The Dollar Crisis

I've been reading a book called 'The Dollar Crisis', which talks about how a rising US trade deficit is unsustainable and is sooner or later likely to be reduced through currency devaluation and general reduction in consumption and import. This will lead to severe repercussions for all export-oriented economies given that they basically survive on exports to the US (the Asian economies are the leaders in this respect, but India will also be affected) as well as other nations, since the world's reserve currency is the US dollar.

A slowdown in US imports will lead to a global slump and perhaps even a recession, creating worldwide stock and property market crashes, among other things. The good news is that prices of goods and services will most likely reduce, but if you're an investor that might not be much to cheer about! Further, if you are one of the many immigrants working in the US, I need not explain how a falling dollar will affect you. The book talks about currency devaluations of the order of 50% or more!!!

Reading all this has got me thinking about the general direction of the Indian economy, as the book provides multiple examples of 'bubble' economies, all of which showed similar trends in the years leading up to the inevitable crashes. We are all most familiar with the dot-com bust and perhaps the Asian crisis, but similar situations have been happening on a fairly regular basis e.g. Japan's bust in the early '90s, from which it is only now recovering...

The 'Crisis' In a Nutshell

Till early in the 20th century, the world followed what was called the 'gold standard', in which their money was backed by gold and, hence, redeemable as such. In such a system no country could afford to have a sustained net trade deficit as that would cause their gold reserves to deplete till it reached a stage when they no longer had enough gold to sustain their economy. Once this stage was reached, their economy would go into a recession and prices and wages would fall till they were low enough for their exports to become cheap so the rest of the world would start importing from them again, allowing their gold reserves to build up once more.

Today's system has no such checks and balances. The international standard is a set of currencies that float in value against each other, with the US dollar as the de facto reserve currency of the world. In such a situation, and with a strong dollar, there is nothing stopping the US from sustaining a large trade deficit (i.e. importing more than it exports). And since it is to the advantage of exporting nations like India, China and the Asian countries to keep their currency values low, they cannot take the US dollars they get from exports and convert them into their own currencies, as that would increase the value of their on currencies and hurt exports.

Therefore, these countries invest them back in the US and state them in the form of national reserves. Thus, the US gets goods and services and pays for them in dollars, which it then gets back in the form of investments. These investments are pumped into the US banking system, which it then lends out, thereby allowing businesses and consumers to buy more things, most of which are imported! This cycle allows the US to continue with a rising trade deficit. Thus, in effect, the US has been buying goods on credit!

This huge US trade deficit has been financing most of the economic growth in the Asian nations and other export-oriented economies, allowing for increased lending and creating jobs and wealth that are leading to economic booms and rising asset values (stocks, property etc). Therefore, a slowdown in US consumption will hurt these economies badly, leading to a very severe recession.

Since the US deficit is underpinned by the willingness of the rest of the world to continue to hold their reserves in dollar instruments, it is only a matter of time before it has to be curtailed as countries begin to get uneasy about the credit-worthiness of the US (after all, it cannot repay infinitely large sums of money) and either withdraw their funds or at least reduce their annual investments. The other possibility is that the US consumer, already neck-deep in debt thanks to all the low-cost credit they have had access to, is no longer able to service increasing debt repayments and chooses to cut back consumption, thereby reducing the extent of US imports.

Both of these scenarios spell doom for the rest of the world, as the net result will be for the US to have to sharply depreciate the dollar against countries with trade surpluses (China, India and the Asian economies) in order to reduce, and eventually reverse, the trade deficit.

The next post will focus on India

I'm a Hedge Fund - and So Are You!

Few of us think of our investments outside the rather narrow context of fixed / time deposits, stocks, mutual funds, cash and government bonds, a mindset that is driven by the common financial planning approach used by banks.

However, this approach does not give us a true picture of how we are faring, as our investment assets generally include many more things that we don't take into account. What about property, jewellery, art, foreign curency, antiques (just check out the market price of that teak almirah and you'll know what I mean) etc? They should count for something, and it's quite likely a lot!

Most of these are potential investment areas as well. People make tons of money on art, for example. In that respect we are probably a lot like hedge funds, which are like mutual funds except they can invest in any asset class they need to in the search for higher returns or whatever the fund's mandate is.

[By the way, you and I could not afford to invest in hedge funds as these are generally rather exclusive and require gigantic investments to qualify]

As a hedge fund, we would be doing financial planning at a 'net worth' level rather than at the narrower level that we do today and managing our wealth as a whole, rather than as 'bank assets' and 'other assets'. We would be allocating a risk rating to our 'other assets' and treating them as part of one overall portfolio. For example, antiques should be fairly low risk but art would be in the high-risk category. Real estate risk rating would probably fall somewhere in between.

What's the Value in This?

Well, for one, you'd feel a LOT happier being that much closer to being a millionaire or whatever you want to be. It's like a free one-time bonus!

Further, you might even want to re-look your portfolio at the net-worth level based on the risk profiling your bank does for you rather than focusing only on the money you invest with them.

If, for example, you are supposed to have 25% of your money in equity (read 'high-risk assets') then see whether your stocks + equity funds + art + real estate + foreign currency add up to that. Same goes for the portion in low-risk assets: check whether your bonds + cash + antiques can make up that portion.

Hey, that's just what private banks do for their customers. And we all deserve that treatment, right?

If you can add up your household assets, then the exercise is even more meaningful because you can plan your finances at a household level rather than as two individuals, making for a more balanced portfolio. That's how my wife and I do it and it works well for us.

Odds of Making Money in the Stock Market

I was surfing through some blogs and came across Value Investor India, a real gem of a blog that is not updated frequently but has some really good posts. It is based on value investing concepts and has some really good posts on arbitrage and industry overviews. Rohit, the author, has obviously gone deep into the internet to dig out some really good stuff, such as this arbitrage returns evaluator, which seems to be based on what I read in Buffetology (or maybe that's just how all arbitrage stock opportunities are evaluated).

Anyways, one post caught my attention, as it seems to be a pretty interesting way to look at timing the market. Basically, the concept is that you should take the current PE and be able to judge the odds of making money in the market based on how often the PE has been higher than this in the past. If today's PE is towards the higher end, then chances are you will lose money in the medium term.

The NSE, and perhaps even the BSE, site allows visitors to download historical index data (open, high, low, close, PE etc) into excel sheets. Now, once you have downloaded the data, it is fairly easy to count the number of times the PE has been higher than the current PE and divide by the total number of days in the historical period considered in order to get an idea of the probability of it being higher than today in future.

