naveegator.in

Author: Naveen

  • Five years as shareholder of IDFC First Bank

    Last year I blogged about completing four years as shareholder of IDFC First Bank. I continue to stay invested in this company and have poured in more of my hard earned money. And as with previous analysis, IDFC First Bank continues to underperform for me after half a decade. But hey, I am in this for long term. I just hope I don’t say the same thing after a decade.

    Last year I had hoped that IDFC First Bank will turn into HDFC Bank. This year—with the number of spam calls from IDFC First Bank rivalling that of Bajaj Finance—I am hoping that it becomes Bajaj Finance!

    Below are my key observations.

    • My investment has not been able to beat Nifty 50 Index. Here I used Nippon India Index Nifty Fund to compare. And with the recent market correction my worth of investment is less than the amount invested.
    • Last time I received dividend was in July 2018. After that the company hasn’t paid any dividend. Dividend yield at cost for me at that time was 1.6%.
    • XIRR is at -5%.

    Return

    Profit

    XIRR

  • Three years with Low Risk – Smart Beta smallcase

    A couple of years ago I listened to Anupam Gupta’s Paisa Vaisa podcast explaining something called as smallcase. Intrigued, I continued to learn more on it. And around 3 years back I decided to dip my toes in the water by subscribing to Low Risk – Smart Beta. Here is what I learned.

    I should not have dipped my toe in this water. I should have dipped my entire foot. Let me explain. A smallcase needs regular rebalancing i.e. every now and then you are going to sell some of your stocks and buy new ones. As I was just dipping my toe in water, I had invested minimum amount required. And rebalancing of smallcase every 3 months meant that most of the time I was selling 1 stock and buying 1 stock. Yes, just 1 stock. That also meant paying brokerage and taxes on every transaction. That in turn meant I was negating whatever minuscule gains I had made before rebalancing.

    After 3 rebalances, I decided to ignore the rebalance notification. As the stocks in the smallcase were reputed companies, I was okay to hold them for long term. Here’s how it has performed for me.

    Psst! If you want to subscribe to a smallcase, go for discount brokers (like Zerodha). You will save big while rebalancing.

    Returns

    For the first year, I diligently rebalanced my smallcase (by selling 1 stock and buying 1 stock). It was towards the end of 2019 I realised my stupidity and stopped rebalancing. Since then, post COVID-19 market crash the worth on my investment has steadily risen.

    If you notice Amount Invested (red line), every now and then it goes down ever so slightly. That is the dividend amount that I am reducing from my Amount Invested.

    Profit

    As you can see, profit has been made only after COVID-19 pandemic market crash. As far XIRR goes, the smallcase has given 16%. And I am happy with that—considering I was dipping my toe in water.

  • Four years as shareholder of Colgate-Palmolive (India) Limited

    Four years ago while brushing my teeth with Colgate, I decided to invest in it. I am using Colgate for more than three decades now, so the company should survive at least few more years. And here we are four years later, Colgate is still there and so is the money that I invested in it. Are the returns great? No. Are the returns good? Still No. Are the return average? Sadly, yes. But hey, it could be worse considering the research that I did here.

    Returns and Profit

    Over these four years I invested 8 times in Colgate. The returns across these four years have largely been positive except during the COVID-19 pandemic market crash. But since last couple of months the share price has tumbled erasing a good chunk of my (unrealised) profits.

    On the other hand, 1%+ dividend yield at cost is much better than the dividends that is given by other companies.

    Profit Percent

    XIRR

    XIRR across these four years has been around 15% and I was happy with that. It was during the last 3 months that the share price price has tumbled putting my XIRR at 5%.

    NOTE: XIRR for initial months varies wildly and is not useful for any analysis. But once the investments complete minimum of 1 year, XIRR gives me a much better picture. So I calculate ‘XIRR (>1 year)’ which calculates XIRR only for the investments which have completed minimum of one year while ‘XIRR’ continues to calculate for all the investments irrespective of how much time has been completed. There are some periods where ‘XIRR’ and ‘XIRR (>1 year)’ calculate to the same amount as for that time all my investments had completed minimum of 1 year.

  • Four years as shareholder of HDFC Life Insurance

    Four years ago I subscribed to the HDFC Life Insurance IPO. And I got lucky! I got the minimum quantity of 50 shares with HDFC Life Insurance opening up with a nice 17% gain on first day. After that I bought the share 3 more times. This is how it has performed over these four years.

    Return

    Over these four years the worth of my investment has never fallen below my invested amount. The dividend yield at cost for me has been around 0.5% with the company declaring dividends thrice over four years. They skipped the COVID-19 year like other companies.

    Profit

    The V-shape that you see between the period Jan-2020 to Jul-2020 is the COVID-19 market crash and its subsequent recovery. I do regret not being able to buy more during the crash. But the recovery was so quick that I had little to no funds to invest.

