5 Mutual Fund traits for good long term investment

Mutual funds are great investment avenue. They provide a layman investor to exposure of capital market in a single window. Mutual fund houses try to purchase various company based on their analysis in different ratio. This ratio is key for good return. Primarily there are two kind of mutual funds. Active and passive. Passive mutual fund try to replicate the index i.e. share market exchange Sensex without putting their own investigation. 

Active mutual fund managers try to combine their views in ratio of stocks they purchase. Each active mutual fund has their own set of companies based on market capital size, bonds, gold etc. So in this way, Sensex is always a benchmark for mutual fund performance and fund manager is key to the success of a mutual fund. 

"If you do not trust on mutual fund's manager, invest in passive mutual fund. At least they will grow by the amount of industrial growth of a country."

However many mutual funds surpass Sensex performance with hefty margins. So it is always beneficial to know the parameters of a mutual fund performance and how to identify a good mutual fund for SIP and long term investment. Below are the 5 well established Mutual Fund traits to fetch good return: 

1. Fund house manager:  Forget about every thing, fund house manager is key to the success of a MF. He is like a CEO of your small investment company. His decisions, brilliance, discipline and imagination can only fetch good return. We need to look his experience, (not MBA degree) and years of running current MF. These information is available with every MF and they can not deny to disclose it. You need to know his 1,2,3,5,10 years and since managing track record.  
2. Investment Avenues: You should always read the investment avenue disclosure. It means what kind of companies they consider for investment. Examples are, small cap, mid cap, large cap, ratio in gold and debt investment. In this way you can know that how much risk you are taking. Some mutual fund are liquid funds they invest only in debt and some portion in gold. These funds are very safe to invest however attracting less return. 
3. Alpha, beta, sharp ratios, standard deviation, and R-square: These ratios  represent performance of MF against volatility, longevity, and deviation from Sensex. Please read following link, as I find a waste of effort in re-writing. Five important ratios for MF
4. Open ended, closed ended, locking period: ELSS in India are usually locked for 3 years. 
5. Size, Diversification of portfolio, entry exit and annual maintenance charge: Pay your broker well but do not overpay. This is a simple rule for entry/exit/annual maintenance charges. Size of MF must be more than 1000 crore. It signifies that huge number of people trust in this fund. If it is not a sectoral fund then believe on MF manager's diversification skills. 

My 10 mistakes in Stock Market

When I started investing in stock market, no one was there to suggest me any thing. In last 5 year I learned many things in hard ways. I wish to share my and my friends top 10 mistakes in Stock Market.