Example:
If today's PE is 18 and you see that over the past 1000 days the PE has been >18 50 times and <=18 950 times, then chances of you making money in the future are 5% and chances of losing money are 95%. So you might want to keep your money in the bank for now.

The obvious flaw in this approach is that as markets in India mature and growth slows down, future PEs might be generally lower than past PEs, thereby throwing your calculations out of the window. Further, since you are looking at an index PE, it would be wise to invest in an index fund on this basis. It might even be better than a passive SIP and yield better returns...

Why would this not work for individual stocks? Because individual stock PEs should not be anallyzed statistically as they are completely dependent on management and factors affecting the individual company. For a basket of stocks such as the index, the approach does provide a good rule of thumb.

If you have bought stock funds in a period when the odds were good of PEs rising in future, you'd probably have really done well, benefiting from the increased PE as well as rising earnings, a double benefit!

The example given in the post was that of the stock market crash during the UPA elections when apparently the odds were 10:1 of PEs rising afterwards - and of course the market soared over the next couple of years!

Anyone want to try this out and let us know today's odds?

How Much is Enough?

--- continuing from the last post on Financial Freedom ---

Stage 2 is a tough nut to crack.

First, you need to know what you want out of life and how you expect to be spending your retirement. And this is a question that is really, really tough to answer for two reasons:

1. You've never thought about it
2. Can one really reliably predict what one will be doing 10, 15, 20 years ahead?

Yet this is important, because your entire well-being in retirement depends on it.

Your Provident Fund Alone Will Not Cut It

Till a few years back, it was OK to think that your Provident Fund would take care of your retirement. But things have changed dramatically of late and there is a pretty clear indication of how our retirement options will be a few years hence. In my opinion, the writing is on the wall:

• interest rates on capital protected investments like PF will continue to fall, eventually aligning themselves with market rates. This may not happen now or even in a few years, but definitely soon enough to demolish your PF strategy
• the responsibility for maintaining and managing retirement funds will move away from the government and into your hands
• inflation will eat away into your savings
• your kids may no longer be willing to take on responsibility for your well-being (God forbid, but one never knows)

Given this horror-story setting, it is definitely important for you to know how much money you need to set aside for a happy and fulfilling retirement.

So, How Much Is Enough?

To answer this, at least in a broad sense, try the following:

1. Figure out when you'd like to retire (Be realistic! Chances are, if you are reading this, you ain't gonna be quitting next year!!)
2. Write down your annual budget as determined from your Stage 1 analysis
3. Add in any additional regular payouts you think you might be incuring when you retire and increase the overall budget by, say, 20-30% since you'll probably want to live in better style than you are accustomed to right now. This is how much you would need if you were to retire today. This needs to be adjusted for increases due to inflation till your retirement date
4. Make a guesstimate on how inflation will remain till your retirement, it's better to aim high than low, so perhaps you could take a figure of 6%
5. Calculate the value of your annual payout at the time of retirement by multiplying your retirement payout (from step 3) with (100+inflation)% to the power 'n', where 'n' is the number of years left to retirement
6. This figure is the annual payout you need to keep you retired and happy and should be generated entirely out of investment income. Based on investment returns of, say, 5% you need to have saved about 20 times of your retirement annual payout (from step 5) in order to be comfortable

Example:

You want to retire 15 years from now and your current annual payout is, say, Rs. 200,000. You expect to be spending an additional Rs. 100,000 for annual vacations when you retire and you anticipate inflation to remain at a level of 6% from now till you retire.

Hence, your annual retirement payout in today's money would be about Rs. 390,000 (200,000 + 100,000 increased by 30%). Adjusting it to 15 years from now for 6% inflation would yield an anticipated annual payout of Rs. 934,657 at retirement. (390,000*1.06^15)

This needs to be generated entirely out of investment income and hence you need to save about Rs. 1.87 crores by the time you retire.

Further

Inflation will not end just because you have retired. Hence, the expenses will continue to rise even post-retirement. To account for that, you need to know how long you expect to live (!) post retirement and save even more to accommodate the increasing costs for that period.

But let's not get into that - it's too complicated!

The point of this entire article was that, while retirement planning is an inexact science, it is something you must do so prepare now rather than being taken by surprise when it's too late.

What is Financial Freedom?

I received a very kind comment the day before suggesting that I truly get what 'financial freedom' is about and I suddenly realised that I had never really talked about what that means to me. After all the very idea of this blog is to post about my journey to financial freedom - and yet that has got missed out on the way!

Different Interpretations

I guess there would be different interpretations for different people. Some might say financial freedom is when you have enough money to live off in the style you want and never have to work again. Others would tend to go with a more approachable definition of having enough money to ensure that living and other non-discretionary expenses are taken care of so one is then free to pursue other things free from the worry of paying the next bill. And for those among us who are saddled with uncomfortable amounts of debt, perhaps financial freedom is simply the ability to pay off the loans!

My Two-Stage Approach

I'm looking at financial freedom as a two-stage approach:

1. Lifestyle Maintenance: Save enough to ensure you can meet living expenses from the interest (if you live off the pricipal then of course you'll be back to square one in no time at all!)
2. Retirement: Then look at saving enough to retire and live a happy and comfortable life (again on the interest otherwise your kids might be a little unhappy at inheriting nothing from you, heh heh)

The first is rather easy to calculate - add up or estimate your living expenses per month, extrapolate that into an annual budget and add in any non-monthly expenses you regularly incur in order to determine your budget.

Examples of monthly expenses would be house rent, utility bills, food / groceries, entertainment, fuel, loan repayments, education-related expenses etc. Non-monthly regular payouts would include insurance payments (not an expense but a regular payout that must be accounted for nonetheless), annual vacations etc. Also factor in an anual lumpsum for large purchases that tend to come up every so often like purchasing appliances etc.

Since this will have to be met out of the interest on your savings, you can work out what the savings should be. I'd guess the interest would be about 5-6% on any capital-protected instrument (like perhaps govt bonds) so you need to have saved 17-20 times your annual budget in order to even get to Stage 1 of financial freedom.

It might be tough, but it is definitely possible for all of us. And this calculation will also give you excellent visibility on your spending habits. If you simply cannot figure out how to get to Stage 1 with your current lifestyle, perhaps it might be worth re-evaluating the necessity of some of your expenses.

