Small is Beautiful

Another good article by Dhirendra Kumar of VaueResearchOnline.com

Please read the article here. It has loads of advice for non-professional investors.

Some important points

• In personal investments, the solution is not to do a lot, but to do only the minimum possible.
• investing in the minimum possible number of securities and by taking the fewest possible actions.
• You should keep all the money that you might possibly need for at least the next five-to-seven years in a safe fixed-income investment.
• Longer term investments should be invested in a small number -- three to four -- of conservatively run equity funds with a good track record.
• The investments in equity should be gradual
• Make a liberal estimate of how much money your family will need if you should fail to wake up tomorrow morning and buy the cheapest term insurance you can find. Do diversify your insurance across LIC and two private insurers

Comments on stock markets

I think Indian stock markets have started retracing their steps.Dhirendra Kumar , writes in valueresearchonline.com that volatality is high.

Dow jones also seems to have struck an invisible barrier and keeps going down or just stalling.The recent World Bank report saying that economic growth will contract more than expected this year will cause the markets to go down more.

Curiously, i saw an ad last week in Bangalore Times Of India newspaper from a big builder saying that as stock markets have risen , the property prices are also going to go up and hence better start booking your flats! what a hypocrisy! Head of LIC MF gave an interview to Business Line of Hindu saying that property prices will not go down any longer.

I take a totally opposite view.In my view, the property prices in cities like Bangalore have risen up so high that they have to stay the same or come down even more.Even software engineers who are primarily blamed for rising property prices cannot take a risk with such prices as their jobs are not assured.So, i guess that the current prices will either stay stable or come down for another 2-3 years.

Oracle vs Sap

http://www.bloomberg.com/apps/news?pid=20601085&sid=a012K7CVKerA

Seems SAP is losing business to Oracle. Larry's strategy of buying a whole lot of small(and sometimes big) companies have helped Oracle to provide a diverse set of products to their customers.

For e.g. the upcoming Oracle Fusion Middleware 11g is supposed to have a lot of applications, some of which are provided free of cost.If any customer starts using a free product like say Oracle Discoverer, a ad-hoc query and BI tool and starts to like it, he/she is not going to buy any specific best of breed applications from other 3rd party vendors.

The maintenance for such applications are covered in the maintenance contract for the whole application suite and hence it is cost effective for companies not to buy new specific best of breed products from other companies.

Stock market thoughts

Stock markets have gone up by nearly 1000 points today and yesterday! I think i will take some dud MF's out of my portfolio using this opportunity.

Will concentrate on a diverse portfolio of MFs but will try to restrict the number of MFs to 5-6.

Only problems is that I do not know whether to reinvest the money in equities.I do feel that the market is overvalued now and will have a major correction within a year.

Budget 2009 thoughts

Read in recent OutlookMoney article that if the Govt of India sells 10% of its stake in Nifty, it can rake in Rs60,000Crore.If it extends this to BSE 200, it can make 100,000CroreRs.

This seems to be one more way for GOI to make money to spend for infrastructure development as the fiscal deficit in India is becoming bigger.This way might be opted if it can't afford another stimulus.

If the GOI does indeed sell stocks to make money, it will try to sell it at higher amounts in which case, it would be good for it if stock markets go up!

We have to await the budget to see what is the direction of our policy makers.I think there might be some dis investment of PSUs announced and more concentration on building infrastructure.

US Dollar - Will it appreciate or depreciate

Investors like Marc Faber, Peter Schiff and Jim Rogers have warned that US Dollar will lose its value a lot because the Fed keeps printing large amount of money. Yogesh Chabria , of Happionaire blog fame, also echoed similar sentiments and advised people to invest in Gold.Yogesh said gold will nearly double in price as people move away from dollar to "safe" instruments like gold.

But today, I saw a conflicting view here . The author argues that Dollar will increase in its value or atleast won't depreciate a lot and that gold will not rise much now.He also warns equities will not be a good investment vehicle as "the worst is yet to come".He is bullish on silver(Jim Rogers also shares this view) though.

Indian stock markets had a big fall yesterday.I think it will trade in some ranges till the budget.But,my personal view now is bearish.I think, this year end or next year, sensex might fall to 10000 levels as the earnings coming out will not be very good.

Black Hamsa?

I named this blog - Black Hamsa which will become translated as Black Swan in English. The Black Swan theory , made famous by Nicholas Taleb's book, says that a lot of happenings in this world were undirected and unpredicted.


In applying this to financial markets, I think there can be both positive black swan events or negative ones.For example, the Indian markets touching 21000 in January 2008 was a positive black swan event as nobody could justify the valuations of the market at that time.


The subsequent crash could be termed as negative black swan event as some analysts were predicting BSE index to rise to 45000.


I think we should try to exploit the positive black swan events to our advantage by making profits to protect against negative black swan events. My brother told me that Taleb recommends 85% of our portfolio in safe debt instruments and only 15% in equity markets.He recommends that we should be prepared to lose all of the 15% in equities but if a positive black swan event happens, make the most of it.


Personally, I missed booking profits at 21K and rued it when my portfolio went into the red by nearly 35%.Now, since the markets are up again, i am trying to take some profits of the table.
I think the sensex is over valued now and believe that it will crash 1 year down the line.

Hello

This is my first post on this blog.I am planning to record my thoughts on economy,financial markets,personal finance and anything related to money on this blog.I am not a expert on any of these topics but just a casual observer.