Update: Nifty Valuation analyzer – rolling standard deviation

The Nifty valuation analyzer now has rolling standard deviation(stdev) curves plotted along with the rolling average PE, PB and Div yield curves.

As pointed out by Ravi Vooda, the

  • mean + stdev, and mean + 2*stdev,
  • mean – stdev, and mean – 2*stdev

curves might give a better picture of the market valuation.

Here are some results

Nifty PE

Nifty PB

Nifty Div. Yield

 

Notice that the standard deviation is more sensitive than the average to time. That is changes more rapidly as the days advance.  So while one can assume that the Nifty is dangerously overvalues when the PE and/or PB exceeds two standard deviations above the average, we must also recognise that the standard deviation and the average are changing with time.  So our assumption could be wrong.

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Nifty Valuation Analyzer: PE, PE, Div Yield, ROE, EPS Growth Rate

Use this Excel sheet to automatically determine Nifty valuations with long-term averages of PE, PB and Div Yield ratios along with ROE and rolling one-year EPS growth rate and dual moving averages.

This sheet has been in development (hibernation?) for the past 6 months. When I wanted suggestions for features at FB group, Asan Ideas For Wealth, Neeta Khilnani Upponi, Co-founder of  stockmusings.com  suggested that I include a Rolling PE analysis. She promptly sent me an Excel with a worked out exmaple of a Rolling PE calulation. However, I have some doubts with regard to its implementation so I have decided to include this in a latter version.

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The Five I’s of Personal Finance

Which is the single most important trait that characterizes a DIY (do it yourself) investor?  

1) I for Individuality

A person who rises above pigheadedness* and understands the steps necessary for wealth creation.  However, once the basics are clear (asset allocation is all that is needed!), the person chooses a path defined by personal comfort and expertise.

Once a particular path/style (with a history of performance) is chosen, He/she does not care about what others do, or how others have done it.

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Moving Average Market Level Indicator

Use this moving average calculator to get an approximate quantitative estimate of current market levels.  It calculates two moving averages  (over durations that can be varied by the user) of  30+ BSE and NSE market indices.

My aim in making this tool is to get an idea of long-term market trends following the method described by Jim Otar in his ‘Hurricane Warning Chart’

The sheet will not allow you to exit the at the top and enter at the bottom.

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My Favourite Movies on Finance

Here is a list of my favourite movies with a financial theme.  This is an off-beat listing and I have deliberately avoided movies with the words Wall Street in them!  I have not listed trading based movies or business oriented movies like, The Insider, Barbarians at the Gates and many documentaries centered around Wall street or the 2008 crash. I am yet to see, the inside job. So it is not here.

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PPF or ELSS? Where should I Invest to Save Tax?

The  primary stumbling block that prevents investors from achieving  holistic fiscal health is mental clutter. Their minds are filled with the wrong questions.   The right question is a prerequisite for finding the right answer.

One such wrong question, and the flavour of the season is: Where should  I invest to save tax? PPF or ELSS?

I don’t even know where to begin answering this question because the question is wrong at so many levels.

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Goal-based Investing Workshop at New Delhi

The New Delhi edition of the Investor Workshop on financial planning and goal-based investing is likely to be held on March 15th 2015, thanks to efforts of Captain AK Anand.  If you would like to attend the workshop, we request you to pre-register via this form asap.

Doing so would help in two ways:

(1) We would know the strength and plan accordingly,

(2) you can register as soon as the workshop logistics are frozen and before registration is announced so that you can avoid the possibility of a sell-out like it happened for the events at Bangalore and Mumbai.

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Bangalore Investor Workshop Updates

The Bangalore edition of the investor workshop on financial planning and goal-based investing will be held on Dec. 14th 2014. Here are some updates:

Venue: Hotel Nandhana Palace , No. 280, opposite to DELL (above Pizza hut), Inner Ring Road, Amarjyothi Layout, Domlur.

The conference hall is on the second floor

Google map location

Limited car parking berths are available.

Schedule

9:30     Registration + Tea

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When Should I Retire?

Use this Excel sheet to answer questions like, “When can I retire?” and “When should I retire?” and hopefully understand the difference between them.  It  also doubles as a simple financial freedom calculator  (whatever that means).

This is a revamped, redux version of a sheet published more than 2 years ago.  For a given age and life expectancy, along with other standard investment and inflation details, the years to retirement is calculated by determining when the monthly income from the corpus is higher than monthly expenses.

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Chennai Investor Workshop Videos – Afternoon Session

Here are the videos from the afternoon session of the Chennai investor education workshop held on 1st Nov. 2014.

Stress Busters by Vasudevan Parthasarathy – Part 1 

Stress Busters by Vasudevan Parthasarathy – Part 2

Goal-based Investing by Pattu Part 4

Goal-based Investing by Pattu  Part 5

Note part 6, the last 30 mins of my talk, could not be uploaded on youtube.  There is an issue with the conversion process. I don’t know how to overcome or get around this.

Taxation  By S R Chandrashekaran Part 1

Taxation  By S R Chandrashekaran Part 3

Note part 2, could again not be uploaded on youtube.

 

Closing Session

Investor Workshops in other cities/workplace

If you would like to participate in similar workshops, please pre-register here.  Future workshops will be announced depending on the demand. Note that these workshops are not-for-profit. Therefore, we would need sufficient strength to pull this off.

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Chennai Investor Workshop Videos – Forenoon Session

Here are the videos from the forenoon session of the Chennai investor education workshop held on 1st Nov. 2014.