Stage 2 is another story, though... will get to that in the next post! Till then, please give me your views on the subject.

Looking Back

My interest in stocks - actually in investing in general - began early last year, when I read 'Rich Dad, Poor Dad' and was inspired enough to sit up and take some interest in my finances, open demat and trading accounts, set up mutual fund SIPs and begin to take an active interest in the stock market.

Beginner's Luck

I was lucky in chancing upon some really good books on fundamental analysis and value investing which I could use to work out an initial stock-picking strategy. Far too many people I think get into day-trading and market timing, approaches that are not suitable for everyone, especially for salaried types like me who don't have the time, guts or funds to get into such short term plays.

I was even luckier to get into the market just before the major crash at the time of the 2004 elections. I saw many of my holdings go into the red but I didn't have enough in the game to panic. Instead, I took the opportunity to add to my holdings, based on some conservative target prices I had worked out by applying various ideas I had got from my readings. The research took time and a great deal of number crunching, but it was worth it.

Lessons Learned

It's now been about 18 months since my first stock purchase and the markets have swung all over the place, from around 5,500 to 4,500 to 8,800 to 7,500 and now back to around 8,500. During this period, a patient and savvy investor would have had several opportunities to buy good companies at decent prices and make money.

I was neither as patient, nor as savvy or alert as I should have been through this period but I think I've made a decent start and would like to share a few of the things I've learnt and validated so far:

1. Have a target purchase price based on some sound reasoning: This is the biggest lesson I have had so far and I am yet to learn it fully! Based on a study of your target company, you must have an idea of how much you're willing to pay. Don't get swayed by the market. I have applied this sporadically and been rewarded handsomely each time. Conversely I have screwed up several times by not working out the price properly before jumping in
2. Have a target sale price and / or some sensible offloading criteria: Again this is based on a study of why the company is attractive and when it will not longer be worth holding. I have not suffered significant losses selling late but I have sometimes given up sizeable gains by selling too early
3. Have confidence in your analysis: Flying in the face of popular opinion is surprisingly difficult to do but remember that if you've done a good job of the research your opinion is at least as valid as everyone else's! The corollary to this is that you must check and cross-check any calculations you are doing, especially if you are using Excel as it is very easy to screw up one formula and end up bankrupt!
4. Be patient: That stock you have your heart set on will sooner or later come down to a reasonable valuation. Wait for your target purchase price to be reached before making a move. It could take a long time but it's better to have cash and do nothing than to jump the gun and have nothing!
5. Evaluate the management: Your company is only as good as its management and share prices will in the long run reflect this factor. I try to judge management by comparing their forecasts and stated plans and strategies from old annual reports with actual achievements as evidenced in subsequent years. This might not be good enough, though.
6. Hold on to a good thing: Why churn your investments if they are doing well? I like steady companies like ITC and Cipla that hold out the promise of slowly, but surely gaining ground year after year.
7. Don't be too cautious: Putting in a tiny amount is going to yield nothing worthwhile so, if you are betting on a stock, make sure the potential gains are worth the effort
8. Don't sweat the small stuff: Don't get hung up on making another rupee. Too often we have a stock making profits at, say, Rs. 119 and we hold out for it to reach 120, only to see it fall to 110 before we have to sell in panic.

My Portfolio as a Basis for These Lessons

Lesson 1: A conservative target price yields good results

• Purchased Hero Honda in May 04 - currently at 76% profit
• Purchased SBI in July 04 - currently at 105% profit
• Purchased ITC in May 04 - currently at 122% profit
• Purchased Infosys in April - currently at 86% profit
• Purchased Cipla in May 04 - currently at 60% profit
• Purchased Wockhardt in May 04 - currently at 58% profit
• Purchased iFlex in April 04 @ 510 - sold recently at about 90% profit

All these were bought at or near target prices I determined through Excel-based analysis

The price for not following this lesson? I bought Thomas Cook a few months back at 550, after which it dropped to 500 and has never come up to 550 again. I'm sure I will make money in the medium term, but it could have been better...

Lesson 2: Have a target sale price

My best example is iFlex, which I sold at 977 immediately before it dropped to below 900. I believe it was a good move as the PE is too high and future prospects uncertain.

I've screwed up on Patni, which at a 20% profit in a matter of a few months. If I had thought it through, I might still have been holding it at a profit of almost 100%! Even worse was my purchase of Nestle at 575 and subsequent loss-making sale at about 560 (when I got worried by its steady decline). The stock is currently over 900!

Lesson 3: Have confidence in your analysis

I passed up City Union Bank when it was at 32 just because some bankers told me it was no good even though my analysis was screaming out for me to buy it. It is currently at 95, a three-fold increase in less than a year. Worse still, I finally bought it at 85 but realised my mistake and sold it at a small loss.

On the other hand, I've had two spectacular successes - a 60% gain in 6 months on the obscure Indian Hume Pipe Company (I've sold it) and a whopping one-year 500% increase in Torrent Cables, another unknown company (I still hold it).

Lesson 4: Be patient

After scaling the rarified heights of 500 and 600 last year, Biocon finally came down to about 400, when I was finally able to buy it after tracking it for months. The stock is currently over 500.

Lesson 5: Evaluate the management

My Biocon purchase was based almost entirely on the management quality and ability to deliver on its promises. I also bought Bharti Tele a few months back, again mostly on the strength of its management (and a recent dip in price that brought it into the BUY zone), and it is already up 70%!

Lesson 6: Hold on to a good thing

I'm still holding almost all the stocks I bought in last year's crash. They've rewarded me handsomely and look set to keep on delivering the goods for years to come

Lesson 7: Don't be too cautious

I invested way too little in many of my small-cap stocks and repented when they turned out to be spectacular successes - notable example again is Torrent Cables where I could kick myself for not putting in more

Lesson 8: Don't sweat the small stuff

I've not been guilty of this, thankfully, but know several people who've had horror stories of this sort.

I hope this was useful. Do write in with your thoughts.

Happy investing!

IPO Analysis for Fun and Profit

Hi all! I’m back after a brief vacation and in keeping with my philosophy of writing for the thinking investor, here is my long-overdue note on IPO analysis.

[Note for people who think the title is nerdy: Make the profit and you’ll get my drift]

What follows is a list of things I look for when evaluating an IPO. These are, of course, generic and there are usually industry- and company-specific idiosyncrasies in each IPO that must be evaluated on a case-by-case basis.

