An expert opinion or textbook answers may not be the best possible solution for dilemmas like generating returns to beat inflation, investing in short term or long term and how to recover from losses. Of course, these dilemmas can be reduced but like systematic risk, they have to be accepted
Generally, investors start investments with an objective to generate return, which will help them meet their future requirements. Some expert investors go one-step ahead and try to create a so-called optimal portfolio, which is meant to help them create a fine balance between risk and return. Whatever may be the expertise and experience of an investor, every investor comes across dilemma in investments. Some such dilemmas are as follows:
My investments must generate returns to beat inflation, but which inflation:
Inflation has been considered as such a villain in investments that all other strategies of investment planning have taken a back seat. Fortunately, or unfortunately, beating inflation has become centre point of all investment strategy. It is often said that investments made by an investor should beat inflation but which inflation is hard to guess. Should it beat consumer price index (CPI), wholesale price index (WPI), or something else? Though inflation is a number published by the government for economy, this number does not affect everybody equally.
Let us take two examples. For a person who has a monthly income of Rs20,000, food inflation has more significance than a person having monthly income of Rs80,000. Therefore, the impact of inflation will not be same for both the person. In addition, if a person’s income continues to beat inflation with a salary of wage hike, inflation does not remain so critical. With increased salary, he can allocate more income for savings and in turn for investments.
In recent times, inflation data has shown that though it is moderating, practically real impact of inflation is different from what the data shows. Inflation in a common man’s life continues to be more pinching than what data shows. So, can these indicators of WPI or CPI be made base to create strategy to beat inflation? Will an investor end up understating, or over estimating inflation number, if he uses these numbers for beating inflation? Even if inflation data published by government becomes the benchmark, will it actually help beat inflation?
Investment in equity pays in long term, but how long is long term:
Investments should always be made for long term. However, there is no definite answer to the question on what can be classified as long term. Even, if we ignore the fact that we are all dead in the long term, we cannot deny that we need to find the answer for the long-term time horizon. One easy way is to link it with the investment horizon and the goal that one has, but it still does not serve the purpose.
Suppose, an investor has set a goal of corpus creation for child’s education and for this he had started a couple of systematic investment plans (SIPs). The initial investment objective was of 10 years. The SIP did not deliver in first six years and generated a poor return, which is not good enough to create the corpus that was planned initially.
This has happened with many investors especially those who had started mutual fund investment when stock market was peaking up in late 2007. In addition, there are some investors, who are stuck in some not so well performing mutual fund schemes, for instance, Reliance Growth fund for more than five years now. Now what should this investor do? Should he continue with the investment, switch to a new fund or move to debt and increase investment amount per month to achieve his goal?
Once again, there is no easy answer to this question. Of course, exit route option is always open but does this experience raise doubts on investments in long term. Is long term more important or being lucky in long term?
I have made a loss, what should I do:
This question is somewhat linked to the previous question. Many investors, who have invested in equity and other such similar products, face this situation. It has nothing to do with a wrong stock selection. This can happen with companies, which have been performing and doing well. After all, companies have no control on macro economy variables and government policies. The loss can happen in some cases when the company negatively surprises with its performance. Infosys is a live example.
Booking a loss is a nice idea, but what will be the next course of action for an investor who agrees to book loss. Move to debt from equity or move to another equity investment with no idea about what will happen in future.
It is not easy to answer these dilemmas. An investor probably needs to live with them and handle them as and when they arise. An expert opinion or textbook answer may not be the best possible solution. Of course, these dilemmas can be reduced but like systematic risk they have to be accepted.
(Vivek Sharma has worked for 17 years in the stock market, debt market and banking. He is a post graduate in Economics and MBA in Finance. He writes on personal finance and economics and is invited as an expert on personal finance shows.)
Dhaka magistrate has directed police to investigate a complaint filed by the wife of a victim who had alleged that her husband and other workers were 'pushed to death' by the building owner
Police in Bangladesh are investigating possible murder charges against the owner of a shoddily built factory that collapsed nearly two weeks ago after the wife of a victim filed a complaint.
Officials on Tuesday said that the death toll from the country’s worst industrial disaster had reached 675.
Sheuli Akter, the wife of Jahangir Alam who was crshed to death, had filed a complaint before Dhaka magistrate Wasim Sheikh. In the complaint, she alleged that her husband and other workers were 'pushed toward death' by building owner Mohammed Sohel Rana and two others.
Alam was employed in New Wave Styles Ltd, one of the five garment factories housed in the eight-story Rana Plaza that collapsed 24t April as workers started their morning shift even though cracks had developed in the building.
New Wave Styles owner Bazlul Adnan and local Government engineer Imtemam Hossain were the two others accused in the case.
The Magistrate has ordered police to investigate the complaints, and local police chief Mohammed Asaduzzman said that they would now investigate possible murder charges.
A conviction for murder can result in a death sentence in Bangladesh.
Nine people, including Rana and Adanan, have already been arrested on other charges. Rana faces charges such as negligence and illegal construction, which are punishable by a maximum of seven years in jail.
By this evening, the death toll had reached 675, according to the police control room at the scene. It is not known how many people are still missing, as workers use heavy equipment to search through the rubble. There is a stench around the collapse site from decomposing bodies.
Officials say Rana illegally added three floors and allowed the garment factories to install generators. Vibrations from garment machines and from the generators were thought to have contributed to the collapse.
The disaster is the worst ever in the garment sector, surpassing the 1911 garment disaster in New York’s Triangle Shirtwaist factory, which killed 146 workers, and more recent tragedies such as a 2012 fire that killed about 260 people in Pakistan and one in Bangladesh that killed 112, also in 2012.
