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The 8 Rules Of Dividend Investing

November 11, 2019 Leave a comment

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Dividend investing involves accumulating stocks that issue dividends to generate a steady stream of passive income.

Rule #1: The Quality Rule

Invest in high quality businesses that have a proven long-term record of stability, growth, and profitability. There is no reason to own a mediocre business when you can own a high quality business.Rank stocks by dividend history and corporate history ,the longer the better. Stocks must have paid steady or increasing dividends through the worst periods of financial stress and turmoil to be eligible for inclusion in your portfolio.

Rule #2: The Bargain Rule

Invest in businesses that pay you the most dividends per rupee you invest. All things being equal, the higher the dividend yield, the better. Additionally, only invest in stocks trading below their historical average valuation multiple to avoid investing in overpriced securities. So rank stocks by dividend yield. Only stocks trading below their say 10 year historical average valuation multiple are eligible for inclusion in your portfolio.

The Sensex And The General Elections

March 14, 2014 Leave a comment

Much has been made of the current rally in the SENSEX,which is generally explained as anticipation of a Modi win.However,compared to the earlier elections in 1999, 2004 and 2009,the rally in 2014 has been much less spectacular,as you can see by following the black line.

Also more volatile markets were seen in both 1999 and 2004- the green and blue lines.

Interestingly,speculators start reacting more sharply in the last couple of weeks before counting gets underway.In 2004.when the markets were seen as anticipating a BJP win, like today,it had already began trending down in the days leading to the vote count.

Predicting the outcome of the elections is itself less than an exact science.So too is predicting the stock market movements.So leave such predictions to the insiders if you wish to safeguard your capital.Or become an insider before you speculate,if you are inclined that way.

Filed under Paper Assets, Tool Kit Tagged with insiders, postaday, rise in the stock market, SENSEX and elections, volatility

Tracking Beta

September 28, 2013 Leave a comment

Volatility in stock prices is one of the reasons behind the large potential returns from shares,but there are times when stock volatility starts preying on your peace of mind.There are times when you want to see steadiness and predictability in the value of your holdings.So here’s a list of the most and least volatile stocks in India to help you plan your portfolio,

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Filed under Paper Assets Tagged with beta, least volatile stocks, most volatile stocks, postaday, stock market investing, volatility

Some Real Estate Facts To Mull Over

August 21, 2012 11 Comments

wealthymatters.com (1)Long term returns from residential real estate

Robert Shiller, by tracking the US home prices data from 1890 concluded that in the longer run, property prices grew at an annualised return of around 3%, just keeping pace with inflation.Housing price rises could not outstrip inflation in the long term because, except for land restricted sites, house prices would tend toward building costs plus normal economic profit.

I have no such data for India.But here is what I can attest to:an ancestral house acquired 120 years ago for 6000 Rupees is now valued at 1.2 crores-an annualized return of about 6%.I think this is close to the long term inflation rate in India.

(2)Is home ownership all that it is touted to be?

In a poorer country like Bangladesh, 90% of the houses are owner occupied. Whereas in a richer country like Switzerland, only 33% of the houses are owner occupied.

Europeans are more comfortable with renting compared to Anglo Saxons and we Indians need to decide whose model we choose to follow.Read what Niall Ferguson has to say about property ownership. Read more of this post

Filed under Theory, Tool Kit Tagged with ancestral house, capital appreciation, Case-Shiller index, depreciation, EMI to income ratio, fluctuations in income, illiquid, inflation rate, keeping pace with inflation, liquidity, long term contracts, Long term returns from residential real estate, monopoly, mortgage insurance, Mortgages, Niall Ferguson, postaday, property ownership, property-owning democracy, real estate investing, rent rate, rent ratio, Robert Shiller, volatility

Why Avoid Small Cap Mutual Funds

July 10, 2011 2 Comments

Mutual funds are largely retail investment products.They are more suitable for saving money rather than make it grow at astonishing rates.They are largely targeted at middle class investors.However wealthy investors too continue to invest in mutual funds.The advantages of getting professional investment management and not having to deal with researching stocks , trading and tracking a portfolio is too much to give up. However mutual funds investing exclusively in small cap companies are not very popular with more sophisticated investors.This is because mutual funds are not the best way to invest in small cap companies.

Consider this: There are 62 funds in Value Research’s Mid and Small Cap category. Of these, no more than six are either exclusively or primarily focused on small-cap stocks. These funds have had a patchy performance with a large amount of volatility and have been unable to give attractive returns even over relatively long periods of time. Of course, volatility is a given in any small cap portfolio because smaller companies tend to react violently to any change of mood. However, the whole idea is that the investment manager will eventually be able to build a decent base of investments in a set of small-cap companies that are on their way to growing out of the category and into being mid-cap companies. Here lies the problem. If a knowledgeable and expert investor were to do this directly, he would probably identify a handful of companies and then would slowly build positions in them.