Saturday, May 23, 2009

Reliance Mutual Fund's underperformance

Even though I am not a big fan of MFs, I still have some money a couple of MFs. One of them is Reliance's regular equity savings plan. I got the SOA (Statement of Account which I mistakenly took as Service Oriented Architecture based on the subject and kept wondering why Reliance sends anything about Architecture!!! see how dumb? uffff!) and when I saw the statement why I was left speechless!
No, my money did not double within 6 months (Dec 08 was when I put in this money) and no it did not grow by 50% and no, it did not grow by .0000000000001%

It infact was down by about 5%!!!!!!!!!!!!!! This statement was sent out on 21st May so the question is what the **** was this doing? I did much better I guess with my individual investments , I was down 50% in dec 08 and I am down only by 10% now. I came across a message in one of the investment groups that Reliance AMC was sitting on 33% cash till last week. That could explain why it underperformed.

This kind of results strengthens my belief that an individual with patience and little bit of learning can earn similar returns as that of an average MF by just holding onto some of the blue chips. Having said that I am not going to pull out my money, I am a patient man so will wait a couple of years before deciding.


Friday, May 15, 2009

A really little book that could help you beat the Market

I was visiting a friend a couple of weeks ago and we were having our usual discussions about investing and stock picking and he mentioned about a blog that rates the stocks in the Sensex and Nifty based on a ‘Magic formula’. Of course the words ‘Magic formula’ got me curious and who wouldn’t be? So I came back home and looked up this blog and found that this formula is actually from a book that the blogger had read in the past.

The title was “The Little Book That Beats the Market” and I almost screamed aloud “what the ****!!”

Don’t we already have countless number of books from third-rate writers or investors that claim to make you rich overnight and/or present you with strategies that let you earn supernormal returns? And I really thought that this blogger must be nuts to follow a shameless author who TOOTS his own horn so loud!

But then for some unknown reason I bothered to look at the author’s credentials.And, wow, weren’t they that bad! The author goes by the name of Joel Greenblatt and he is the founder and managing partner of Gotham Capital, a private investment partnership that has achieved 40% annualized returns since its inception in 1985. Having read this I asked myself does this guy really needs any cheap publicity or quick money?

Maybe not!

So I went ahead and picked up a copy of this book from the local library. And I have to admit that this was the simplest and the smallest investment book that I have read in the shortest time. The book has been deliberately kept free of financial jargons which I liked the most about this book and I could easily grasp the concepts. The concepts are not new, most of the value investors already use them in one way or the other, but the strategy keeps the whole process very simple which should keep emotions and attachments to particular stocks out the door.

I think this book should be most useful to the starters and not so financially savvy and I also tend to believe that this should work to give good returns if not the super normal returns promised by the author.

More information can be found at the following site