Courtesy: CartoonStock

1. I assumed that stock market can go only up, and if ever fallen, its a buy opportunity. This is a very wrong assumption. Because there must be some valid reasons too, to fall in price apart from speculations. Otherwise who want to sell cheap things. Other reason is that if some thing can fall 10-20%, it can fall 40-50% too. So wait patiently till market get crashed or invest small portion on regular basis.  
2. I took loan from my friends and banks. I assumed that I can earn more than 10%, so I will keep the rest of money. This is where most of the people like me are wrong. You can not invest borrowed money, its only spare money which one do not required for many years can be invested. But surely you can do investment for some one else, like many investment adviser do.  
3. I sold my winning bets and kept loss making companies in hope that one day they will become profitable. In fact, I keep adding more shares of loss making companies. How can some one cut a blossomed tree and keep the fruitless trunk. 
4. I was bit impatient with my investments. I thought few months are enough to earn big profit. You keep feeding your kids for 25 years without any expectation and expecting your investment to enrich you on daily basis, is a fools paradise.   
5. I leveraged my investment using Future and Options with out proper hedge. First of all, you can not do investment on someone else money either directly or indirectly. These are indirect financial tools which had their all together different applications. However greed has taken over and ruined the primary concept of hedging. It is understandable if Infosys to currency hedging to protect its Doller revenue, but considering it as a investment tool or lottery ticket is blunder. many of us do it unknowingly. Second, as a basic principal of leverage, one should hedge its position, to limit the losses. I will write another article on this. Some people devices stop loss, this is a waste concept. I will explain why in future. 
6. I made big investments in single trench. Due to huge price fluctuations on daily basis, single trench investment is not recommended. It is not for retail investor. If you are dealing with industrialist directly and buying significant shares, you can bargain and buy it one trench. However being dependent on market mercy, and not having any bargain power, systematic investment plan is best option. One should invest a certain amount of money in a diversified portfolio on regular basis.  
7. I was naive to the market and started investing based on some one's advice. I did not hire a professional adviser, or researched enough using books and visiting actual company premises. I would say that it is not an entirely investor fault. System of advisory is not transparent in any profession. However once someone have a basic understanding of own disease, it is easier to find a doctor. So before investing and searching for a good adviser, you should read some book and have your own investment goals. Its better to have some research of your own and then look for an expert, otherwise their jargon words make you bankrupt.  
8. I thought, stocks are like lottery tickets, every thing is only luck. Now I know that there is only 20% luck and 80% in hard work, knowledge, decision making ability and minimizing greed and fear, like any other park of life.    
9. I became too much dependent on quarterly results of a company. I forget that these data can be manipulated. Like many researched and government data, it is very easy to tweak a quarterly of half yearly result. So one has to look for significantly long performance period to understand the behavior and prospects of company. I think not only net income result, but 'Cash Flow' direction per year basis is very important parameter. We will discuss this in future. 
10. I track my portfolio on daily basis and made many decision emotionally. I remember a Boman Irani dialog in 'Munna bhai MBBS' that he can not operate her child because he become emotional and his hand can shake. This is very true in case of investment. These decisions can not be taken based on someone's emotion towards a company. If your boss do not hire you based on personal relationship, how can you give your hard earn money to someone just because you 'FEEL' that they will do good in future. 

20 things you should not do in Stock Market

Based on varies studies and experience, these are a collection of 20 things you should not do in Stock Market:

1.  Do not invest unless you do not know. [Peter Lynch] 
2. Do not invest money, you may required in next 3 to 5 years.
3.  Do not watch your portfolio daily or weakly. 
4. Do not influence your investment decision by current quarter or half yearly results.
5.  Do not invest in Initial Public Offer (IPO). There are thousands of company you can know better in secondary market. 
6.  Do not invest even for 10 minutes if you can not stay invested for 10 years. [Buffet]
7.  Do not believe in rumors, tips, future earning prediction by Bloomberg or CNN IBN. 
8.  Do not put all the money allocated for a company on single day. Make it in six trench and invest at fix date of every month. 
9.  Do not compare your company performance with overall market behavior. Your crop may not be ready when others are harvesting. 
10.  Do not allocate more than 25% of net investment in a single company. 
11.  Do not invest in more number of company than you can track. [Peter Lynch]
12.  Do not invest in a company having market capital below Rs. 10,000 Crore.
13.  Do not invest in a company having debt to equity ratio more than 0.5.
14.  Do not invest in a company having average PE more than 25 over last 7 years.
15.  Do not invest in emerging or technology business. Invest in a well established sector and companies giving technology services. 
16.  Do not buy or sell on regular basis. Be as lethargic and lazy as you can. It is hardest part for any investor. 
17.  Do not put unrealistic targets. Your investment goal should be 15-25% return yearly. Upper bound comes only with time and experience.
18.  Do not watch 'Stock T20' or '6 stock for today' on TV. 
19. Do not be overdependent on statistical data such as PE, PEG, CAGR and profit margins. Be imaginative and socialistic.
20.  Do not put more money on loosing bets. Lets it give you some profit and prove its worthiness.

