Paper Assets | wealthymatters

Women! Assert Yourselves In Money Matters

June 12, 2014 Leave a comment

wealthymatters

Legitimate marketers,con artists and stockbrokers make lots of money off people’s irrational behavior.Behavioral economics tries to figure out why people consistently make irrational financial decisions and a load of recent research in behavioral economics suggests that men’s portfolios and pocketbooks would be a lot better off if they listened more to women.

Terry Odean, a University of California professor, has studied stock picking by gender for more than two decades. A seven-year study by him found single female investors outperformed single men by 2.3 percent, female investment groups outperformed their male counterparts by 4.6 percent and women overall outperformed by 1.4 percent. Why? The short answer is overconfidence. Men trade more, and the more you trade, typically the more you lose — not to mention running up transaction costs.Male investors traded 45 percent more than female investors. Read more of this post

Filed under Paper Assets, Theory Tagged with behavioral economics, John Coates, Peter Lynch, positivity illusion, postaday, Terry Odean, The Hour Between Dog and Wolf: Risk Taking Gut Feelings and the Biology of Boom and Bust, women are better investors, women are better money managers

Lesson From A Recent Investment

June 8, 2014 2 Comments

Success is rarely determined by the quality of your ideas.But it is frequently determined by the quality of your execution.

Filed under Alternative Assets, Entrepreneurship, Paper Assets, Theory, Tool Kit Tagged with ideas vs execution, investing in businesses, investment experience, postaday

RJ Speak

May 30, 2014 Leave a comment

wealthymatters The following is an excerpt from a Rakesh Jhunjhunwala interview in the ET on the 27th of this month. Prescience?Wisdom?Wishful thinking?Motivated sound bytes?……….Time will tell.I thought it best to record the words for easy future reference.Here’s waiting for the structural and secular bull market that RJ speaks about!

During the challenging years of 2008-13, Indian corporates have restructured and become more competitive. Corporate governance has become better; and yet Indian investors have become more risk-averse and grossly underexposed to equity . We have come to believe that high interest rates, poor earnings growth and net outflows for domestic equity investors are the new normal. These factors are about to change, and for a very long time. This change is in inevitable and irreversible.

We are at the cusp of an era of strong policy frame work, business and investor friendly environment, elimination of supply-side constraints, initiation of a new capex cycle, falling interest rates, resumption of job creation, rising savings and a wall of foreign inflows combined with domestic outflows reversing into domestic inflows with a vengeance. While this is more obvious now, most of us are unable to comprehend the scale and the longevity of this change. We are at a stage where we are blinded by sudden light after being in a dark tunnel for years. We are unable to conceive the impact of a transition from the vicious cycle described above to a virtuous cycle the scale of which we have never experienced before. Read more of this post

Filed under Paper Assets Tagged with Inflation, postaday, Rakesh Jhunjhunwala, the structural and secular bull market

They Can’t Both Be Right

May 30, 2014 2 Comments

Stock markets have been touching new highs over past six months on improved sentiment, but macro concerns have kept bond yields high.Historically, cheap money, or low interest rates, has been a pre-condition for a bull run in equities. Given that interest rates in India are at multi-year highs, the question is who is right -the bond investor or the equity investor?

The story of the last six months in these two markets has been different. The benchmark Sensex has rallied over 20%, but the bond yields have continued to remain high above 8.6% in the period, suggesting the equity rally is purely driven by sentiment, and not by economic fundamentals. At the beginning of the 2004-2007 bull run, the 10-year government bond yields were at 5.28%, which increased to 7.8% towards end 2007 (the Sensex rose from 4800 to 20000 during the period). The bond yield fell to 5.26% in December 2008 as the Reserve Bank of India joined global central banks in lowering interest rates to prevent a worldwide collapse of economies after Lehman Brothers went bankrupt. That formed the base for another rally from 2009 to 2011; the Sensex rose from 8600 to 20500 in the period.The benchmark bond yields are now at 8.69%, close to a five-year high. Read more of this post