The good news is that it doesn’t take too long to cover all the ground. On an average, it takes me no more than two or three hours to do the research (a fast internet connection is an asset) and make up my mind about an IPO.

Is that good enough? Possibly not, but then my track record is perhaps better than average and it’s tough to find more time than that anyway!

Part I: Screening (10 mins)

• Already Listed: Beware if a company is already listed. Chances are that it is trading at a huge premium to the offer price band at the time of the IPO and you’re tempted to make easy money. Going by recent history in many such offers (Punjab National Bank, Jindal Polyfilms) the prices are likely to come down close to IPO levels and you’ll make little or no listing gains. Invest only if you really like the business and even then it might be a good idea to wait till after the IPO and pick up shares straight from the market.
• Prior Experience: Experience of similar IPOs in the past should serve as a good guide to investing in any fresh issue
• Industry: Are you comfortable with the industry the company is in or do you feel it has bleak / unpredictable / cyclical prospects over the long term. Know what you’re getting into
• Market Cap Post Issue: Does the post-issue market cap ‘look’ reasonable or does it look like a grossly inflated figure e.g. Google has a market cap higher than McDonald’s, which, even given Google’s potential for stunning growth, seems a little out of whack
• Demand: Check out the NSE-BSE demand graph on the NSE website, especially on the last day. This will indicate the extent of oversubscription. Most investors seeking to make quick profits would apply for highly oversubscribed issues but I tend to favour the less popular ones as chances of getting a decent allotment there are better.

Part II: Googling! (1 hour)

• The Company Website: Look for their products and services, financials (if available), geographic spread, client list, history, management profiles, press releases, partnerships and client testimonials. If you’re really lucky, you’ll find downloadable documents / presentations related to the business and the industry on the company website. Read these carefully and no points for guessing that such transparency is a sign of good, professional management
• News Items: Check out news items (try Google News) on the company, preferably going back at least 2-3 years. These will give you a feel about the company, its management and its overall direction as well as its recent achievements and level of visibility. One often also finds out things (usually bad things like lawsuits and squabbles between promoters) that are under-stated in the prospectus but quite important from an investor’s perspective.
• Analyst Reports / Informed Opinions: Right from Sharekhan and Moneycontrol down to blogs like the celebrated one you're reading right now – there’s a wealth of opinion on the net. Get as many perspectives as you can.
• Industry and Peer Group: Which other companies are engaged in similar lines of business? How are they doing? What are the general trends (growth, innovation) in the industry?
• What People Are Saying: Check out the bulletin boards on Moneycontrol. They’re always buzzing with activity, though only about a tenth of the posts are of any use. You’ll might find a nugget or two there.

Part III: The Prospectus – Softer Aspects (30 mins)

You’ll find offer prospectuses (prospectii?) on the SEBI website. It could be filed as a draft, ‘red herring’ or final offer document. I have no clue as to the differences between these but I guess they are pretty much the same.

• Risk Factors: These are outlined right at the beginning and again in the middle of the document. Several of these are of the ‘filler’ type but tread carefully – there might be a couple lurking about that could really rock the boat if they were to come about. Examples of these are sizeable lawsuits (ERA Constructions), chances of a major industry downturn in the near future, over-dependence on a single or small group of clients / suppliers etc. There is often a discussion of management’s viewpoint on some of the ghastlier ones and they are worth taking note of
• Business Overview: There is usually a 2-3 page discussion of the industry structure and trends as well as key growth factors. This is worth reading to get an idea about the industry and to identify the company’s special niche (one hopes it has one!). As a bonus, knowledge gleaned from one prospectus can be used in IPO / stock analysis in the same or related industries
• Objects of the Issue: The proceeds of the issue should be used entirely in value-enhancing, business-related purposes. Anything else – like Emami using 17% of the proceeds to build a plush head-office – is a strict no-no. Use of proceeds for working capital is also not a very encouraging sign
• Track Record: The company must have a decent track record. Investing in brand-new companies (like YES Bank) is a huge risk in my book. If you must go for such issues thoroughly check out the management and the company’s strategy, because that is the sum total of what you’re paying for
• Promoter and Management Profiles: Ideally the senior management should have long years of experience in the industry and be professionals unrelated to the promoters. Companies where the leadership roster reads like a family tree are best avoided
• Promoter Holdings Post Issue: Should be high enough to keep them interested in the business but not so high as to smother professional management completely. Something like 40-60% sounds about right.

Part IV: The Prospectus – Financials and Hard Numbers (1 hour)

• Check on Diluted Financials: Remember to check that all per-share data has been calculated on a diluted basis i.e. on the increased number of shares outstanding following the issue
• Growth Rate: What is the cumulative growth rate of overall sales, net profit, and operating profit of the company over time (at least three years of data would be provided in the prospectus). What is the average year-on-year growth rate? Is it steady and increasing or showing signs of unpredictability, with wide deviations from the average growth rate?
• PE Ratio: Is it reasonable compared to its peers (a peer-wise comparison is often provided in the prospectus)? Ideally the PE Ratio should be lower than the average growth rate and also at a discount to peer values
• Return on Equity / Return on Net Worth: Is the ROE figure comparable or higher than its peers? Is it growing over time? I’d ideally like companies with ROE over 20% and growing
• Debt / Equity Ratio and Interest Cover: Is the debt / equity ratio low (for the industry) and consistently falling over time? Does it compare favourably with its peers? Is the interest cover high (preferably over 5) and consistently rising?
• Price to Book Value: To be a bargain, the price should be below the book value (price to book ratio of less than 1) but that is a utopian dream in a fresh issue. Anything that seems about right for the industry should be fine. Growth stocks (like IT, Pharma, Biotech) usually have prices waaaay beyond the book value.
• EBITDA / Enterprise Value: This ratio determines the return on investment for someone acquiring or buying into the company (like us!) and works well for growth companies like small IT players and capital-intensive enterprises like airlines and telecom. I’d ideally look for something greater than 10%
• Unusual Spurts and Dips in Financials: Look for suspiciously high profits in the last year or sudden increases in personnel / raw material costs. These may be genuine but one should know the reasons for the same.
• Large Bonus Issues / Stock Grants in Recent Years: These only benefit the promoters and leave less on the table for investors like you and me
• Notes to Accounts: Often neglected, this is the place to look for financial jugglery if you can make sense of it. If not, trust in God (and the management) not to hand you a mini Enron!

