Mahesh K Bhat

To Ride The Bull Or Not To

Vyoma — Thu, 23 Jul 2009 07:09:16 +0000

Investing in equity, as 'they' say, is on the basis of one simple rule - buy low and sell high.

It turns out for a neophyte invester that it is not that simple. How would one decided if the stock of a particular company is being traded at a lower value? Lower than what? Would it rise in the future or at least in the timeframe of that particular investor? Bottom line is that it is not that simple.

Let us put this aside, and try to make it simpler. Let us say, that you did buy the stocks of (fictious) company Achme at Rs.100 per share. The actual cost does not matter, so a US investor can say he bought it at $10. This investor, bought 100 shares at the rate of Rs.100 - that puts his investment amount at Rs.10000.

Since he bought it when the market was low earlier, and now due to various factors which the investor is not completely aware of, the market has gone up. It is in a bull market. The stocks of Achme are being traded at Rs.200. That brings his investment value to Rs.20000. Returns is a 100% over what he invested.

Should he sell now? One should buy low and sell high.

And there comes the catch. What if there is a lot more potential in the market? What if the market goes up and Achme trades at Rs.300?

Should the investor ride the bull some more, or should be bail out?

If he pulls out his investment now, he will be in the green by getting Rs.20000 and notching a Rs.10000 in profit.

If he stays put, then it all depends on how the market turns out. If the market goes further up, and he pulls out at a later point (when?) then he gets more profit. But if it starts facing down, even further down that Rs.100 per share, then he will be in the red zone.

Should he risk that loss. The investor has been exposed to this risk and now he has a chance of pulling it out, but he looses the opportunity to increase his returns.

To ride the bull or not to?

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What the ICICI wealth manager did not tell

Vyoma — Fri, 17 Jul 2009 20:00:43 +0000

This post is an anecdotal, that would be of less interest to those living outside of India. It is about the relevation I had in terms of equity and debt markets, and how to position ones investment in them.

Background

About three years back, though too young in my career, I thought it would be a good idea to start investing for the time of retirement.

I aimed for a small amount to be set aside for this. That was when ICICI was my banker, and there were these 'wealth managers' who then happened to approach me with a particular plan. It was ICICI Prudential LifeTime Pension II [PDF] plan; yes, quite a mouthful. He also told me that since I was young, I could expose myself to more risk and hence I should choose the Maximiser style within the plan. That way, I had a chance to get more returns. I did whatever he was told, since I was did not know anything on those lines.

I have been regularly paying 5000 every six months, and it does seem quite easy to set aside that amount currently. With my new found knowledge, I now wanted to see how my investments were performing.

NAV comparision

I downloaded two and a half year worth of data and charted out the various different styles of investment the policy/plan had. The NAV (Net Asset Value) of each for each of them shows different variation. Obviously, the Maximiser follows the market as it is more equity biased as opposed to, say Preserver which is debt biased.

Yet, the NAV of the Maximiser is higher than the rest. For a moment, I felt like the 'wealth manager' then told me what I had to know. But then, I felt that I was missing something.

Analysis

It actually does not matter what the NAV is currently, when taken at a single point. It depends on what was the NAV when I made investment in them. I have been putting 5000 every six months, and it would get converted to units based on the NAV at that point in time. To get a better picture, I compared the two plans - Maximiser and Preserver.

And I calculated the returns. The picture is not pretty. In fact, because I chose Maximiser plan, I am trending downward and loosing the mone I accumulated. Preserver infact is performing better than Maximiser, weather the recent recesssion.

ICICI Prudential just happened to be the fund managing institution I opted for; I am sure the case is same with almost all.

Lessons

Bottom line is, just becuse you are able to expose yourself to more risk, does not give you the privilege to be careless. In fact, you have to be more careful, and know when to pull out from the risk exposure and lock your earnings.

In broader view, do not just rely on 'wealth managers', especially those who get you into a particular policy/plan with out explaining the strategies to be taken. I do not blame the plan for performing badly, but I do blame the wealth manager for not letting me know what I need to be aware of.

Part of the blame is on me for not knowing what to know. :)

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Indian Citizens Save - Indian Government Borrows

Vyoma — Fri, 17 Jul 2009 12:29:21 +0000

Back in 2004, Martin Feldstein said in Budget Deficits and National Depth [PDF]:

... the budget deficit of the central government is about six percent of GDP and this rises to about 10 percent of GDP if the deficits of subnational governments are included. The combined government debt is now close to 75 percent of GDP.

More recently on Reuters (emphasis, mine):

By March 2010 its debt liabilities would have climbed to 35 trillion rupees, a 12 per cent jump in a single year.

D. H. Pai Panandiker says in article Indian government - the compulsive borrower.

Percentages does not give me good grasp of actual amount, and I tried searching for the order of debt. Searching around, I did find one page hosted by Finance Ministry of India titled India's External Debt position that seems to have updated atleast recently. It had put the External depth at the figure of 229,887 million US dolloars. At the current exchange rate ( 1 USD = 48.66 INR ), the External depth comes to 11,186,301 million rupees. That amount, I beileve is roughly 11 trillion rupees.

But this covers only the External Depth - what Indian Government owe to other countries. I wanted to find out what Indian Government owes as a whole - to others as well as its own citizens. Finding this was easier, Central Government Debt for the Quarter Ending 31.03.2009-(Q1).

It puts the total debt (both internal and external) at 2840888.68 crore INR. Speaking in millions, that comes to 28.408868 trillian dollars. I think Mr.Panandiker does have his maths in line, when he says it will be 35 trillion rupees in 2010.

Now, we have seen the data that an average Indian household save more than those of other countries. It is quite suprisingly contrasting that the elected government of India has put the whole country in such a financial fix. I am still having hard time grasping the number of zeroes in a trillion.

