Premium Value Investing NewsletterDownload Free Issue

Archives for March 2012

The Secret of Peter Lynch’s Investing Success

If there is one legendary investor who not just beat the market but destroyed it, it is Peter Lynch.

Lynch ran Fidelity’s Magellan Fund in the US for 13 years, from 1977 to 1990. During this period, he beat the US stock market index S&P 500 in 11 years. His average annual return during this period stood at a mind-boggling 29%.

It means that every US$ 1 invested in his fund in 1977 grew to more than US$ 27 by 1990.

Fortunately for us, Lynch has laid down his secrets in two great books that every investor must own and read several times – One Up on Wall Street, and Beating the Street.

[Read more…]

7 Steps to Becoming Your Own Financial Planner

I am a strong believer of managing one’s own money and finances.

The simple reason is that it’s your money at stake, and your financial future that’s being planned.

Nobody cares more about your money than you do. So if you are not motivated to improve your financial situation, nobody else is going to do so either…not even the best financial planner around.

I manage my own finances and see no reason why anyone else can’t do that on his or her own.

[Read more…]

‘Einstein Way’ to Get Over the Stock Market Insanity

Albert Einstein defined insanity as ‘doing the same thing over and over again and expecting different results’.

In the stock market, these are some things that most people do, over and over again…

  • Worry where the Sensex is moving next
  • Worry where interest rates are moving next
  • Worry what FIIs will do next
  • Worry about the GDP growth next quarter and next year
  • Worry about the government’s fiscal deficit targets
  • Worry what the next quarter might bring for companies
  • Worry what will happen in the US, Europe, and China
  • Worry why most people are worried about these worries

The truth is that these worries either keep people away from investing, or these lead them to make serious errors of judgment with their investments.

[Read more…]

How Much Term Insurance I Have, and Why

This seems like a season of disclosures!

After disclosing to you the stocks and mutual funds I own in my portfolio, today I discuss the amount of term insurance I’ve bought and my reasons for the same.

Buying a term insurance is one of the most important steps in your overall financial planning.

You may avoid buying any ULIP, Endowment, Money-Back, or Child Plan…but just don’t avoid term insurance.

This is especially true when you have dependents but don’t have enough assets (investments, trusts, etc.) to provide for them after your death.

However in case you have dependents and also have enough assets to provide for them after your death – a fully-paid-for home, a large and well-performing investment portfolio, frugal lifestyle – then you “do not” need term insurance.

[Read more…]

Why This Paid-Versus-Free Financial Planning Di

This is what happens when you are enjoying your holiday and get a cold-call from a financial planner who first offers you a fee-based service, and then goes down to do anything for you for free.

This is with due regards to Dhanush and his team for their wonderful composition that I’ve twisted to suit what I want to tell you with respect to my view on this entire debate of “free versus paid” financial planning, and which one is better for you – the investor.

So here I go…

[Read more…]

10-Point Checklist I Use to Sell My Stocks

“I wish there was a quarterly review possible in a marriage,” rued my wife after a small fight. “I also wish there was an exit clause,” she added, this time raising my interest levels.

Long term investing is a lot like a marriage.

For a peaceful relationship, you must be willing to…

  • Commit for the long term
  • Keep your ego and emotions aside
  • Keep your expectations realistic
  • Learn to say ‘no’
  • Learn to take the blame
  • Know that things could change and accept when they do change
  • Have immense patience

However, there’s one big difference between marriage and investing.

[Read more…]

My Stock Portfolio (See at Your Own Risk!)

I recently did a post on how minimalism has changed my life as an investor.

Therein, I mentioned that I own 15 stocks and 5 mutual funds in my portfolio. A couple of readers requested to see what exactly I hold in the form of these stocks and funds.

I was anyways planning to do a post around my investments, so these requests just led me to do it sooner than later.

Before I share my portfolio with you, here is what one reader commented after knowing that I will be publishing the same…

Everyone should realize that we are all different and so is our investing style. Mutual fund SIP does make a sense to copy provided certain things are common but stock portfolio should be thought out and worked on.

Thanks Mansoor for posting this comment, as it has made my life easier! This is exactly what I wanted to suggest through today’s post.

[Read more…]

Rajiv Gandhi Equity Savings Scheme: Boon or Disaster for Small Investors?

As an investor, the only thing of interest in the latest Budget was the Finance Minister’s announcement of the Rajiv Gandhi Equity Savings Scheme (RGESS).

Here’s what the FM said on the scheme in his Budget speech…

To encourage flow of savings in financial instruments and improve the depth of domestic capital market, it is proposed to introduce a new scheme called Rajiv Gandhi Equity Savings Scheme.

The scheme would allow for income tax deduction of 50% to new retail investors who invest up to Rs 50,000 directly in equities and whose annual income is below 10 lakh. The scheme will have a lock-in period of 3 years.

When I multiply Rs 50,000 per person with around 1.5 crore people with annual income up to Rs 10 lakh and who do not have a demat account as of now, I get to a potential Rs 75,000 crore of fresh money that could flow to the Indian equity markets in the first year of this scheme.

This works to just around 1.2% of the current market cap of BSE. Even if you take Sensex’s market cap as the denominator, this is just around 2.6%.

[Read more…]