Part V: Informed Sources (10 mins)

• Friends in the Company: Company employees are usually a good source of down-to-earth information that cuts through the hype. The flipside of course is that most insiders usually paint an overly pessimistic or optimistic picture based on a relatively narrow view
• Industry Insiders: People in the industry usually have some idea of the main players and especially about their competitors. Such people are a good source of unbiased, though sketchy, information

Do write and let me know whether you found this useful.
Till next time, adios amigos!

Mutual Funds - Make Your Own Unit-Linked Insurance

Much is written and said nowadays about unit-linked insurance, which is touted as one of the best savings schemes for the retail investor, especially one with some appetite for risk.

Unit-linked insurance plans are essentially bundled savings offerings that combine the risk cover of insurance with stock market-linked returns of a mutual fund. These schemes are likely to generate superior long-term returns to the traditional endowment policy while allowing the individual to retain the tax benefits available on insurance – a win-win situation. As with any market-linked instrument there is a modicum of risk attached but over the long term that insurance policies are (or should be) held, the chances of loss are negligible.

There is a catch, however. Unit-linked insurance plans are always offered against funds managed by the insurance provider, which might not be among the better-performing options available in the market. Therefore, while you would be better off than if you invested in an endowment policy, the returns could have been higher. And the power of compounding is such that over the twenty-year period of the average insurance policy, a difference of even one percent could mark quite a significant increase in the size of your nest egg.

Do-It Yourself

Ideally, we’d like to have our insurance linked to the returns of the market-leading mutual fund and there is a way to achieve this. The solution lies in term assurance.

Term assurance is a no-frills insurance that covers risk, full stop. There are no returns – even your principal will not come back. However, the premium payments are really low, much lower than with the savings-oriented insurance schemes, and the same tax benefits are applicable. Such a pure-risk insurance plan offers us the ability to manufacture our own ‘unit-linked’ insurance, but this time with any fund of our choice.

A Step-by-Step Guide

• First decide on the amount of insurance you want to take on a unit-linked scheme and calculate the premium you’d need to pay
• Then figure out the term assurance premium of an equivalent amount. This would be significantly lower. Take out a term assurance policy for that amount.
• With the money you have left over – and this is where the beauty of the scheme lies - set up a Systematic Investment Plan (check out my previous post on SIPs here) in any fund of your choice. You’d generally prefer a market-leading diversified equity fund with a long and successful track record, like Franklin Bluechip.
• If your policy and SIP renewal period is the same (usually annually) then you need to take little extra effort over what you’d have done for a standard unit-linked insurance
• Sit back and relax – you’re almost certainly going to save more than with any unit-linked insurance scheme

Caveat Emptor!

Thanks to my wife for pointing this out:

Before you rush off to put this idea into action, remember that tax benefits would be available only on the insurance allocation, not on the mutual fund investment. Hence the plan might not hold as much charm for those who purchase insurance for tax benefits alone.

Real Estate - A Strategy for Apartment Purchase?

For some months now, I’ve been in the market to purchase a good apartment. Unfortunately, I find I’m not alone! Thousands of others have had the same thought – apparently at the same time – and, armed with cheap home loans, they’re driving up prices way beyond control.

Unfortunately, not only is a flat a major investment, it is illiquid and the price at any point is quite subjective. There are few, if any, guidelines to determine the value of a property accurately.

A Strategy for Purchase

Now, if you’re like me, you’d have taken a loan for the purchase, probably up to 90% of the value of the apartment. The remainder plus the registration amount would be financed through available cash and perhaps a personal loan as well.

In this scenario, there are two components to the investment we’re making – principal repayment (which is basically installment payments against the value of the apartment) and interest (which is the amount we are spending in addition to the value of the apartment). Since the principal is merely a payment for the property, we don’t have an issue with it – we got a flat and we’re paying off against it. The problem is with the interest, which is an additional, fairly substantial, amount that we will have to fork out over time. This is the part we need to take care of.

The plan I have is to ensure that the rent for the apartment takes care of the interest component (home loan + personal loan if any) at least. This way, I’m merely paying for the value of the property, which is not an issue.

The other problem is the down payment that we’ve made from our own cash resources. Given a choice we would like the cash to earn interest. Let’s assume that for a low-risk investment similar to property, we would want returns of 10-12%. The expectation would then be that the apartment being purchased must has enough scope to appreciate by an amount that would make such returns possible.

Thus, in summary:

• Principal payment (home loan + personal loan) gets set off against value of the house
• Interest component (home loan + personal loan) should be matched by the rent
• Capital appreciation in the value of the property should be at least enough to translate into 10-12% returns from the down payment made with our own cash

An an example, let's take an apartment of value 50 lakhs, of which the home loan is for 45 lakhs. Let's assume registration amount is 5 lakhs. The down payment required is therefore 10 lakhs, of which the buyer intends to take a personal loan of 5 lakhs and fund the rest himself. The interest component of all the loans works out to about Rs. 25,000-27,000, which needs to be covered by the rent. Further, the apartment must appreciate by at least Rs. 50,000 per annum to generate returns of 10% on the 5 lakhs paid by the buyer. This implies that the apartment should show capital appreciation of 1% per annum at a minimum.

If the buyer had been able to fund the entire down payment himself, the rent requirement would have been lower at about Rs. 18,000 and the capital appreciation required would have been 1 lakh per annum, or about 2%.

Real Estate - Investing in Property

The first (and last) bit of investing advice most of our parents gave us – save, save, save and buy a house as soon as you can. You can never go wrong in real estate!

And it does seem like a good proposition. Just ask the people who’ve made millions from their ancestral properties or those who’ve recently made a killing in Bangalore or Gurgaon!

For many of us, buying a flat or a property is a big deal in every way. It is likely to be one of the biggest investments we ever make, it has a lot of sentiment attached to it and it does give a sense of fulfillment - I have a house, ergo I’ve arrived in life! Plus there’s the expectation of the property appreciating many times in value over time.

But is this expectation justified? Is real estate really an investment that defies the basic risk-return principle, yielding high returns for relatively low risk?

Consider This

Property purchases are fraught with uncertainty. For one, we never know what the ‘fair’ value of a property is. There are all kinds of intangibles determining the price, there is little or no flow of information and of course there are the buyer’s own biases involved as well. Further, during times of rapid expansion, ‘hot’ areas tend to appreciate to stratospheric levels (like parts of Gurgaon today) and there is rather inevitably a correction. Property prices, contrary to popular opinion, do not always tend northwards.

