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Commentary

MV Chronicle: Statutory Warnings With Buy and Hold Strategies

The recent Chronicle at MarketVision (Subscribe for free!) is on Statutory Warnings With Buy and Hold Strategies and More.

Sometimes long term returns are tauted using our past data and statistical notes, and yet, there are sometimes problems in using such inferences to make assumptions and in the assessment that our prosperous economy means a great time for stock markets. Read on, and find all else at MarketVision as well.

Statutory Warnings With Buy And Hold Strategies


In a post recently I had mentioned the Nifty Monthly returns over the years, and I’m going to post it here as well.
Nifty Monthly Returns

This may look like a very colourful graph but the colours indicate the intensity of the up move (green) or the downmove (red) with yellows and oranges being used for a moderate picture. Let’s look at the same thing for the Sensex (for which I got data all the way back to 1979, thanks to Manish Chauhan from Jagoinvestor):

Sensex Monthly Returns

The best month to invest seems to be December, which could be because of lower volumes in general because of holiday season. And May has had political upheavals, so it has seen huge moves, and has the highest standard deviation. So should you just go buy option straddles in May and buy the Index on November 30 to sell on Jan 1?

Not really. The answer lies in further understanding what SD means

….

But there’s another way to look at things. Let’s look at rolling returns. If I buy and hold for one year, how much might I earn if I did that last year, versus 18 months ago, versus 2 years ago and so on. And what about holding for three years? Five? Ten?
Sensex Multi Year Rolling Returns

Editor’s Picks

 


A set of links chosen just for you.

 

A “new normal” for inflation? – The Economic Times

The Economic Times The RBI’s decision to clamp down on inflation through a 50 basis point increase in the repo rate has gone down surprisingly well in most quarters. In a different period, the RBI would have been roundly criticised for spoiling the Indian growth story so soon after the rebound from the financial crisis.

Pantaloon Retail buys 99 lakh shares of Future Ventures for Rs8 crore despite its weak financials (Moneylife)

Another Future Group company, Pantaloon Industries, also bought 98 lakh shares for another Rs8 crore to prevent a further fall of the stock price on debut. But the Future Ventures share is still struggling well below its issue price

Bronte Capital: The Steve Madden counter example

Every company I short I have to ask myself – even if I am sure this is dodgy – how do I know I do not have the next Steve Madden. To me that is the stuff of nightmares. (author unknown)

Videos


Reviewing a ULIP: HDFC SL Crest

MV Chronicle: Statutory Warnings With Buy and Hold Strategies

Learn about how to understand a ULIP from Deepak Shenoy as he reviews HDFC Crest, a Unit Linked Insurance Policy.
1.      Understanding premiums and tenures
2.      The Guaranteed NAV, how it works and why it’s not as good as it sounds
3.      A comparison with a Term Plan+MF combination – which is way better!
4.      Even performance of the ULIP has been sub-optimal compared to a mutual fund from HDFC (the promoter!)
5.      Costs and how they hurt your returns

(See Video, 10 Min)

Past Short Takes:

 

(Read the entire Chronicle)

  • Anonymous says:

    >I feel that around the months of April-May lot of companies report the yearly earning numbers too. This brings in some sanity on the buy and sell decisions. Hence May shows higher SD. I believe May is truly a good month to invest as you have the latest and greatest earnings and accounting statements easily available online. It's hard to research stocks as of today when i can only see an year old balance sheet for March 10 (as seen on many websites like Money control or India Infoline).