I know people and companies can go bankrupt. What happens when a country goes bankrupt?

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Economic Times give confusing tips on investment

Vyoma — Mon, 13 Jul 2009 20:12:36 +0000

I have to put a disclaimer before I state anything. My knowledge on stocks and investments could not be called anything but rudimentary. Any investments I did in equity market, I did it based on advice given by my father.

That said, I have started to look at the market recently. And from my understanding, the basics of investment is something along the following lines. When you can take risk, which is usually at earlier part of your life, your investment portfolio should be more in equity and less in debt market. Equity market has a higher risk, but does give you a higher returns. Debt market on the other hand, is less in risk and in returns. The basic premise behind this is that, at a younger age you have time to recover from any losses the risk of investing in equity, than the time you have at later part of your life.

But there cannot be a preset ratio or correlation of the ratio to your age. There are other factors that you need to take into account. There might be some responsibilities, or some loans that you need to repay. The market conditions too need to be taken into account. There is no point investing into equity when you cannot get a return, just because you are young.

That brings me to hunting and searching (googling, or should I say binging?) for current news, tips, and articles on investment strategies. Since I did take advice from my father, and that has acutally helped me build assets, I thought I would do what he did. As a kid, I remember him reading through several newspapers and related magazine, one among them being Economic Times.

I do not buy newspapers. I am not sure how that will effect the newspaper industry in India. I turned to the online version. And that led me to these two articles.

Stock market faced strong sell-off last week by Deepak Mohoni
Increase your exposure to debt funds by Pallavi Mulay

These are two articles published on the same day, by the same news outlet. One says the debt market is strong, while the other advices to invest in equity market.

What am I, a newbie investor, to make of this?

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Sorceress

Vyoma — Sun, 12 Jul 2009 20:37:02 +0000

It had been a long time since I started working (or should I say reworking) on the Armem Enlom comics. Working on the comics, since it included a lot of fight scenes, I had to study a bit of human anatomy.

Just to check if I was getting any better at doing human anatomy, I picked up this unnamed sorceress from the same realm as Armem Enlom (which is Chaos And Order, by the way).

This is a "work in progress" snapshot of the artwork. I did go through a lot of images on the web, but I would like to make a nod to one of the artists I have been following at deviantART. In particular, her artwork, titled "Mekania" inspired the costume of this particular character.

Bookmark my deviantART profile OR follow me on Twitter OR subscribe to the feed to make sure you do not miss the next update on this piece.

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Ubuntu 9.10 Boot Performance - It Does Matter

Vyoma — Thu, 02 Jul 2009 15:02:29 +0000

In his post, Ubuntu 9.10 Boot Performance, and Does it Matter? Christopher Tozzi makes a point that it doesn't really matter that the boot performance has improved since "none of us" shutdown the desktops/laptops, opting instead for suspend/hibernate.

It just seems quite seems like his world view is quite flawed in my opinion. When I was in Denver, and a power outage did not occur for the two years I was there, I did keep my Ubuntu powered Dell laptop up and running all the while.

But back in India, now in Chennai, the power outage is quite frequent. I do not want to keep my laptop hooked on all the time. I do want to shutdown completely and boot in when I want to use it.

I just hope that people who lead the development of Ubuntu as a distribution are not just filled with people with narrow views.

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BloomSpot - Logo Design And Illustration

Vyoma — Wed, 24 Jun 2009 19:25:43 +0000

I just completed the latest illustration/design project for a client, BloomSpot.

Read more about it at services/portfolio page. The client is yet to take the site live. Hence it will be a while before this logo is actually used in the website.

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Apple - You Lost Me As Customer

Vyoma — Fri, 05 Jun 2009 07:10:18 +0000

It has been a while since I decided not to use Apple products any more.

Here are some of the reasons I came to this decision:

Their iTunes software required to sync/buy music and to make use of the iPod/iPhone Apps out there is not available on Linux. I hate it these days when someone forces me to dual boot into my Windows partition.
iPod batteries suck. Not batteries themselves, because I do understand the concept of recharge cycles, but not able to replace it yourselves is really a bummer. And sending it in to Apple for a replacement will cost you almost half the price of the device, which is absurd. Read MG Siegler's view at The Short Lifespan Of The iPhone.

Now, I will be using the iPod I bought, until it dies. I am glad I bought an iPod Touch and not an iPhone. But I will not be buying anymore of Apple's products. I will not be buying them for myself, or as gifts for others.

Apple has lost me as a customer.

iPod photo by juanpol.

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What about Google Chrome for Linux?

Vyoma — Tue, 02 Jun 2009 19:38:12 +0000

I have been tweeting (follow me) my impatience to see Google Chrome for Linux for a while, but this post on them getting it ready for Mac, does make me voice my opinion as a blog entry.

Google, I believe does owe a lot of what it does technologically to Open Source, and I feel they are leaning towards being evil by not committing to deliver a Linux native port for Google Chrome.

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C++ vs Java

Vyoma — Mon, 11 May 2009 15:45:58 +0000

Those who have been following me on twitter, would have realized that I have started to dabble in C++ recenlty. Those who know me personally, would know that I did quite a bit of my programming antics in that language. It is only for the past couple of years that I had gotten involved into Java.

Not to say that I have quit Java, but I find it quite refreshing to work in C++ again. There are some new constructs and features that the language is providing since I stopped working on it. Moreover, it seems like there are lot more standardization effort that has taken place.

Here are some to and fro articles in terms of Java and C++:

I am not really sure of the credibility of these authors, so please do your research before taking them as facts.

Speaking of C++, I do feel obligated to link to the Bjarne Stroustrup - the designer and implementor of C++.

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