India should be kept at 4% with an upper and lower limits at 6% and 2% respectively. Though Mint (daily) had earlier hinted the govt may reset the target at 5% to help the economy recover fast. Let us understand the virtues of this monster if kept under control. An inflation is much better than a deflation. Why? Because in case of deflation (falling price) – 1. People would prefer to wait for purchase and so the whole economy would reel under lack of demand. 2. The real biting of EMIs on the limited monthly earn
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SEBI’s Risk-O-Meter

SEBI’s Risk-O-Meter is definitely a huge improvement on the earlier risk grading method adopted by it  for securities and debt funds. As in earlier method the whole category of fund was rated letting the each  constituent of the portfolio be unnoticed. But now what is rated is not fund category but the fund itself and that too on the basis of it’s ingredients. The earlier rating system as adopted in 2015 were measuring on five risk levels which has now in 2021 been raised to six levels– Low, Low to Moderate, Moderate, Moderately High, High and |Very High. Now the debt fund will be rated on three parameters – Credit (on 1-12 scale), Interest rate (on 1-6 scale) and Liquidity (on 1-14 scale). Portfolio risk will be the simple average of this three. Interestingly the interest rate risk measurement will be based on Macaulay Duration which is weighted average of maturity period of each ingredient of the portfolio. So definitely an investor would gain more insight based on deeper understandi
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Synergy gain of pair endorsement

Doubling expense to the tune of ₹5-8 Crore does not necessarily mean ₹10-16 Crore. It can be significantly less. And an ad manager uses his faculty for financial analysis to rope in duo charism of Virat-Anushka or Ranveer-Deepika. Though the blazing persona of a sole celebrity is enough to create a long living throb for the ever-upscaling volume but when put in conjunction with love-partner can just be disrupting.  And no prize for guessing, gossiping flow abound for a high-profile glamour couple. This justifies the endorsement sagas of Ranbir Kapoor-Alia Bhatt’s flipkart fashion and Lays, Ranveer Singh-Deepika Padukon’s Jio, Lloyed Air-conditioners and Virat Kohli-Anushka Sharma’s Manyavar. Though our gut instinct says that even the celebrities may also be loving to appear with their best love-partners and so might be conceding on less that the total sum of their individual endorsement fees. In her interesting article published in the latest FE Sunday, Venkata Susmita B says “A star o
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