Further, as with any investment, one should consider the cost of funds and ongoing maintenance. In this context, we have tax breaks to consider, differing interest rates for loans, different payment schemes, stamp duties, property taxes, ongoing maintenance costs, brokerage…

In the following discussion, I propose to treat real estate as just another asset class in my portfolio and hence determine whether it compares favorably with other instruments. Of course, an underlying assumption here is that the purchase is purely for investment and not for personal use. In the latter case, just buy the best location you can afford - preferably in an area you’re comfortable with - and then forget it. Who cares what happens to the price? Your kids maybe, not you!

Some Basic Assumptions

In this discussion, I’ll focus on purchasing a house / apartment, not land. Land purchases, by their very nature, are speculative and the returns indeterminate. One buys land in the hope that it will appreciate in value but there’s no indication of what the appreciation might be.

In the case of an apartment, however, there is a clearly defined rental income that one can expect and I hope to use this as the primary basis for evaluating whether a property is a worthwhile investment or not.

Other assumptions (I’ve tried to take the worst case scenario) -

• The apartment costs Rs 10 lakhs, inclusive of stamp duty
• The property is bought on a 20-year loan @ 8.5% fixed interest rate working out to an EMI of Rs 900 per lakh or Rs 9,000 for the whole. I assume there’s no initial down payment required
• Inflation over 20 years will average at about 5% per annum. A higher inflation will be more beneficial by reducing the real interest rate on the loan
• The tax benefit on interest paid for housing loans does not exist.
• The rental yield on the property is about 4% per annum (about average for most cities in India, except Gurgaon, where the yield is higher), which works out to about Rs. 3,300 per month. This increases at par with inflation (usually the rental increases are higher)
• Ongoing maintenance costs plus applicable taxes are about Rs. 12,000 per annum (or about Rs. 1,000 per month), appreciating in line with inflation
• Tax on rental income is at 30%
• Post-tax returns on a low-risk bond are 6% per annum

For the above scenario, one could consider the property investment in two ways:

• As a pure investment: In this case, the buyer’s mindset would be of an investor looking to allocate his capital between various assets. The purchase of an apartment is incidental and the focus is on return on total investment
• As a mandatory purchase: In this case, the apartment price itself is above scrutiny and the focus is on determining whether the additional costs (interest, maintenance etc) are worthwhile in terms of returns.

Real Estate as a Pure Investment

The investor would only purchase an apartment if the returns (capital appreciation + post-tax rental income are comparable with other low-risk assets like bonds. Hence, the investor would consider the total cost to be the sum of the NPV of the total repayment over 20 years and the NPV of maintenance costs. This would be compared with the NPV of the rental income and the returns expected from a bond of similar cost in order to determine the capital appreciation required from the apartment.

In our example:

• NPV of loan repayment over 20 years = Rs. 13,45,920 (Rs. 1,08,000 per annum discounted at 5% rate of inflation)
• NPV of maintenance costs over 20 years = Rs. 2,40,000 (Rs. 12,000 per annum, rising in line with inflation)
• NPV of post-tax rental income over 20 years = Rs. 4,80,000 (Rs. 24,000 per annum post-tax over 20 years, rising in line with inflation)

Total investment in today’s prices = Rs. 13,45,920 + Rs. 2,40,000 = Rs. 15,85,920

Value of similarly-priced 6% bond over the same 20-year period = Rs. 50,86,250

In order to be an equally good investment, the ten lakh rupee property must appreciate to Rs. 46,06,250 (since the rental income is about Rs. 4,80,000) i.e. it must grow at a cumulative rate of 8.37% per annum.

One should purchase the apartment only if the expectation is for the property to grow at this aggressive rate year after year.

Real Estate as a Mandatory Purchase

The mandatory purchaser would not focus on the cost of the property, assuming that the price is a fair one. The only concern here would be to ensure that the extra cost of maintenance and interest is met by the rental income and the gain in apartment value so that the there is no loss incurred in the purchase.

In our example:

• NPV of interest repayment over 20 years = Rs. 7,47,730 (Rs. 60,000 interest payment per annum discounted at 5% rate of inflation)
• NPV of maintenance costs over 20 years = Rs. 2,40,000 (Rs. 12,000 per annum, rising in line with inflation)
• NPV of post-tax rental income over 20 years = Rs. 4,80,000 (Rs. 24,000 per annum post-tax over 20 years, rising in line with inflation)

Total investment in today’s prices = Rs. 9,87,730
Value of similarly-priced 6% bond over the same 20-year period = Rs. 31,67,790

In order to be an equally good investment, the ten lakh rupee property must appreciate to Rs. 26,87,790 (since the rental income is about Rs. 4,80,000) i.e. it must grow at a cumulative rate of 5.34% per annum.

One should purchase the apartment only if the expectation is for the property to keep pace with inflation year after year, a not unreasonable requirement.

Final Thoughts

The above analysis does not really throw up anything new other than the idea that real estate, as a pure investment, seems to be rather speculative. It’s not the sure-fire winner that people would have one believe. The best bet is probably to purchase apartments on the outskirts of growing metro cities or in B-category towns with the potential to scale up fast. It might even be a better idea to just buy land.

Buying an apartment for security and the feel-good factor seems to be a better motive. It’s also probably a good idea for people who currently stay in rented accommodation. Even apartments in mature parts of large cities should at the very least keep pace with inflation.

Returns could be juiced up a bit by holding for short period of time and selling out on substantial jumps in value, obtaining tax benefits on interest repayment, finding an apartment with a high and growing rental yield and perhaps reinvesting the rental income into interest-bearing investments.

When Does One Sell?

‘You hold on to stocks like they’re your babies and then sell when they are at their lowest!’ says my wife, making a point. Sound familiar?

A lot’s happened in the past month – the stock market bull run turned into a bit of a dream run, with stocks rising to dizzying heights. We saw record highs that even a year back few would have predicted. And I saw my investments generate over 50% in unrealized returns – man was I good!!

The key word in the fairy tale above of course is ‘unrealized’ returns – that's about the only realization I've had in the past month. It’s been only a few weeks since the record highs and the market index has fallen by around 10% or so, wiping out a lot of those gains. Stocks that had gotten ahead of their valuations have returned to more reasonable levels (though not to bargain prices by any stretch of imagination). Thankfully, I’m still profitable, though of course at a more modest level.

But why, oh why, didn’t I sell?

Kind of makes one wonder, doesn't it? Is a buy-and-hold strategy really a good idea? And if it is, how long should one hold? And when should one sell?

