Money Matters

There is general perception that investing in equities is risky. Can the perception be changed by  some kind of facts and  data visualization?  In short answers is yes and proof lies in numbers. So I undertook this study of historical returns from BSE Sensex and since this index has history of 35 years its perfect barometer for long term returns from Indian stock markets. I calculated BSE Sensex rolling returns for 1 year, 3 year, 5 year, 10 Years and 20 Year for past 16 years and the results as as follows. Sensex Rolling Returns Rolling returns is the annualized average return for a period ending with the listed year.  So 3 year rolling return for year  2003 means annual compounded returns for preceding three year from 2000 to 2003. Now lets convert numbers into graphs. The 1 year returns for every year from 2000 to 2016 is depicted below. This is a very scary graph in may ways. The returns are unpredictable and in some years returns are negati...

I hear a lot of friends, colleges, relatives and even my better half  afraid of investing in equities. To some extent the fear is justified as they have witnessed the events that unfolded in 2008 market crash. But what if told you that you could have profited from the crash and subsequent volatility. There are some assumptions that you need to be aware of. You have surplus income which you don't need for long period of time.  For most salaried people it is some portion of salary they can allocate for long term goals. You are willing to continue your sip with mutual funds with long track record and trust the Mutual Fund Manager  You believe in Indian  economy, and are willing to overlook the short term  set backs. If events like Brexit, Demonetization and Trumphication, give you sleepless nights then either change your thought process of stay away from equities. Lets take  HDFC top 200 Fund as an example which has long history of more than 20...

Mid-cap stocks are having good run on exchange since the General Election of 2014. The overall valuation can be judged by analyzing  the P/E graph for  NIFTY Free Float Midcap 100 since it was created, The P/E value for  NIFTY Free Float Midcap is hovering around 32 as of today, which is highest till date since the inception of this index. Even during  market crashes of 2006 and 2008 the PE was well below current value at around 26. The median value for PE for index  is 16.83 and mean is 17.6. Reversion to mean is well known phenomenon our mid cap stocks are showing no signs of retreat as of now, only time will tell. From behavioral aspect I can see more retail investors flocking to mid and small cap Mutual funds as the rate of interest on FD is declining. The index movement taken form  edelweiss  shows the following pattern. Note that the PE values and price values move in similar pattern from February 2014 own wards, which means p...