Are all long-term financial goals the same?

Nearly three years ago, I was introduced to an interesting idea in goal-based investing by Chenthil Iyer, Horus financials.

You invest a monthly sum of X in a single portfolio for all financial goals. The portfolio is allowed to grow and when the time for each goal arrives, the necessary sum is withdrawn. The final value of the portfolio should be equal to the retirement corpus.

Ideally, the corpus will evolve with time like this

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The Art of idling!

I have fond memories of my BSc days. From the pressure cooker situation of 12th standard, we found ourselves suddenly having a lot of time in hand. A LOT of it

Thankfully, cable tv was at its infancy and there was no internet. So I had the most creative and productive years of my life .. until I did my MSc and found myself back in the pressure cooker.

For those 3 years, the one thing I did a lot was .., nothing! I took long walks and sat in my college ground thinking about life in general, god, reglion, astronomy etc.

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Report: Hyderabad Investor Workshop

The Hyderabad investor workshop was held last Sunday (28th June). Here is a report with a few photographs.

The workshop was co-ordinated by Phani Rambhatla along with his friend Vijay Shivaji Rao.

Thanks to their efforts we were able to get a four-star hotel at a pretty decent price.

Right from the day it was announced, I was filled with a sense of trepidation.  In all the workshops held so far, there were a couple of other speakers besides me. For Hyderabad, I could not find anyone who fit my requirements.

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How many stocks does a mutual fund hold?

How many stocks does an equity mutual fund hold? It is related to the assets it is managing? It is related to performance relative to peers (aka star rating)?

Let use see if we can get some insights into these questions. I started digging around in this direction because I would like to do (yet another!) series on understanding volatility and would like to treat this post as part 1.

There is much to discuss or conclude this post. Let us just stare at the graphs and see what we can make out of it.

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Money Kraft videos on Mutual Fund Taxation

Dr. Uma Shashikant speaks about lesser known aspects of mutual fund taxation.

Money Kraft is an educational initiative of Centre for Investment Education and Learning Pvt Ltd (CIEL) . Money Kraft aims to empower investors and intermediaries to make better personal finance decisions. The objective is to provide unbiased, simple, conceptually correct, practical and useful educational content. Moneykraft is not a producer or seller of financial products, nor does it undertake financial advisory or distributional services for a fee or commission.

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Value at risk (VAR): Would you buy a car with a faulty airbag!

Value At Risk (VAR) is a risk measure used to determine the probability of a certain percentage loss (or gain!) in the value of a security based on historical data.  Although widely used by risk managers to determine worst case scenarios and handle the risk a firm can take (in a bid to earn more!), it is deeply flawed.

Not because it uses historical data to calculate future risk, but because it assumes that the historical returns (daily. monthly etc.) fall under a normal distribution or bell curve – the one used to fix employee appraisals (another flawed application!).

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Update: Automated Stock Analyzer V 6.1 – Workaround for Moneycontrol Stock Price Issue

This is a bug workaround update for the automated stock price analyzer.

The automated stock analyzer

  • pulls annual (standalone/consolidated) and quarterly financials from Value Research online
  • pulls financials from morningstar and analyzes them,adjusted
  • pulls adjusted stock price history from money control, and
  • calculates intrinsic value five different ways!

Many users have complained that the Moneycontrol stock price download page either pulls the wrong price history or draws a blank.

The source of the problem is Moneycontrol. For many stocks, the id they use for financials differs from the one used for  price history. Unfortunately, I could tabulate stock ids for financials only.

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Equity Mutual Fund Investing: What to expect when you are expecting!

While recommending equity as an asset class or equity mutual funds as an instrument suitable for newbies, illustrations about the power of compounding, past returns and how they have comfortably beat inflation are typically used.

This is followed by caveats (besides past performance disclaimers)  that the investor must

  • be ready to stomach the ups and downs of the market,
  • ride the course,
  • stay invested no matter what,
  • get used to volatility etc.

These caveats are typically not quantified. Even if done  (as attempted here in the past), they do not help in preparing in the investor for the journey ahead as much as they should.

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Misconceptions about frugality

Here are some common misconceptions about frugality and frugal folk.

What is frugality?

Wikipedia makes a wonderful reference to a behavioural science research paper titled, “Lifestyle of the Tight and Frugal: Theory and Measurement”

http://jcr.oxfordjournals.org/content/26/1/85

The authors state,

“Frugality is conceptualised as a lifestyle trait reflecting disciplined acquisition and resourcefulness in product and service use. Frugality is sacrifice in denying a series of short-term purchasing whims and industriousness by resourcefully using what is already owned or available for use; all of this is in service of achieving longer term goals.”

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Investor Workshop on “Strategic Personal Finance” at Bangalore

I am delighted to announce that  Dr. Uma Shashikant, Managing director, Centre for Investment Education and Learning (ciel.co.in and moneykraft.com) will be conducting a workshop on “Strategic Personal Finance” at Bangalore on July 26th 2015.

Dr. Shashikant in my opinion is one of the best teachers in the country, in any discipline. Scores of financial advisors have been trained by her, including some luminaries like Subra.

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Automated Stock Analyzer V 6.0 – with financials from Value Research!

The automated stock analyzer now pulls annual (standalone/consolidated) and quarterly financials from Value Research online. It also pulls financials from morningstar, adjusted stock price from money control and calculates intrinsic value five different ways!

Note: If you are not familiar with valuation techniques, I suggest that you download the tool, and read the references provided in each valuation sheet.

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DIY Standing Desk

This post describes why and how I made a standing desk. That is an arrangement by which one can work standing up.

The why is easily explained: Because “sitting is the new smoking”. Google that you will get several nice articles explaining why.

The  upshot of it is that sitting for long overs increases the risk of all kinds of diseases (don’t ask!) and the daily exercise will not help if the individual continues to sit for long hours.

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Mutual Fund SIP XIRR Tracker

Use this sheet to automatically track the XIRR of your mutual fund SIP month by month and compare its performance with a benchmark index.

What is XIRR? When you invest a lump sum in a volatile instrument (equity, debt fund, gold fund etc.), the average rate at which the investment has compounded is given by the CAGR

When you invest periodically in the same instrument, instead of CAGR, a quantity called the XIRR,  is calculated. This can be interpreted as the average CAGR of all the installments.

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Version 4.0 – Mutual Fund Risk and Return Analyzer

Use this sheet to gauge the performance of equity mutual funds on risk-adjusted basis for investment durations ranging from the past 1 year to the past 9 years.

This version of the mutual fund risk and return analyzer incorporates the recently released downside protection calculator

This analyzer can be used by ALL retail investors. NO knowledge of risk and return analysis is required to use the sheet and understand the results!

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Should a pension plan allow partial withdrawals?

Should a subscriber be given the option to make partial withdrawals from a pension plan?  The EPFO always allowed it. That is how mom and dad funded my education!  Which, many argue is the main reason why retirees do not have much of a corpus to speak of!

Now the pension fund regulatory and development authority which manages the NPS has allowed partial withdrawals from a tier 1 account.

Now an NPS subscriber can withdraw up to 25% from his own contributions after subscribing for 10 years.  Three withdrawals can be made with a spacing of 5 years for:

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