Is a Buy-and-Hold Strategy a Good Idea?

I think it is, at least for me. Look at the benefits – lower tax, less worry and no need to time the market except in a broad sense. On the down side, one tends to fall in love with one’s buys and live in a world of paper profits and ‘unrealized’ gains as I’ve just figured out. That, however, needs a mind-set change and acceptance of selling as an important aspect of investing. A bit of discipline (and a sharp jolt like the current downslide) should help sort it out. Not a problem, really.

When Should One Sell?

As with the choice of investment approach, there seems to be no single ‘best’ method for determining the selling strategy. Here are three options that have stuck in my mind and may be used as appropriate:

• In a rising market, set stop-losses at levels below the normal stock price fluctuation so they get triggered in case of unusual dips in the price. This has the advantage of being a mechanical method and hence creates discipline. The downside of course is that the stop-loss levels should be reviewed periodically (perhaps even daily) to ensure that they are relevant to the current stock price. Further, this approach will also lead to short-term corrections inadvertently triggering off the sale of a stock that should actually have been held for longer
• Peter Lynch’s investing approach is to find companies whose stocks have a good reason to grow manifold in the near future and then wait for the market to catch on. Hence the selling strategy would be to do so once the story has been fully played out, as per the investor’s opinion. The advantage of this approach is that it looks at the long term potential rather than at short-term price movements. The disadvantage of course is that the investor might be wrong in his / her assessment of the company or that the market may not bid the stock up in the near future. In the meantime the investor would hold on, accumulating losses in the hope of a turnaround.
• Another approach is to sell the stock when it reaches a price such that reinvesting the proceeds in a low-risk investment would still allow the investor to meet his / her financial goals. This is actually an intriguing idea – I think this is Warren Buffet’s - and it’s worth dwelling on this further.

Sell High and Re-Invest in Low-Risk Instruments

Let’s say you have invested Rs. 1,000 today in the hope of turning it into Rs. 10,000 in 10 years (you’re target returns are 25% compounded per annum). Now suppose after two years there is a major bull run and the stock reaches Rs. 5,000. Based on this philosophy, the investor could sell it and invest the proceeds (Rs. 5,000) into a low-risk bond at 8% let’s say. At the end of 10 years, the investor would have made approximately Rs. 9,500 with almost negligible risk.

This way, the investor meets his goals in the most efficient way by taking advantage of a bull run to jump-start the process. A capital idea (again no pun intended!), but would one be able to do this? Would it not take fabulous amounts of forbearance to sell a stock that’s doing well and put it into the boring ‘slow and steady’ bond that will get you to your goals but will not help you get rich quick? Would it not cause pangs of regret when the same stock scales even greater heights immediately after you sell? And what if it hits Rs. 10,000 when you’ve sold at 5,000 to take the scenic route to your destination? Whoa, that’s a killer!!

And do I hear you ask what I would do? I’d go for the rational and disciplined approach of selling high and investing in bonds, of course.

Or perhaps leave just a wee little bit in the stock just in case…

Actually, let me just wait till the next bull-run to find out.

Mutual Funds - Selecting a Mutual Fund

Mutual funds are an excellent way to grow one’s money. Not only do they diversify risk by investing in a large number of stocks, they also provide small investors like me the reassurance of having an expert fund manager.

Welcome to the Jungle

For better or for worse, there are loads of fund choices open to retail investors looking for mutual funds and sorting through the lot is quite a chore. It’s a bit like hacking through the Amazon jungles with a machete - and, just like in the jungle, it’s very easy to get lost without a map!

In an earlier post, I’ve stressed the importance of having clearly-defined financial goals when investing for the future. Your goals are like your map of the jungle and a good, clear map (as opposed to an illegible scrawl about a site marked X) is essential for investments, including those in funds.

Before I started looking for a fund, I made sure I was clear about the following:

• The returns I was looking for (15%)
• My investment timeframe (over 10 years)
• My degree of comfort with short-term volatility (very comfortable, as long as overall trend is upwards)
• My ability to make regular, monthly payments to purchase units (I settled upon a relatively small monthly amount that I would not miss normally)

Having drawn up the map, I was all set to go hunting. The only issue was the bewildering number of options open to me:

• Debt (funds that invest mostly in debt instruments like bonds), Balanced (roughly equal mix of debt and equity) or Equity (funds that invest primarily in shares) funds.
• Within equity, there’s a choice of index funds (funds that invest in Sensex / Nifty stocks in exactly the same proportion as the indices themselves in order to exactly mirror their movements), sectoral funds (investing in specific sectors like Pharma) or diversified equity funds (investing across companies in a variety of industries)
• Within diversified funds one needs to choose between about 12-15 fund houses – Franklin Templeton, Reliance, HDFC, HSBC…. you name it! My choice was limited to the 7 fund houses that my online brokerage allows. The decision to go with one of them was mainly based on history and prior track record
• Each fund house has a few diversified equity schemes as well as index funds to track the Sensex as well as Nifty
• Within each scheme, there is a choice between dividend and growth options – the dividend option pays out regular dividends from profits whereas the growth option retains the profit and grows the investment at a compounded annual rate

Confused? Well, you should be. I know I was completely stumped till I found an excellent mutual funds site that made comparison-shopping extremely simple. You could try it out too – http://www.valueresearchonline.com/. The site gives all kinds of filters for you to short-list funds based on your goals and it also provided detailed information about each fund in the form of an information-packed page on the past performance, sector and company exposure, entry / exit loads and much more.

Choosing An Ideal Fund

I followed the following method to choose my funds:

Step 1
Look for diversified equity funds that have returned an average of over 25% annually. You may want to note that mutual funds gains seem to be reported in simple interest terms rather than as compound interest, so a gain of 25% for the past 5 years would actually only be a CAGR of 15%, which is my target. I realized this quite late and was initially taken in by the promises of 40-50% ‘annualized’ gains that some funds claim.

Step 2
Select the funds that have the longest track records and come from well-known fund houses that you trust. I believe a track record of at least 5 years is necessary to judge a fund’s performance.

Step 3
Narrow down the list to funds that your broker / online brokerage will support

Step 4
Look for 2-3 funds with the best combination of entry and exit loads and performance. ‘Loads’ are commissions charged on your investments with entry loads being charged on purchasing mutual fund units while exit loads are charged on redemption. The better performing funds usually charge higher loads, which are liable to be increased at any time.

