For programming languages to survive indefinitely, they have to either:
Simplicity and Survival
- Be simple enough to be implemented with little cost.
- Become irreplaceable critical infrastructure of many large organizations.
-
Survivability of programming languages
Category: Food for thought -
Two years with Weekend Investing’s Mi_NNF10 Momentum smallcase
My second year with Weekend Investing’s Mi_NNF10 Momentum smallcase was going okish, until a report from Hindenburg Research—accusing Adani Group of brazen stock manipulation and accounting fraud—burned everything.
Hindenburg report
Mi_NNF10 smallcase had invested in couple of Adani Group companies from Nifty Next 50 index. Once the Hindenburg report was released there was a massive sell off in Adani Group companies. In a single day, two years worth of my (unrealised) profits were wiped clean and I was in red. I initially thought of exiting only Adani stocks, but decided against it and went with fund manager’s monthly rebalance.
The lower circuit
When it was time to do monthly rebalance, I could see that all the Adani stocks were being sold off. I hit the Confirm Update button on the smallcase portal but one of Adani Group company stock hit the lower circuit and I could not sell it. I had to repair my smallcase; a first for me in 2 years. But it kept hitting lower circuit I lost 70%. Ouch!
My learnings
While smallcase simplifies direct equity investment with a fund manager’s guidance there are certain caveats that I learned along the way.
1. Taxes
With every rebalance you will be selling some or the other stock. And with that you will be hopefully making some long or short term capital gain; mostly it will be short term capital gain. And that is taxed at 10% or 15%. But you won’t pay that right away. It will magically show up while filing your tax returns. When I was filling my tax return I could see a bunch of capital gains that were getting taxed but it was really difficult for me to analyse if they were from the smallcase or my own trades. And if you have more than one smallcase then… well you get the idea. In essence, calculating impact of taxes on your smallcase is very difficult, if not impossible.
In contrast, calculating impact of taxes on your mutual fund redemptions is fairly straightforward.
2. Lower circuit
If any of your stock in smallcase hits lower circuit when it’s time for rebalance and you need to sell, then you are f…, I mean you are at gods mercy. This is what happened to me and I had thought it will never happen to me. You see, I chose Mi_NNF10 for a reason; it only invests in Nifty Next 50 companies. What could go wrong, right? Wrong! One of the Adani Group companies went into lower circuit and by the time I was able to sell it, I lost 70% on that investment. Ouch!
3. Comparison to benchmark
Since there is no NAV for the smallcase you cannot compare it to any benchmark. There is chart on the smallcase homepage that shows its performance against equity large cap, but that does not consider impact of fund manager’s fees, LTCG, STCG, and events like lower circuit hampering your rebalances. I can be making 20% XIRR but I cannot compare it to any index say Nifty 50 Index. Had I invested the same money in Nifty 50 Index would I have made better returns? I can never answer this question.
Unsolicited tip for smallcase folks: Show historical performance of smallcase for each individual.
4. Expense ratio
If you want to get full benefit of your smallcase then you need to look into expense ratio. If your expense ratio is more than 5% then its not worth it. IMHO, it should be in the range of 1-2%; similar to that of mutual funds. And this expense ratio has to be managed by you. Unlike mutual funds, where it does not matter how much you invest—five hundred or five lakhs—the expense ratio remains the same.
One good side effect of managing the expense ratio was that, with dividends earned I was able to recoup my subscription fees in its entirety for both years.
And yes, the fund manager started a scheme offering discounts to subscribers who had been with smallcase for more than two years reducing my expense ratio for this year. Yay!
Return
Calculation of Amount Invested
- Subscription fee for smallcase
- Being fee for smallcase
- Amount paid while rebalancing
- DP charges that I incur while selling stocks due to rebalancing
- Amount received while rebalancing (deducted from Amount Invested)
Profit Percent
Future
I am planning to continue in the smallcase for one more year.
Related reading
Category: Smallcase -
Evil and stupidity
Powerful words. Unfortunately can’t find this book on Amazon India.
One can fight evil but against stupidity one is helpless. … I have accepted the fact, hard as it may be, that human beings are inclined to behave in ways that would make animals blush. The ironic, the tragic thing is that we often behave in ignoble fashion from what we consider the highest motives. The animal makes no excuse for killing his prey; the human animal, on the other hand, can invoke God’s blessing when massacring his fellow men. He forgets that God is not on his side but at his side.
