bond v/s equity

https://www.livemint.com/opinion/online-views/why-stocks-crashed-today-11614336123392.html

Summary

US Govt bonds are considered to be safest financial instrument in the world.

Yesterday, bond yield (kind of interest a bond holder would receive) rose above 1.5 % after long time. This reflects that inflation is just around corner as more people get back to normal pre-covid environment.

FII may dump securities to invest in government bonds. So for every rise in bond yield, there shall be fall in capital market index around the world.

Good article that summarize it from Vivek Paul.

Non linear world

As I grow up, (pre-2000 years) one of the frustration was non availability of source of information or specific order in which I could find information.

e.g. When I was in school – books, teachers or news papers (or magazine) were only source of learning for me. It was always available in specific order or period. I could read grade 7 books only after passing grade 6 or find books that explain limited portion of any topics etc.

But that changed with google or for that matter with Internet. Anyone can now be able to read any content – in any order. This has optimized world for quick learners. It has freed up people would like to learn anything. Of course organizing information or good quality content search was new problem.

So now limiting information/knowledge to specific educational institute may be just middle-class mentality or security thinking.

David v/s Goliath story

Every now and then we read about “David v/s Goliath” story. Last week it took place in never imagined place – wallstreets. Yes, a place for rich and educated with tons of resources at their disposal.

Premise of story is simple – retail investor aggregated their strategy using portal (reddit) and played zero-sum game with hedge fund managers – via “short squeeze”.

Now this generation has found it’s leaders who use this retail power to drive prices up. They publish content which can be spread and read easily. Most SPEC hit their upper circuits and end up contributing to lot of frenzy in capital market.

Posting this URL from Livemint has some details – “Cathie Wood” of Ark Innovations ETFs.

https://www.livemint.com/market/stock-market-news/why-reddit-loves-elon-musk-cathie-wood-and-chamath-palihapitiya-11612234210763.html

Books on trading and investing

Posting this URL to track further books to read on trading and investing.

20 Books Every Trader Should Read

Over times, I learned that reading without much of practice do not help build conviction in the information one person has. This is process of converting data to information to knowledge to wisdom. This is greatest open secret.

Updating post to reflect books recommendation from Capital mind – Financial advisory firm that has model portfolio, publishes periodically and has in depth articles on various topics related to investing.

https://www.capitalmind.in/2021/01/recommended-books-investing-trading/

Investment learnings summary

I found this post via alphaideas.in blog.

Saying Goodbye: 10 Years, a 19% Annual Return, and 17 Investing Lessons

In general I agree to most of things said – esp. following

  1. Few winners can make up for losses in investment.
  2. Buying when Stock is hitting 52W High or all time high is one of most difficult thing due to price anchoring effect.
  3. At times it is difficult to identify what you don’t know – due to approximation bias where oneself can start to speculate due to approximate ideas of how things work. So writing down investment thesis every time you buy or sale help one track
  4. If you don’t have large capital base to began, capital gains could be limited. Most of current large investors had trading portfolio at some time before they become long term investors. Again how to balance two techniques is challenge for retail investors.
  5. Knowledge compounds over time but without checklist it would be difficult to remember or apply all knowledge a person has every time one invests. So try to convert your knowledge into a checklist.

IPO and preOpen

There is euphoria in capital market across the world now. Every type of investors are just pouncing on every kind of IPOs coming to market. Recently, Indian stock market seen one of highest subscriber ratio for consumer facing business being listed on market.

Allocation during IPO is matter of luck – if there are large number of over subscribers. What is there is another way to buy before entity is listed or is available to large retail investors?

Following two articles list a investor can buy same entity in pre-open or post-closure of stock. Again price discovery during stage is some what rule based as well as tricky. But for something that could gain/loss on euphoria, an investor can take their chance in pre-open session.

I discovered this via one of valuepickr blog.

https://support.zerodha.com/category/trading-and-markets/trading-faqs/market-sessions/articles/what-are-pre-market-and-post-market-sessions-and-orders

What Is Pre-Open Market Session in the Stock Market?

Adding official information from NSE website

https://www.nseindia.com/products-services/equity-market-pre-open

Indian Macro Tracker

I found this page on livemint that tracks and publishes macro numbers on India. It also document sources of information and delay in their presentation – such as Broadband data is delayed by 2-3 months (such in Nov end we have data for August month), similarly SIAM or every automobile company publishes data on number of vehicles dispatched to their vendors or showrooms and not actual vehicles sold by showrooms.

Data from RTO registration published on vahan portal help track that number.

Article covers 4 categories

  1. Consumer economy – PVs, Tractor Sales, Broadband Subscribers, Domestic Air Travel
  2. Producer Economy – PMI composite, Core Growth, Bank’s Non Food Growth and Rail Fright traffic
  3. External Sectors – Import cover, Rs v/s Dollar, Labor intensive export sectors, Trade Balance
  4. Ease of Living – CPI, Core CPI, Job Outlook and Real rural growth

There are few more areas to cover – such urban vs rural employment growth, Construction of Road etc.

https://www.livemint.com/news/india/some-warning-signs-in-india-s-economic-report-card-11606288871230.html

innovations books

Its been while when Infosys acquired any companies. Some of their previous acquisitions run into various issues – cost paid, merger synergy and benefits etc.

Recently they acquired a company that services product companies. So I thought of going through their services and blog. Here is quick list of books recommended by them for innovations and design.

Top Innovation Books Every Designer Must Read

Not sure why they don’t have any books authored by people at IDEO – design firm known for pioneering “design thinking”. Also having read 1-2 books from IDEO, I would recommend following books from them.

https://www.ideo.com/post/creative-confidence

https://www.ideo.com/post/the-little-book-of-ideo

passive vs active funds

If you follow American Market, I am sure you shall find about Vanguard ( Or Mr. Jack Bogle) who introduced notion of Index Funds. Mr Buffet mentioned about following in his one of annual letter –

“If a statue is ever erected to honor the person who has done the most for American investors, the hands- down choice should be Jack Bogle,” 

This alone highlights importance of Index Funds and how their operational costs help deliver staller returns over period of time.

But are Index funds good for all economies? I cannot say for sure.

Here is article in LiveMint that has some advice –

https://www.livemint.com/money/personal-finance/invest-in-a-combination-of-active-and-index-funds-instead-of-sticking-to-one-11602176009870.html

“They certainly have the potential to generate good returns for investors, but the consistency of index funds outperforming active funds over a long period depends on the maturity of the economy and the depth in the market. In developed countries, index funds tend to do better because most of the companies are at a matured stage and they have gone past emerging and growth phases. In an emerging market like India, there are opportunities for businesses to improve their efficiencies. The potential to invest in such companies will usually be more through active funds until these companies become a part of benchmark indices. Hence, prudently-managed active funds would have better potential to outperform index funds until Indian markets mature further.”

I have some questions on above article.

  1. Most companies enter Index when their market cap reach some filter criteria. Most companies take lot of time to enter stocks – with exception such as HDFC Std Life which had stellar debut.
  2. So are all constituents of Index Funds in India in mature phase?
  3. There can be always some part of business in sunrise sectors – such as Retail or Jio Platforms of Reliance Industries?
  4. How is this article not discouraging customer to invest in Index Funds in India – given agents have incentives to encourage indirect active funds such as Large Caps etc.