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LinkFest #6: Resolutions, Funds and Buffet


Seven Resolutions for mutual fund investors in 2007 (MoneyControl)
Sanjay Matai tells you seven things to remember and follow: Be wary of NFOs, Share prices and NAVs are not the same, don’t time the market, don’t look at dividends, invest according to needs, balance your portfolio and of course, remember rules 1 to 6 through this year. I like the concept but I disagree with two things: I don’t recommend “balancing” your portfolio, and I don’t recommend not timing the market. Why?

Balancing portfolios is not a good idea. Stay overweight on equities if you can take the risk, and stay overweight on debt if you have huge loans to take care of. Timing the market may sound insane, but it is not very difficult to know when the market is overbought or oversold to a large extent. Even a strategy as simple as comparing the Sensex PE with the projected sensex earnings growth – if the former is higher, sell, if the former is lower, buy – will work to your advantage. I think we just need to get smarter.

Index funds: Tracking errors galore?(Value Research Online)
Index funds should closely track the index they are linked to. Yet, many Index funds in India don’t seem to! Some Index funds have bigger cash reserves than necessary, some others have underperformed the index by 12-13%.

Reverse Mortgages (Economic Times)
Living in an owned property is a liability – and in your old age, you have little use for it as an investment – after all, if you sell it, where do you live? Renting is a choice but every year you have the fear that the landlord might not extend the lease. Solution: Reverse mortgage your own house to a financial institution, and have them pay YOU in installments, every month. If you want it back, you just have to pay them the money they gave you, and if you die, the institution sells your house and distributes the remaining money among your heirs. But read through the rules carefully.

The Warren Buffet Story (Moneycontrol)
Some interesting details about one of the greatest investors of our times. What can I say? Read this article.

Avoiding miskakes and making safe investments (Amar Pandit)
A set of things to do if you want to avoid common mistakes in investing. I agree with Amar in a lot of the things he says, except where he does not recommend timing the market. But the rest of the advise is sound, and I’d like to emphasise one thing: Become a smart investor. And focus on “smart”.

Earlier Linkfests: Linkfests: 1, 2, 3, 4, 5.


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