When New York Mayor Michael Bloomberg tapped Cathie Black to be schools chancellor, a lowly intern filed a freedom of information request that the city fought for two years. Now, that intern reflects on why the mayor tried so hard to keep secret emails that turned out to be innocuous
In November 2010, I was earning $300 a week for The Village Voice, blogging about unemployed actors who moonlit as bed bug exterminators and a city project to make biofuel out of toilet water. One afternoon, then-Schools Chancellor Joel Klein stunned the city by suddenly resigning his post of eight years for a job at Rupert Murdoch's News Corporation.
The bigger shock that day was who New York City Mayor Michael Bloomberg chose as Klein's successor: Cathie Black, the Hearst Magazines chairwoman who, as far as anybody could tell, had never stepped foot in a public school, let alone knew how to run one (or the city's 1,700, for that matter).
The announcement sparked fierce criticism among parents, educators, politicians and the city's press corps.
So I fired off a routine Freedom of Information request to the mayor's office, seeking emails between Black, Bloomberg and their staffs.
When the emails were finally released last week, after a two-year legal battle, they revealed a desperate public relations campaign in which city officials tried to rally support from prominent women — including Oprah Winfrey, Gloria Steinem, Caroline Kennedy, and Bette Midler — to champion Black's appointment. (I will admit: never in a million years did I expect my work to result in stories containing the sentence, "Ms. Winfrey couldn't be reached for comment.") In the end, the emails were amusing, slightly enlightening, but largely innocuous.
Which is why it's so puzzling that the city fought all the way to the state's highest court to block their release. Cathie Black resigned as schools chancellor after just 95 days on the job. The case to keep her emails secret would last more than six times as long.
If I hadn't had high-powered help, the city would surely have won, and quickly. The city initially denied my request and, after I had exhausted an administrative appeals process, John Cook — now the editor of Gawker — put me in touch with a media law clinic at Yale Law School.
The Bulldogs and Elizabeth Wolstein — a partner at Schlam, Stone & Dolan who once supervised appeals for the U.S. Attorney in the U.S. Court of Appeals for the Second Circuit — agreed to take the case, pro bono, propelling a fresh-out-of-NYU, semi-employed, then-21-year-old journalist into a courtroom battle with New York's billionaire, third-term mayor.
Plenty has been written about the actual emails since they were finally released last Thursday. The documents (and the protracted legal dispute surrounding their release) led to two articles in The New York Times, an article and an editorial in the New York Post, and stories in the New York Daily News, the Associated Press, WNYC, the Village Voice, the New York Observer, The Daily Beast, Gawker , Gothamist , Metro, New York magazine, NY1, and The Wall Street Journal.
But less has been written about why the city fought so hard — it spent more than 180 hours, totaling more than $25,000 in staff time — to keep the emails secret. Susan Paulson, a senior attorney for the city's Law Department who handled the appeal, has given some clues.
Last Halloween, Paulson showed up to the courthouse on East 25th Street and Madison Avenue. The five-judge panels in this courthouse hear appeals for civil and criminal cases in Manhattan and the Bronx, and at 3:10 that afternoon, Paulson took to the lectern and presented the city's argument.
While Black was not yet on the government's payroll when the emails in question were written, she was nonetheless acting as a "consultant" to the mayor, Paulson said, because she was acting at his direction to further one of his policy goals. What was that goal? Securing Black's own position on the government's payroll.
In her original order, trial court Judge Alice Schlesinger had minced no words, calling this argument "particularly specious" and "wholly devoid of merit." The five judges on the appellate panel also rejected the city's claim.
But the city persisted and tried to get a hearing in the state's highest court, the Court of Appeals, claiming the case now represented a novel and statewide issue.
I'd often been asked why I thought the city was fighting so doggedly to keep these emails secret. But without having seen them, it was difficult to say whether there was a sinister motive or a more legitimate reason.
While petitioning the Court of Appeals to take the case, the city began to make its policy concerns clearer. Disclosing communications with people who were appointed to, but had not yet taken, office would make it more difficult to lure good talent from the private sector, it argued. Of course, people considering public service know they are stepping under a public microscope.
There is also an interest, the argument goes, in allowing government officials some degree of privacy to do their work, so they can deliberate freely and candidly. That is the reason certain communications within and between government agencies are often exempt from disclosure under public transparency laws. These days, of course, much of that deliberation occurs electronically, creating a permanent record. Ardent transparency advocates often want those records open, too, arguing we shouldn't have any smoke-filled rooms — literal or virtual.
"The City believes that the principles permitting government employees to exchange opinions, advice and criticism freely and frankly, without the chilling prospect of public disclosure, should extend to individuals who have been elected or selected to public office but have not yet assumed office," Paulson wrote me — in an email, of course — answering a question for this article.
The question is where, exactly, to draw the line? Suppose the public backlash had forced Bloomberg to abandon hiring Black as chancellor, or that Black herself had withdrawn from the running. Could the emails have been kept secret merely because she had, at one point, been considered for the job? What, then, would prohibit an agency from withholding records of true public import by simply claiming that the Mayor was thinking about hiring John Doe to be his next Deputy Junior Assistant Something-or-Other someday?
While the city maintains it fought for the principle of free and candid communications, there's another theory as to why the mayor's office resisted disclosing these emails: It feared a precedent that would open the floodgates to release other ones that might be worse than embarrassing.
Public records laws rarely have much bite. And, except when disclosure has been advantageous to its goals, the Bloomberg administration has had a famously poor track record of respecting them . But they are still valuable tools for empowering public oversight. And sometimes, they even let David the lowly intern cut Goliaths like Bloomberg down to size.