A sharp fall in equity markets over the past couple of months have brought back the importance of asset allocation in focus. The market fall was broad-based. It didn’t really matter which fund or stock you invested in. Almost everything fell. What mattered was how much of your money was in equities. Portfolio 1: 80% of your portfolio in the best-performing equity … [Read more...] about What is the Right Asset Allocation for your portfolio?
The current market crash has been very painful. Equity portfolios have taken deep cuts. During such times when we are so occupied with limiting losses in our equity portfolios, we might lose out on peculiar tax-saving opportunities that these times may throw up. I am talking about tax-loss harvesting, where you can use losses from one capital asset to set off capital … [Read more...] about Market Crash: Use Tax Loss Harvesting to Reduce your Tax Liability
The last few weeks have been terrible for equity investors. And we don’t know if it will get worse. The market correction has been savage. And nothing has been spared. The best of blue chips have been battered. So have mid and small caps. Global equities have been trashed too. It is not just the quantum of correction but also the pace of it, that has most investors … [Read more...] about Market Crash: How could we have reduced the pain?
Risk and Reward go hand in hand. Higher the risk, the higher the return. Isn’t that what most of us have come to believe? Well, this understanding is only partially correct. Why? If you could earn a high rate of return simply by taking higher risk, a lottery ticket would be the best investment. And you would find the world’s best investors in casinos. If we define … [Read more...] about The Less Understood Relationship between Risk and Returns
Investors have different levels of risk tolerance. Some don’t bat an eyelid even if their portfolio nosedives by 25-30% while others worry even if their portfolio is down just half a percent. The first set of investors is likely made up of experienced investors while the second category of investors has a low level of risk tolerance. How should such investors with low risk … [Read more...] about How to invest if you have a low risk appetite?
If you are new to equity markets, you may have some discomfort with volatility. If you are closer to retirement or you are making a lumpsum investment, this discomfort is quite justified too. You can lose a lot of money and put your financial well-being in danger. However, if you are a young investor, volatility should not concern you too much. Let’s try to understand … [Read more...] about If you are a young investor, volatility can be your friend
Karthik, a good friend, forwarded an article from ColloborativeFund.com titled “The Reasonable Formation of Unreasonable Things”. The article talks about how market bubbles and crashes are inevitable. And that bubbles are a result of shortening investment horizons. And that volatility is needed if you need big returns. The article made a lot of sense to me. By the way, the … [Read more...] about How Traders and Investors have different expectations and how it affects markets?
Gaurav works in the treasury department of a leading private bank. He believes that the interest rates are headed downwards and there will be huge gains in the bond portfolio of banks. He expects that these gains to reflect in the prices of banking stocks in the medium term but he is not sure which banking stock to invest in. He starts a systematic investment plan (SIP) to … [Read more...] about Should you invest in Sector Funds?
This is our second blog post on trading discipline. In our previous post on trading discipline, we had discussed the importance of adequate risk reward in trading. In this post, we shall write about the trade sizing. You recently landed up a hefty annual bonus and want to park these funds for quick returns. Mutual funds are too conservative for you. You want quick returns; … [Read more...] about Trading Discipline: How much to trade
Ever felt you are getting enough trading calls right, but aren’t still making significant profits? An unfavourable risk-reward ratio could be the answer. At the outset, we want to mention that trading is inherently risky and requires, in addition to deep understanding of chart patterns, a lot of discipline. Be advised that trading is not a quick way to make money. A trader must … [Read more...] about Trading Discipline: Risk and Reward