On Turning Eighty by Henry Miller (via Henry Miller on Turning 80, Fighting Evil, And Why Life is the Best Teacher)Category: Food for thought -
Three years as shareholder of D Mart
When D Mart announced its IPO, I decided to skip it because I rarely went to D Mart; opting to go to Big Bazaar instead which had lesser crowd (in the hindsight, this should have been warning sign) and cleaner aisles. That was the only research that I did for deciding whether I should apply for the IPO or not. When the IPO had a bumper listing I was left scratching my head. How can this overcrowded store get a bumper listing in front of the swanky store of Big Bazaar? But reading through a couple of articles I realised what D Mart was doing better than it competitors. For e.g., being profitable. Duh! So, three years back I decided to start investing in D Mart. Here are my key takeaways.
- I have invested 12 times across these three years.
- I unfortunately invested in D Mart at its peak of 5000+ levels. This severely impacted my XIRR. And the recent correction in the share price has meant that I have underperformed Nifty 50 Index by a huge margin.
- The company has not paid any dividends. This was something I found out after investing in it.
Return
Profit Percent
XIRR
Category: Stock Market -
Three years as shareholder of Relaxo Footwear
Three years ago I decided to start investing in Relaxo after seeing its meteoric rise and absolutely zero research. During the first two years I was comfortably beating the index. But 2022 was a tough year for Relaxo. It erased all my profits and is now in a loss.
Returns
Profit Percent
XIRR
Category: Stock Market -
Five years as shareholder of Colgate-Palmolive (India) Limited
Continuing my investment in Colgate—which has been underperforming since 2 years—has been a very painful experience. I still have my conviction on this stock after five years, albeit it is now on shaky ground. The only saving grace for me has been the dividend yield at cost which is at 1.3%. Compared to Nifty 50 index the XIRR has underperformed by a good 15%. Ouch!
Hoping that next year I write about ‘Six years as shareholder of Colgate-Palmolive (India) Limited’.
Investment through the years
Returns
Profit Percent
XIRR
Related reading:
Category: Stock Market -
Five years as shareholder of HDFC Life Insurance
I got lucky with the HDFC Life Insurance IPO and saw Nifty 50 index beating returns for four years. But this year the stock stumbled and as of today HDFC Life Insurance has under performed the Nifty 50 index by good 9%. But I still have conviction in the company and have been increasing my allocation. In fact, 50% of my total investment in the company has been made this year alone. And I intend to continue my investment in future also.
The dividend yield at cost has been small with the latest one being 0.3%.
Investment through the years
Returns
Profit Percent
XIRR
Related reading
Category: Stock Market -
Wilful Ignorance
Not having an investment view on every imponderable in financial markets can seem like ignorance, but it actually shows an acute awareness of the environment in which we operate. It is far more ignorant to believe that we can accurately predict all manner of complex and unfathomable things.
Rather than have an ever-evolving set of views and positions, we would be far better off allowing others to pontificate and trade, and instead wait until there are opportunities where the probability of good outcomes are firmly on our side.
Investors would be far happier (and better off) not having a view on most things most of the time.
The Power of Not Having a ViewCategory: Food for thought -
Five years as shareholder of ITC
Last year when I wrote about ITC, I mentioned that there are die hard fans of ITC who are waiting for its resurrection some day. I think that day is here. Since Feb-2022, ITC has consistently moved up and as of today it is beating Nifty 50 Index after five years.
ITC continues to give great dividend returns with the latest dividend yield at cost for me at 2.8%.
Investment through the years
Like Asian Paints, I did not continue investing in ITC after my first investment. That was a bad decision. 83% of my total investment in ITC has been made in last three years so I am still a long way to consider myself as a long term investor.
Returns
Profit Percent
XIRR
Related reading:
Category: Stock Market -
Four years as shareholder of Havells
I have been incredibly lucky with my investment in Havells. With 25% XIRR I have beaten the Nifty 50 Index by a comfortable margin. But then it is because of this outperformance I have been a bit hesitant to invest more in this stock. I have not invested in this stock since last two years and the share price’s sideways movement has meant that the outperformance over Nifty 50 Index has shrunk over the last year.
The company pays dividends regularly and for me the latest dividend yield at cost has been at 0.7%.
The Russian invasion of Ukraine did affect the share price but it was still resilient compared to some other companies.
Investment through the years
Returns
Profit Percent
XIRR
Related reading
Category: Stock Market