Welcome Address by Srinivasan Sundaraman, MoneyKare 

Key Note Address: Sunil Subramanium, Deputy CEO, Sundaram Mutual

 

Goal-based investing Part 1 by Pattu

 

Goal-based investing Part 2 by Pattu

Note on part 3, the last 25 mins of my talk, could not be uploaded on youtube.  There is an issue with the conversion process. I don’t know how to overcome or get around this.

 

Technology Enabled Investment Solutions by Srikanth Meenakshi, FundsIndia

Equity Portfolio Construction Part 1, Balaji Vaidyanath, Sundaram Mutual

 

Equity Portfolio Construction Part 2, Balaji Vaidynath, Sundaram Mutual

Investor Workshops in other cities/workplace

If you would like to participate in similar workshops, please pre-register here.  Future workshops will be announced depending on the demand. Note that these workshops are not-for-profit. Therefore, we would need sufficient strength to pull this off.

read more ...

Mumbai Investor Workshop is a Sell-out!

The Mumbai investor workshop on financial planning and goal-based investing on Feb. 1st 2015  is a sell-out. We  hoped 75 would attend but now we have 101 registered! We regret that we cannot take on anymore for this meet. A second meet can be organised sometime in Summer next year.

Banglaore Workshop

Readers may recall that the Bangalore workshop scheduled on Dec.  14th sold out in 4 days.  A second workshop may be held in mid-February. We already have 86 pre-registered for the event.  If you would like to attend the mid-Feb workshop in Bangalore, please pre-register asap here (this will help us prepare accordingly).

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How to Conduct a Personal Financial Audit

I love December.  The Chennai Summer is busy recharging its batteries and therefore not in full force.  The Carnatic music season seems to begin earlier each year, thanks to some prudent marketing.  The semester is over, and for me, goal-based investing month starts!

Most of what little I know about personal finance and investing comes from time spent staring at Excel sheets in December. All my retirement and goal-based investing calculators were done in December as I evaluated my goals and future cash flow.

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Update: Integrated Financial Planning Template

It has been a year since the integrated financial planning template with which you can create your own financial plan, and print it on one side of an A4 sheet, was released.

Glad to note that this is now the most popular Excel sheet at freefincal. Not so glad to know that the Chit fund calculator is in the top 3 (made it to show why Chit funds are bad!)

I have now added two graphs to the planning template

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Equity Portfolio Construction – Chennai Investor Workshop Video

Balaji Vaidyanath from Sundaram AMC where he works as a fund manager in its PMS wing spoke about,

investment process and construction of an equity portfolio

on 1st Nov. 2014, at the Chennai Investor Education Workshop on Financial Planning and Goal-based investing.

The  workshop was jointly organised by Srinivasan Sundararaman of MoneyKare, Wealth Managers, and myself and was jointly sponsored by Sundaram AMC. The event was videographed and I will be posting videos from the event in the coming days.

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Say NO to Packaged Financial Products

We all like solved problems. Right from school, when faced with a question, many of tend to search for an ‘example problem’, so that we know how to proceed.  When it comes to personal finance, solved problems or ready-made financial products packaged for a specific need can be disastrous.

Some examples are the pension plan and child plan  offered by insurers and mutual fund houses.  Now Cafemutual reports that many more retirement linked mutual funds are on the anvil. During the PPFAS unitholders meet, Rajeev Thakkar mentioned that such plans might replace ELSSS mutual funds.

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Chennai Investor Workshop Videos: Risk vs Reward in Mutual Funds

The Chennai Investor Education Workshop on Financial Planning and Goal-based investing was held on 1st Nov. 2014. It was jointly organised by Srinivasan Sundararaman of MoneyKare, Wealth Managers, and myself .

The event was partially sponsored by Sundaram Mutual AMC.

I will be uploading videos from the event in the coming days (make that weeks, for it is painful).

Still learning how to upload without loss of clarity.  Starting off with a short clip (4 mins) on risk vs reward in mutual funds.

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Franklin India Blue Chip vs. Franklin India Prima Fund

Comparing the performance of a large cap fund (Franklin India Blue Chip) and a mid and small-cap fund (Franklin India Prima) can be instructive in at least two ways.

  • It allows us to understand volatility and risk (associated with a investment duration) better
  • It helps answer questions like, should  I avoid large caps and have more of mid/small cap exposure for goals several years away?

The two funds from Frankin are 20 years old which allows us to study long-term rolling returns.

The Fund A vs. Fund B Rolling Returns Calculator was used for this study.

First the normalized NAV movement.

 

Since we have data for several years, the recent NAV movement dominates that during early years.  So we need to look at the NAV movement in a logarithmic scale which expands the early year data (but compresses the recent data)

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Misconceptions about the Nifty PE

Are the markets overvalued? Is the Nifty PE too high? Should I exit and re-enter later? Aided by  ‘experts’ who advice ‘caution’, such questions are doing the rounds again.  Here are some misconceptions and myths about the Nifty PE.

In a previous post on the relevance of the Nifty PE for the long-term investor, I had shown that whether one exits at high PE and/or re-enters or high PE, there is no guarantee or loss-prevention or  large gains and that there is a huge spread in returns.

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Should a parent quit working after the birth of a child?

There are some grey areas in personal finance and there are some downright dark areas. One such dark area is how a couple should prepare for parenting duties once a child is on the way. Dark, because there are several possibilities and each would impact the present and the future in several ways.

Child birth will impact a families cash flow (salary, expenses  emi etc.) in several ways. One question that will influence cash flow, lifestyle and future goals is,

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