Step 5
Finally, make your decision based on the management fee (ranges between 0.5 to 2.5%), which is the cost of running the fund and hence gets deducted from your returns. Again, the better funds tend to have higher management fees. Since the final shortlist would have similar performing funds, it makes sense to go for the cheapest.

A Couple of Suggestions

Once you have chosen your fund, I recommend Systematic Investment Plans (SIP) as the best fund investment method and an almost foolproof method to make good money in the long term. A SIP is essentially a standing instruction to invest a fixed amount in your chosen fund on a regular basis (usually monthly). It has the following advantages:

• It is automatic and hassle-free. I’d suggest setting it up for 6 months to a year at a time and then forgetting about it
• It removes the need to time the market because by making purchases at regular intervals, you essentially remain invested at all times, buying more units when the market is down and fewer when the market is up. This way, you broaden your base of units in lean times, enabling greater increases during bull runs. Your average cost of units also remains low.
• It imparts discipline to your investing, which, along with goal setting, is a key ingredient in financial success

Having said that, an SIP is most effective over long periods of time so consider one only if your investment horizon is more than 3 years and you have the discipline and wherewithal to keep at it for the entire period.

Another recommendation is to seriously consider index funds, which are effectively diversified equity funds with very low loads and management fees (due to the fact that they only need to track the index and hence the stock choices are automatic and require little management). According to Warren Buffet, investors in index funds will likely outperform over 90% of ‘active’ investors over the long term!

My Choices

Being at a relatively early stage in my life and career, my primary goal is to grow my money as fast as possible and I’m quite prepared to live with short-term volatility. Hence, the choice was between diversified and sectoral equity funds.

I invest only in diversified equity funds / index funds with the growth option. Sectoral funds are extremely volatile and move up or down depending mainly on whether that particular industry is the ‘flavour of the month’. Hence there is a strong element of market timing involved, which is something I am not comfortable with – my targeted 15% returns do not warrant this much risk and effort anyway. Over a long period of 10 years or more, it seems better to take a wider basket of stocks, which could gain from upward movements in multiple sectors.

I have SIPs in a mid-cap fund, a large-cap fund and an index fund from the same fund house. After a few months of meddling with the amounts, I have managed to settle on investing in a ratio of 1:1:2 in these funds. Second-guessing and frequent changes to SIPs are not desirable, but its probably something that a rookie investor like me will have to live with for a while till I get a degree of comfort with the performance of my funds.

Over the course of nearly a year, my investments have yielded about 20% returns, this despite the fact that I made the mistake of committing large sums in purchasing over-priced units at the fag end of a bull run. My funds had to compensate for my poor initial judgment and weather a major market crash. That they have performed well despite these hurdles is testimony to the virtues of patience, discipline and the efficacy of SIPs.

Till next time, have fun(ds)! ;-)

Investing in Stalwarts

According to Peter Lynch, stalwarts are large and established companies that have the ability to grow at a steady annual rate of 10-12%. I’d say the equivalent companies in India would show returns of about 15-18%, especially if bought at the right price. These are a very special group of stocks due to their ideal blend of growth potential and predictability and hence these stocks form the backbone of my stock portfolio – after all a growth rate of 18% would have these investments doubling every 4 years!

I believe ‘stalwart’ companies should have shown consistent and significant EPS and book value growth over the past 10-15 years. My method for finding a good purchase price for such companies is to calculate anticipated share price using 3 approaches and then take the lowest. To do this, the following are necessary:

Step 1
Calculate the average share price, EPS and book value growth rates over the past 10 years at least and then extrapolate these over the next 10 years (my expected holding period for stocks of stalwarts). In this manner I can find the expected share price, EPS and BV after 10 years.

Step 2
One can easily derive the stock price from these:
- Expected stock price using EPS = future EPS * lowest historical PE
- Expected stock price using BV = future BV * lowest historical return on net worth * lowest historical PE

Step 3
Take the lowest expected value from among these three methods and then work backwards to find the price at which the share should be bought in order to achieve the targeted returns

Step 4
Have the patience to wait for the target price to be reached.

What does this achieve? Well, for one you are confident of having taken the most conservative estimates for growth and can be fairly sure of meeting your targets, barring extenuating circumstances. At least there is little need to monitor these stocks’ performance on a daily basis. Further, there is a bit of a bonus, as dividends have not been considered in the above calculations.

Using these methods I was able to identify companies like Infosys and ITC as candidates for my portfolio and then had a bit of luck when the market crashed immediately after the elections and allowed me to buy both these companies at prices below my target price. These investments are currently doing well.

Setting a Goal

One of the most memorable things I learnt from reading about Buffet is that your returns are not determined by the price at which is you sell but instead at the purchase price of a share. In other words, every share (even a blue chip) has a ceiling price above which it is no longer a good investment.

A good investor must learn to determine the price at which to buy a share in order to make the kind of returns which he / she expects.

There's more to this sentence than meets the eye. Look at the implications - to make money, an investor:

• must have a well defined target percentage return in mind. The higher the target, the smaller the universe of stocks (or, for that matter, the universe of investments in general)
• must identify promising candidates and research them to get an idea of their long term prospects. The time horizon must necessarily be long (5 years or more) because short term fluctuations in price are difficult, if not impossible, to predict
• must be willing to wait for share prices to reach a level at which buying them makes it possible to achieve the target returns

Of these, the first is the one which people are likely to gloss over. Much has been said and written about research and the importance of patience in value investing but little is ever said about setting a target. But then, what use is all the research if you don't even know what your goal is?

Your goal should be a function of your own requirements and circumstances. Some people might expect 50% returns from their investments year after year whereas others would be happy with 15%. Most mutual funds in India would struggle to generate more than 15-17% on a consistent basis, desipite the high level of inflation and market volatility; Buffet apparently has a track record of growing money at a blistering rate of 23% per annum. (Note that Indian mutual fund returns seem to be usually stated in 'simple interest' terms whereas what we're looking for is compounded growth rate). Hence the purchase price ceiling for the same share would vary between individuals depending on what they're looking for.

I personally would like to see returns of 22-23% on my investments. What this implies is doubling of my investments every three years or, in other words, retirement in 15 years!! ;-)

Ambitious? Maybe, but I have great hope on the Indian markets. We're powering forth in the 21st century - India Inc. as a whole is going great guns and markets have enough pep to keep the right stocks going at rates possibly even a lot better than this. The trick is to finding these growth stocks. And my search has just started...