A new beginning

[Thad E Ginathom]

I don't believe that bankers, wealth managers, analysts or the 'experts' on TV channels exist to make a profit for small investors. They exist to make a profit for themselves and to pass on the losses to the people who innocently (and in most cases foolishly) trust them.

Hah! Lesson learnt the hard, expensive way.

When you visit a bank, you are served by sales staff. The Wealth management crew will happily tell you that they all have MBAs. Ask the speciality: ten to one it is marketing. Their actual knowledge of economics, finance, industry, banking, is no better than mine.

A few years of boom in India made this particularly bad. Any fool can profit in a boom, but few know how to handle the end of it.

 

[anm]

Only benefit with MFs is saving via SIP. Also profit is tax free, IFF you make any profits, if you hold them for more than a year.
If there is a better scheme where I can invest in small steps every month, and gives decent profit after adjusting for income tax - please suggest.

 

[milestoneseeker]

One tip worthwhile exploring is buying silver for 2013. From what I have dug up, the only way to buy it in demat form (I am not a fan of physical gold or silver) is from NSEL through an authorized DP. Karvy is the only trusted DP for NSEL that I am aware of. Either buy the F&O or look at e-silver in NSEL as no ETFs exist on NSE or BSE.
Nothing beats SIP for non-active investors with diligent oversight of one's MFs basket.

sent from my SIII using tapatalk

 

[ajay124]

"A few years of boom in India made this particularly bad. Any fool can profit in a boom, but few know how to handle the end of it."

Thad

In order to understand where we are coming from (and where we are going) we have to filter out the BS and focus on essentials. Our generation and the generation which came after ours, may have lived most of their life inside a bubble. A bubble which might have begun on August 15, 1971 when the gold standard (after being watered down for several decades) was finally buried. We have been taught to believe in the myth of perpetual growth. We believe that stock and real estate prices may suffer a few hiccups now and then, but they will eventually keep rising higher and higher. But a different story may unfold in the future. We may discover that rising asset prices are a thing of the past. That in the future we have to focus on capital protection rather than capital appreciation. On minimizing our losses rather than dreaming about maximizing our profits. Instead of blindly trusting wealth managers and television pundits, it would be better to google for information about how bubbles are created and how they get punctured. For starters one can begin with some heavyweight but interesting economic history lessons:

Gold Standard: The Concise Encyclopedia of Economics | Library of Economics and Liberty

Hyperinflation in the Weimar Republic - Wikipedia, the free encyclopedia

History of the Federal Reserve System - Wikipedia, the free encyclopedia

GlassSteagall Act - Wikipedia, the free encyclopedia

GrammLeachBliley Act - Wikipedia, the free encyclopedia

Subprime mortgage crisis - Wikipedia, the free encyclopedia

Quantitative easing - Wikipedia, the free encyclopedia

 

[milestoneseeker]

We believe that stock and real estate prices may suffer a few hiccups now and then, but they will eventually keep rising higher and higher.

I wholeheartedly agree. The blind faith I see amongst people around infallibility of real-estate investments astounds me. Particularly when they never step back to truly assess the returns they have got on property (principle + interest) in lieu of alternative investment opportunities.

 

[vinay]

Anm,

In a day trading career i think most of them loose money over all, especially if they can not devote full time and are not disciplined or lacking the risk management tactics.

One of the reasons people fall prey to day trading activity because it looks very easy to make money and lucrative too be in, if this is not enough broker's etc make large promises that there calls are 90% right etc but the fact is of what many of us know. While that is a another story many individuals too claim that they are making money, that too daily, but will not show the copy of ledger or be it the contract, so what does this mean?

You have done a smart thing Anm, by getting into the world of mutual funds.

V.

oops I don't know what I was smoking but I meant ended up loosing lot of money

 

[ajay124]

One morning, many moons ago, I went looking for someone who had actually made money on the stock market. I'm still looking.

 

[sidvee]

Me too cheers, Sid

 

[Thad E Ginathom]

Trading itself has become a service that is promoted. What I see is people gambling.

Without the right education, information, etc, that is all it is, unless one sticks to the safest of bluechip stocks. Pros do not get to trade just by opening an online account, eh? Actually, probably they are the ones that admit that it is gambling.

Heyho, at least I made a small amount of money on Satyam. But I wish I'd had the guts the to buy lots when it was throw-away, instead of just a little when it was well on the way to recovery.

Actually, I wish I'd had a deposit box full of gold for the past six years. And I mean gold, not "gold" on paper. That's just another financial scheme that they want to sell us: who knows how much of the real stuff they actually have compared to deposits?

 

[asliarun]

Trading itself has become a service that is promoted. What I see is people gambling.

Without the right education, information, etc, that is all it is, unless one sticks to the safest of bluechip stocks. Pros do not get to trade just by opening an online account, eh? Actually, probably they are the ones that admit that it is gambling.

