If diversification is about ‘not keeping all eggs in the same basket‘, rebalancing is realising that ‘what goes up, will come down‘. Yes, investment portfolio management is all about simple common sense. In this post, I would like to revisit the topic of portfolio rebalancing and discuss what it is, why do it is, and…
Continue reading →Diversification refers to the simple common sense, ‘not to rely too much on one entity’. In this post, I discuss simple ways to build a diversified portfolio using mutual funds. The main purpose of diversification is to minimise losses, or rather the volatility in the portfolio value. This implies reducing exposure to an asset class…
Continue reading →Suppose you had invested in a mid-cap fund, say SBI emerging business from Sep 2010. Here is a tool with which you can compare the current performance of the fund with all other funds in the mid-cap category and its benchmark. I am not a fan of peer comparison after investing a mutual fund. Many other are….
Continue reading →If I choose a fund with a solid track record, what are the chances that it would deliver in future? Does past performance matter? This is a question on the minds of most mutual fund investors. Let us try and answer this question using annual returns of all diversified equity funds from Value Research. This…
Continue reading →The 10th version of the freefincal automated stock analyzer includes an easy-to-understand graphical analysis of the factors that drive return on equity (ROE) using the five-step Dupont Analysis. Return on equity is defined as ROE = Net income/shareholders equity. It is the profit for each unit of shareholders equity or the earning power of the company….
Continue reading →The correlation between mutual fund returns and the upside/downside capture ratios is discussed using Mid-cap mutual funds. It is no secret that I am a fan of the downside capture as a simple means of measuring downside protection, selecting and reviewing mutual funds. In this post, the recently obtained downside Capture Ratio of all Mid-cap Equity…
Continue reading →Dear reader, I write this to make two requests: (a) help beta test an Excel sheet that automatically downloads standalone or consolidated financials data (in new format or old) from MoneyControl, and (b) provide your feedback on how to improve the freefincal stock analysis spreadsheet. MoneyControl Financials Downloader The aim behind making this sheet is…
Continue reading →Although it has limited technical utility, the standard deviation is probably the simplest measure of understanding investment risk. Therefore, it has great practical value when it comes to ‘product positioning’ as the fund industry calls it. ‘Where does a given fund fall in the risk vs reward map?’. AMC often given a product positioning risk vs…
Continue reading →Equity savings funds are the latest type of asset allocation mutual funds introduced first in late 2014 when the government made the duration for debt mutual fund capital gains to be classified as ‘long-term’ from 1-year to 3-years. Equity savings funds are basically arbitrage+equity+ debt funds. They would hold a minimum of 65% equity (most…
Continue reading →In the last ten months, we have had three instances of credit rating downgrades in mutual fund portfolios. We had discussed these in some detail and also suggested ways to choose debt mutual funds with no credit risk and low volatility. In this post, let us look at how these funds have recovered and what we…
Continue reading →All long-term financial goals require periodic review to ensure that they are on track and in line with expectations and assumptions made while planning for the goal. Here are seven easy steps to review the health of your financial freedom or retirement portfolio. First posted on Mar 25 2014, now republished with updates. Retirement is…
Continue reading →The start of the financial year is the best time to plan for saving tax. For those who recognise the importance of tagging tax saving instruments with long-term financial goal portfolios, there is not much to do! Linking tax planning with goals is a one-time affair and all it needs is investing and review. In…
Continue reading →Facebook group Asan Ideas for Wealth (AIFW) is a fascinating micro ensemble for studying and understanding how investors think and act. Even if you don’t want to consciously study it, it is impossible to not observe a few common patterns. The group is famous for its abbreviations: MDBSC* – My dull and boring SIPs will continue (*…
Continue reading →Use this financial freedom calculator spreadsheet to answer questions like, “When can I retire?” and “When should I retire?” and hopefully understand the difference between them with minimal inputs. 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…
Continue reading →Any keen follower of personal finance space would have encountered their fair share of ‘why you should invest in equity?’ articles and ‘why equity alone is capable of beating inflation over the long-term’ arguments. Things have come to such an end that fixed income investors are considered as not being financial literate. This kind of…
Continue reading →