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Commentary

Missed The Bus, Banker Scams, Smart Charts and More… (MV Chronicle, Feb 5)

And the next edition of the MarketVision Chronicle is out! Click here to read. (Needs FREE registration)

Have you really missed the bus investing in equity? Here’s your time. Or not. Also, a piece about bankers who you think mean well, some interesting charts and the best of MarketVision in the last week. Enjoy!

You haven’t missed the bus

Or is the bus moving at all?

If you looked back, would you have loved to have invested in the Great Indian Economy in January 2010? More than a year back?

Nifty on Jan 4 2010: 5232
Nifty on Feb 3, 2011: 5526
One year Growth: 5.62%

If you had your money in a fixed deposit you would have made as much money as investing in stocks. Forget the ups and downs – you saw the money fall 10% and then go back up 30% before it came back to FD levels of growth.

Let’s now look at three years.

Nifty on Feb 1, 2008: 5317
Nifty on Feb 1, 2011: 5417
Three Year Growth: 0.66% (Annualized)

The date choices are deliberate – and intended to give you a certain feel. Had I chosen Jan 2008, you would have LOST money (about 15% in three years). Had I chosen Jan 2009, you would have been hugely happy:

Nifty on Feb 2, 2009: 2767
Nifty on Feb 1, 2011: 5417
Two Year Growth: 39.92% (Annualized)

What is scary is that you could make whatever case you want by looking at the data selectively. It’s one of those times when you’ve either missed the bus, or the bus is moving around in circles.

Scamming Bankers

My mother went to HDFC bank recently, and chatted with a representative. She wanted to deposit some money into each of her grandchildrens’ accounts, every year. The rep suggested this:

“If you put Rs. 20,000 per year for 10 years, we have a product that will give you back Rs. 500,000 after 10 years. And you’ll get coverage also.”

My mother told the rep that she would talk to me before doing anything. Lucky.

Because that, as you must have realized, was a ULIP. The bank rep was trying to sell my mother – who’s more than 60  – an INSURANCE package. They also were well aware that my mother couldn’t understand the product. This is downright fraud.

Why? Making 20,000 per year for 10 years into 5 lakhs involves a return of about 16% per annum.

Learner note: Excel Calculation: =RATE(10, 20000, 0, -500000, 1)

Interesting Charts

Nifty’s EPS growth is starting to perk up again:Nifty EPS Chart

 

(Read the full piece)

Would love your comments.