This post was first published on capitalmind.in I remember the precise moment I had my first doubts about books on management success.  In one of my earliest jobs, as a fresh management consulting associate, we used to get assigned books at random by the partners we reported to. Predictably, these were from management lessons and Business Strategy genres. Saturday mornings were set aside for us to present what we’d understood from those books to the rest of the office. A way to make sure we read them.  My BS detector first went off while reading this book called ‘Big Winners and Big ..read more

A recent tweet citing Mint analysis talks about how the probability of higher returns increases with increasing investment horizon. The numbers looked a bit off, so I recreated the analysis using the Nifty 50 Total Returns Index. The numbers in each of the cells are higher than what is shown in the analysis cited in the Mint article. For instance, the probability of returns exceeding 8% over a 10-year holding period goes up from 76% to 97%, a sizable difference. Similarly, the probability of exceeding 12% over 10+ years is only 51% (a coin toss) in the Mint piece but is 68% on the basis of o ..read more

They hold the same constituents except in different weights.  The Nifty 50 is your traditional market cap-weighted index where each stock is allocated a weight in proportion of its free-float market cap. So HDFC Bank, after its merger with HDFC Ltd accounts for almost 14%, Reliance Industries nearly 10% and so on. Source: The Nifty 50 Equal Weight is an alternative weighting strategy. It includes the same 50 companies, except weighted equally. Weights are reset to equal-weight every quarter. Same constituents but significantly different weights. Which one, the Nifty 50 ..read more

This post, first published on capitalmind.in, wasn’t meant to be a post, but just a few things I scribbled for myself as things about money I’d tell my younger self. The list grew, and so here it is. The ten money messages I’d want my younger self to absorb: (1) You don’t need to think about investing as much as you think you do “The investor who starts a SIP at 25 ends up with double the corpus of the one who starts ten years later, even with a bigger SIP! Behold the magic of compounding!” “Do you realise how much healthcare will cost when you’re 60?”  “This Technology-Biotech-AI NFO clo ..read more

My top 10 highlights from the book: The Signal and the Noise: The Art and Science of prediction by Nate Silver The need for prediction arises not necessarily because the world itself is uncertain, but because understanding it fully is beyond our capacity. We can never make perfectly objective predictions. They will always be tainted by our subjective point of view. Prediction is important because it connects subjective and objective reality. Risk, as first articulated by the economist Frank H. Knight in 1921 is something that you can put a price on. Uncertainty, on the other hand, is ri ..read more

My top 10 highlights from the book: The Success Equation: Untangling Skill and Luck in Business, Sports and Investing by Michael Mauboussin Much of what we experience in life results from a combination of skill and luck. A basketball player’s shot before the final buzzer bounces out of the basket and his team loses the national championship. A pharmaceutical company develops a drug for hypertension that ends up as a blockbuster seller for erectile dysfunction. An investor earns a windfall when he buys the stock of a company shortly before it gets acquired at a premium. Different levels of sk ..read more

NSE has a ton of equity indices, 96 of them. Removing a bunch of the repetitive ones, we are still left with over 50. Chart below shows their CAGR since inception. All the way from 23% (Midcap150 Momentum50) to -3% (Realty). The Nifty has clocked 14% over 24 years. Worst drawdowns. Realty fell 93% from peak, IT *gasp* 90% from March 2000 to Oct 2001. CAGR calculations assume you invest on inception date and never again. So we also see how a monthly SIP would’ve done in each of those indices. The worst 3 SIP performers: Media, High Beta 50 and Realty The best 3: Midcap150 Momentum 50, Alpha 5 ..read more

This post was first published on capitalmind.in Last quarter, there were 484 mentions of ROCE in the filings of just the 50 Nifty companies. ROCE stands for “Return on Capital Employed.”: how well a company is generating profits from its capital. It is considered a critical part of the puzzle of finding quality businesses. ROCE typically helps differentiate between ordinary and high-quality businesses. Imagine we’re looking at two restaurants in the same town, Restaurant A and Restaurant B. Both offer delicious food and have a steady stream of customers. How would you identify the better prosp ..read more

This post was first published on capitalmind.in Amazon is famous for being customer-focused. Jeff Bezos’ shareholder letters over the years emphasise this focus. Here’s one excerpt: Senior leaders that are new to Amazon are often surprised by how little time we spend discussing actual financial results or debating projected financial outputs. To be clear, we take these financial outputs seriously, but we believe that focusing our energy on the controllable inputs to our business is the most effective way to maximize financial outputs over time. Our annual goal setting process begins in the fa ..read more

This post was first published on capitalmind.in An engineer, a chemist, and an economist were on a ship that capsized. They clamber onto a lifeboat with nothing but the clothes on their backs. The lifeboat just about manages to get them to a tiny deserted island before it breaks apart. Just as it goes down, our heroes salvage a solitary can of beans. The only problem, they don’t have any implements to open the can. The engineer, his thinking cap on, suggests that he climb a palm tree to a precise height, then throw the can an exact distance at a specific angle. ‘And when the can hits,’ he said ..read more