I guess that's the difference between trading and investing. I'm a lay person in all this, but one thing that has always stuck in my head is the gist of what Warren Buffett and Benjamin Graham (of The Intelligent Investor) have to say - if you're buying stock, you should treat it the same way as if you were buying the entire company. Now the world of finance is infinitely more complicated so this statement may be far too simplistic, but to an ignorant person like me, this makes sense.

 

[ajay124]

And I mean gold, not "gold" on paper. That's just another financial scheme that they want to sell us: who knows how much of the real stuff they actually have compared to deposits?

thad

Derivatives: The $600 Trillion Time Bomb That's Set to Explode Money Morning - Only the News You Can Profit From

The punch line from the moneymorning write up

The world's gross domestic product (GDP) is only about $65 trillion, or roughly 10.83% of the worldwide value of the global derivatives market, according to The Economist. So there is literally not enough money on the planet to backstop the banks trading these things if they run into trouble....Compounding the problem is the fact that nobody even knows if the $600 trillion figure is accurate, because specialized derivatives vehicles like the credit default swaps that are now roiling Europe remain largely unregulated and unaccounted for.

Warren Buffet on derivatives: (edited excerpts from the Berkshire Hathaway annual report for 2002.) Yet most bankers say it happened without a warning!

http://www.fintools.com/docs/Warren Buffet on Derivatives.pdf

A derivative is a financial instrument whose value is based on one or more underlying assets....Derivatives are broadly categorized by the relationship between the underlying asset and the derivative (such as forward, option, swap); the type of underlying asset (such as equity derivatives, foreign exchange derivatives, interest rate derivatives, commodity derivatives, or credit derivatives); the market in which they trade (such as exchange-traded or over-the-counter);....Derivatives can be used for speculation ("bets") or to hedge ("insurance"). For example, a speculator may sell deep in-the-money naked calls on a stock, expecting the stock price to plummet, but exposing himself to potentially unlimited losses.....Under US law and the laws of most other developed countries, derivatives have special legal exemptions that make them a particularly attractive legal form to extend credit. The strong creditor protections afforded to derivatives counterparties, in combination with their complexity and lack of transparency however, can cause capital markets to underprice credit risk. This can contribute to credit booms, and increase systemic risks. Indeed, the use of derivatives to conceal credit risk from third parties while protecting derivative counterparties contributed to the financial crisis of 2008
-wikipedia

 

[milestoneseeker]

I guess that's the difference between trading and investing. I'm a lay person in all this, but one thing that has always stuck in my head is the gist of what Warren Buffett and Benjamin Graham (of The Intelligent Investor) have to say - if you're buying stock, you should treat it the same way as if you were buying the entire company. Now the world of finance is infinitely more complicated so this statement may be far too simplistic, but to an ignorant person like me, this makes sense.

The diligence required on one's side (not to mention the ability to read a balance sheet smartly) for value investing is the reason why people recommend MFs in SIP mode. It allows you to put money in a basket of equities/debt rather than a specific stock and SIP gets you the advantages of compounding. The closest an average joe investor can get to value investing is at least researching his MFs (portfolio of the MFs, consistent fund manager etc) and sticking to it for at least 3-4 years.

 

[Thad E Ginathom]

Derivatives, paper money, etc etc. As mentioned, since the demise of the gold standard, it is all based on ... ... ..

 

[ajay124]

Derivatives, paper money, etc etc. As mentioned, since the demise of the gold standard, it is all based on ... ... ..

Yet most people spend their entire life following this paper trail. My daughter is six years old but she already understands that 'paper' can be exchanged for shiny new toys. The young have unlimited desires, but limited means for satisfying them. I can empathize with their single minded pursuit of money. But I find it kind of funny when septuagenarians and even octogenarians talk about making 'long term' investments. At their age they should have learnt the only lesson which can be learned during our brief and mostly incomprehensible sojourn through mother earth.... that the only finite, scarce and valuable resource is time. The happiest and most productive lives are led by those who 'invest' their time wisely rather than those who spend (waste) their time worrying about long term investments even when they are within sniffing distance of the point of no return.

 

[tirthankar]

But I find it kind of funny when septuagenarians and even octogenarians talk about making 'long term' investments. At their age they should have learnt the only lesson which can be learned during our brief and mostly incomprehensible sojourn through mother earth.... that the only finite, scarce and valuable resource is time. The happiest and most productive lives are led by those who 'invest' their time wisely rather than those who spend (waste) their time worrying about long term investments even when they are within sniffing distance of the point of no return.

I see your point... but then I know some elderly people who look for long term investments for the sake of their progenies, who are made the benefactor.