निवेश: Investment

2008 जनवरी में जब मैंने निवेश करना शुरू किया था तब बाम्बे स्टॉक एक्स्चंगे का सूचकांक अपने समय के उच्चतम स्तरो पर था, और सभी उसके 25 ,000 और 30 ,000  तक जाने का कयास लगा रहे थे. चूँकि मै भी मार्केट से अनभिज्ञ था और पहली बार निवेश कर रहा था वो भी टैक्स बचने के लिए, मैंने अपने LIC एजेंट को ही अपना निवेश गुरु मान कर उसके कहे अनुसार 65000 रुपये का चेक काट दिया. उसके 2 दिन बाद से ही मार्केट ने अपना रुख बदला और ऐसा बदला कि 3  साल तक लोगो का चैन हराम कर दिया. कई कंपनियां समाप्त हो गई और कई आज भी 2008  के स्तर से 80-90 % नीचे चल रही है.

ये तो मैंने अपनी बात लिखी है. परन्तु यही हाल ज्यादातर लोगो का होता है स्टाक मार्केट में. लोग किसी के कहे पे अपना सारा का सारा पैसा लगा देते हैं और भारी नुकसान  उठाते हैं. और दुःख कि बात ये हैं कि आज कल के टी वी चैनेल्स भी लोगो को सही जानकारी न देते हुए गलत ढंग से निवेश कि या यो कह ले सट्टा खेलने कि सलाह देते रहते हैं. इन प्रोग्राम के नाम भी ऐसे होते हैं कि या तो आम आदमी घबरा जाये या फिर लालच में आ जाये. निवेश या investment कोई खेल नहीं है, कोई लड़ाई नहीं है और न ही रातो रात अमीर बनाने का नुस्खा. अगर आप अपने बच्चे को पढ़ने के लिए अपने खर्चे में कटौती करते हैं या फिर आम का बगीचा लगते हैं तो वो भी निवेश है.

2008 में अपने पोर्टफोलियो में भरी नुकसान देखने के बाद भी मै उन निवेशो को बेच नहीं पाया क्योंकि टैक्स सविंग मुचुअल फंड्स को आप तीन से पहले नहीं बेच सकते. और यही शायद मेरे पोर्टफोलियो के लिए उत्तम साबित हुआ. परन्तु मैंने साथ साथ ही तमाम सारी जानकारियां इकट्ठी की और अपना निवेश बंद नहीं किया. ये सारा ज्ञान मुझे पिचले तीन से चार साल के अपने जीवन के कठिन छड़ो में मिला इसलिए काफी कुछ अनुभव जनित ही है. मै अपने आपको 'राकेश झुनझुनवाला' या 'वारेन बफेट' कि श्रेणी में नहीं रख रहा हूँ  और न ही निकट भविष्य में ऐसी कोई संभावना है. हाँ किन्तु मैंने यह तो जरूर समझा है कि एक आम आदमी निवेश कैसे करे और उससे क्या कुछ प्राप्त कर सकता है.

इन्ही सब बातो को ध्यान में रखकर मै अपने अनुभव और ज्ञान को लोगो तक पहुचाना चाहता हूँ. यहाँ मै किसी विशिष्ट कंपनी या 'टिप' नहीं बताऊंगा, बल्कि आप लोगो को ये बताऊंगा कि निवश का मतलब क्या है और निवेश से सम्बन्ध में आप कैसे फैसला करें. मै देख रहा हूँ कि इंग्लिश में बहुत सारी बाते उपलब्ध है किन्तु हिंदी में ऐसा बहुत ही कम या नहीं के बराबर है. कुछ हिंदी टी वी बिज़नस चैनेल हैं, परन्तु अपने के चक्कर में तरह तरह कि भ्रांतियां और तरीके सुझाते हैं. मैं यहाँ जो भी लिखने वाला हूँ वो या तो मेरा खुद का अनुभव है या फिर मेरी कुछ पढ़ी हुई किताबो का. मै आप लोगो को उन किताबो का हवाला भी दूंगा. मेरा ये प्रयास रहेगा कि आप लोगो का विचार बदले और आप अपना निर्णय स्वयं ले सके.

आप मुझे अपने प्रश्न और सुझाव हिंदी या English में कमेन्ट में पोस्ट कर सकते हैं. धन्यवाद.

निवेश का अर्थ: What is Investment