LEARNING


Moneylife Digital Team 23 October 2015
Are mutual fund managers efficient in managing downside risk?   In the previous issue of Moneylife, we cited a research which found that multi-asset mutual fund (MF) schemes are not as superior as they claim to be when it comes to market-timing. Apart from market-timing, fund managers...

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R Balakrishnan R Balakrishnan 20 October 2015
Stock market forecasts are meaningless. Ignore them   There are more people making a living by telling others what to do out there in the stock markets than actual people who invest. But the stock market is an interesting place. It never behaves the way it has been forecasted. The...

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Moneylife Digital Team 25 September 2015
When 100 past psychology researches were replicated, only 39 yielded the same results   Enormous amount of research has been done in the field of psychology. However, you may not want to trust those results because less than half of them may be accurate. Brian Nosek, a social...

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R Balakrishnan R Balakrishnan 22 September 2015
A simple tool—RoCE or return on capital employed—separates the winners from the losers   Return on capital employed (RoCE) is a great tool to choose good-quality stocks. In any company, the ‘capital employed’ comes from two sources. One, from shareholders, who have put in equity and...

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Moneylife Digital Team 11 September 2015
A US academic study shows that the nearer you are to a golf course, the better are your returns   It is an old business saying that more deals are struck on golf courses than in boardrooms. Golf fosters valuable social interaction and communication among business professionals. And,...

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Moneylife Digital Team 11 September 2015
An individual’s net worth is not an indicator of financial knowledge, shows a study   Are wealthier households better equipped to invest in complex financial securities? Not exactly. In the United States, an individual investor is qualified to be an accredited investor if he has an...

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R Balakrishnan R Balakrishnan 08 September 2015
We seem to be feeding the consumerist frenzy, rather than building up long-lasting assets   Consumerism, as a disease, has hit India big time. Aggressive online marketing by companies like Amazon and Flipkart—coupled with aggressive financing by credit-card sellers and lenders—is...

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Moneylife Digital Team 28 August 2015
Theory’s guru Richard Thaler winds up with mixed success   Can behavioural finance theory be used to make correct investment decisions? This is what Russell Fuller and Richard Thaler, who are actively involved with studies in behavioural finance, attempted to accomplish when they...

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R Balakrishnan R Balakrishnan 25 August 2015
Mid-caps give you higher returns than large-caps. How does one select?   Would I buy a fast moving consumer goods (FMCG) company that has a turnover of under Rs3,000 crore and available at a price-earnings (P/E) of over 70, or one that has a turnover of over Rs30,000 crore at a P/E of...

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Moneylife Digital Team 14 August 2015
A new US study uses a different metric to prove that they are   In the active vs passive fund management debate in the United States, studies have generally proven that passive management is the best option for investors. Does this mean that highly-paid active fund managers in the...

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R Balakrishnan R Balakrishnan 11 August 2015
Be mindful of your expectations when you buy really expensive shares   Old stamps, antiques, old watches, paintings, etc, are called ‘priceless’ for a reason. They do not follow any rules, or principles, of valuation. Their value could be from zero to infinity, depending on the eye of...

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One must revise investing strategy according to circumstances   ‘Asset allocation’ is a much-bandied and frequently used term in personal finance planning. It simply means how much to invest and in what kinds of assets. Now, finance is a complicated subject. Most people are clueless...

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Moneylife Digital Team 17 July 2015
Investing is a complex process. A checklist can ensure that you do not overlook the essential factors   Kaizen is a Japanese business philosophy which involves continuous improvement of working practices or a manufacturing process. Within the kaizen methodology, checklists are the...

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Moneylife Digital Team 17 July 2015
American workers face an income gap in retirement   Even with 401K savings and social security retirement benefits, most Americans face an income gap in retirement. According to BlackRock Cost of Retirement Income (CoRI), Retirement Indexes for the quarter ended March 2015, a...

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Being aware of the risks we are taking makes it easier to manage our portfolio   Out of 6,000-odd listed companies, maybe a couple of hundred will pass our test which would include factors like: history, stability of business, high return on equity (RoE) and reasonable size. We are...

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Moneylife Digital Team 07 July 2015
Price-earnings Ratio (PE ratio) – reflects the number of times a stock is quoted to its underlying per share earnings. It’s the most popular valuation measure in the stock market and is calculated in two ways. One, divide the market-capitalisation of a stock by net profit. Two, divide the...

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Moneylife Digital Team 03 July 2015
Stock bubble in China again underlines how we never learn   In China, about 29 million new stock accounts were opened in 2015 up to 22nd May. This was more than the new accounts opened in the four previous years combined. More than 10 million new stock trading accounts were opened in...

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Moneylife Digital Team 03 July 2015
A small percentage difference in returns can make a huge difference over the years   While several people know about the power of compounding, many fail to grasp how powerful it can really be—a tiny difference in the rate of return can create a huge difference to wealth, over a long...

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Look beyond ‘well begun is half done’, if you want your performance to be better   In the previous issue, we wrote about picking up a few stocks for systemic investment plan (SIP) of investing. The logical question that follows is: “I have made my shortlist. I like five companies....

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Moneylife Digital Team 23 June 2015
Debt Equity Ratio: This ratio is used to calculate how much of business assets are financed by debt and equity. A higher ratio indicates more dependence on debt which is risky. A higher debt equity ratio is particularly adverse when the cost of debt (interest) is high. Companies with high...

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