 

[ajay124]

Back to hifi. After a brief detour

A few years ago I attended live concerts of Bhimsen Joshi, Amjad Ali Khan, Zakir Hussain, Rajan & Sajan Mishra, Hari Prasad Chaurasia and Shiv Kumar Sharma at the Tagore Theatre, Chandigarh. In those days the acoustics and interiors of the theatre were not very good. The sound equipment was probably sourced from a local DJ with more experience in playing remix music at farmhouse weddings, than in organizing live concerts of classical music. The maestros played or sang spell binding music but I don't remember the audio quality as being particularly remarkable.

My present system is reproducing a startlingly "live" sound with good quality Indian classical recordings. I love the Dynaudio sound and have lost the desire to audition any other brand. The Dyn's sound perfect to my ears. I have finally started listening to more Indian classical music than western classical. Something I have been wanting to do for a few years now. I find Indian classical more soothing and relaxing than Western classical. I have bought several new box sets (all of them are issued by Sony) from Rhythm House of Bhimsen Joshi, Amjad Ali Khan, Shiv Kumar Sharma, Pandit Jasraj, Visva Mohan Bhatt, Zakir Hussain and Allah Rakha. I have a few cd's of Ali Akbar Khan, Ravi Shankar, Nikhil Banerjee, Bismillah Khan, Ram Narain, Dagar brothers and Gundecha brothers. I intend to build a good collection of Hindustani classical music in 2013.

Apart from Indian classical my current listening (6-8 hours a day) primarily revolves around:

Gustav Mahler, Bela Bartok, Igor Stravinsky

Beatles, Simon & Garfunkel, Carpenters, Steely Dan, Stevie Ray Vaughan, Grateful Dead

Sly And The Family Stone, Marvin Gaye, Aretha Franklin, Nina Simone, Sam Cooke, James Brown, Louis Armstrong, Ray Charles, Nat King Cole, Ella Fitzgerald, Mahalia Jackson

No jazz. I am completely off it for the moment.

But above all I like listening to Phil Ochs. I can't get through the day without my daily fix of his music

 

[avidyarthy]

"I find Indian classical more soothing and relaxing than Western classical".

It is indeed! If you have started to gaze at Hindustani Classical, also look at the offerings from down South too. Thad would be of great help, am sure.

 

[vinay]

Ajay,

I am confident that your relatives and friends have done the investment in a wrong way as many of them do, therefore Ajay, the result is bad. A mutual fund which is highly rated by researchers can never give negative returns provided the market is trending or be it sideways, i can bet on this.

The biggest mistake your contacts must have done is to invest when the market was probably at peak, if this is not enough then they would have put money in sector funds or surely would have put a lump sum amount etc. In other words if we put money regularly and keep away from sector funds, watch the fund's performance, we need to take action if they are not able to follow the compitation on returns front. These said pointers are among the golden rules to make money in mutual funds, in last 12 years i have not lost a single rupee.

As far as sector funds go, a lot of profits can be made provided one is well versed with the investment planning.

About trading it is true that most of the talks given in media are not in order therefore one has to learn his own way, slowly and steadily. In general it would take at least 3 years to be profitable in day trading provided actions are taken on constant basis about the mistakes we make and needless to say there should be no emotions or views about the market, there should be a set rule by which the trade should happen.

There is a lot of hidden treasure in the forums for how to go about in trading or investment, but we need to have a deep look in many a threads. For example take photography, with your writing there are so many of us who are inspired and are getting the knowledge how to go about, i too bought a camera for mere 7000 rupees, and went shooting last 2 Sunday's for 2 hours in the morning.

V

vinay

As we have discussed several times before, my views about mutual funds are very different from yours. I am happy that you are getting a good return from them. But none of my relatives or friends who invested in highly rated mutual funds have ever made a penny from their investment. In fact most of the funds have consistently been trading below their entry point, even though the Sensex has risen by a few thousand points since they made their investment.

I don't believe that bankers, wealth managers, analysts or the 'experts' on TV channels exist to make a profit for small investors. They exist to make a profit for themselves and to pass on the losses to the people who innocently (and in most cases foolishly) trust them. Stock, commodity and currency markets are a jungle. Everybody who is brave enough (or stupid enough) to enter this jungle, has to pay a serious amount of 'blood money' before he or she can learn the ways of the jungle. But in order to survive one has to quickly learn how to fend for himself or herself. There is very little chance that we will encounter a good soul who will lead us to the treasures hidden in the jungle. We are more likely to encounter a big bad wolf:

 

[ajay124]

"i too bought a camera for mere 7000 rupees, and went shooting last 2 Sunday's for 2 hours in the morning."

Vinay

Congratulations! Which one? A Nikon Coolpix or Canon Powershot I presume?

 

[manoj.p]

My daughter is six years old but she already understands that 'paper' can be exchanged for shiny new toys. The young have unlimited desires, but limited means for satisfying them.

Agree. The young ones are quite smart. My 5 yr old always wanted to get toys every time we went shopping. When I tried to slow it down, saying we need to pay for those, she said, "No, we have to just swipe the card".