    XIRR

    NOTE: XIRR for initial months varies wildly and is not useful for any analysis. But once the investments complete minimum of 1 year, XIRR gives me a much better picture. So I calculate ‘XIRR (>1 year)’ which calculates XIRR only for the investments which have completed minimum of one year while ‘XIRR’ continues to calculate for all the investments irrespective of how much time has been completed. There are some periods where ‘XIRR’ and ‘XIRR (>1 year)’ calculate to the same amount as for that time all my investments had completed minimum of 1 year.

  • Norway Is Running Out of Gas-Guzzling Cars to Tax

    Makes me wonder, if some day electric cars rule over the Indian car market what will happen to all the tax revenue from petrol and diesel?

    When it comes to sales of electric cars, Norway is in a league of its own. In September, battery-powered electric vehicles accounted for 77.5 percent of all new cars sold. That figure makes Norway a world leader by a long way—leapfrogging over the UK, where 15 percent of new car sales were electric as of October, and the US, where that number is just 2.6 percent.

    Norway’s electric dream has been credited to a series of tax breaks and other financial carrots that mean brands like Tesla can compete on price with combustion engines. But these incentives—and their success—have created a unique predicament: Norway is running out of dirty cars to tax.

    Norway Is Running Out of Gas-Guzzling Cars to Tax

  • Why Birds Can Fly Over Mount Everest

    A wonderful article by Walter Murch on how the birds came to have super-efficient lungs.

    The answer seems to be that bar-headed geese, like all birds—hummingbirds, ostriches, pigeons—have super-efficient lungs. It makes our lungs—and the lungs of all mammals—look primitive. I’m sure when birds get together they gossip about how pathetic our lungs are!

    All mammals, including us, breathe in through the same opening that we breathe out. Can you imagine if our digestive system worked the same way? What if the food we put in our mouths, after digestion, came out the same way? It doesn’t bear thinking about! Luckily, for digestion, we have a separate in and out. And that’s what the birds have with their lungs: an in point and an out point. They also have air sacs and hollow spaces in their bones. When they breathe in, half of the good air (with oxygen) goes into these hollow spaces, and the other half goes into their lungs through the rear entrance. When they breathe out, the good air that has been stored in the hollow places now also goes into their lungs through that rear entrance, and the bad air (carbon dioxide and water vapor) is pushed out the front exit. So it doesn’t matter whether birds are breathing in or out: Good air is always going in one direction through their lungs, pushing all the bad air out ahead of it.

    How did birds get such great lungs? They inherited them from dinosaurs. Birds are dinosaurs! When I was growing up in the 1940s, there was a category in biology called Aves, which meant birds. But scientists have now folded Aves into a category called Dinosauria, and those dinosauria, like pigeons and seagulls and geese, are flying all around us today. If you want to know what a dinosaur probably tasted like, eat some chicken!

    Why Birds Can Fly Over Mount Everest

  • What to do with your portfolio when stock market crashes?

    I don’t know. But the folks at Marcellus know. They call it ‘Post-facto rebalancing’.

    …we stay fully invested at all times and rebalance our portfolio in two ways to benefit from a stock market crash. Firstly, after a crash, we rebalance the portfolio to increase our allocation to companies that have undergone high drawdowns (we finance this investment by shaving off our allocations to companies that have NOT undergone high drawdowns). Secondly, after the share prices of our portfolio companies have recovered, we again consider rebalancing the portfolio to sell some allocation in companies that have seen a sharper recovery than the rest of the portfolio. Such rebalancing is also carried out if share price dislocations happen without a broader stock market crash.

    How Portfolio Rebalancing Tools Enhance Investors’ Returns

    They even have an real life example and discuss on the pros and cons later in the newsletter.

  • Four years as shareholder of ITC

    ITC—in my humble opinion—is probably the most polarized stock in India. On one hand, you have the die hard fans who are waiting for its resurrection some day to prove them right. On the other hand, there are the detractors who don’t miss a single opportunity to poke fun at it. And some of those jokes are actually good. Don’t believe me, just Google ‘ITC meme’ and get ready for laughs.

    When I invested in ITC I didn’t know it was butt of jokes—pun intended—on the internet. I put some money in it and forgot. Then I received my first dividend. And I started day dreaming about living off with ITC’s dividend in my retirement. But sanity prevailed and here I am still holding ITC, waiting for its resurrection but not hoping to live off its dividend.

    Return

    The returns are—well—nothing to talk about. Apart from few spikes here and there, the returns have largely been flat.

    Profit (rather the absence of it)

    In case of ITC my profits and losses have always made sure they are never too far from 0%. They will go till 10% or –10%, but never too far.

    XIRR

    With such dismal returns over past four years you may ask why am I still holding ITC? Well I ask the same question to 250+ mutual funds (as on Sep 2021) holding ITC.

    NOTE: XIRR for initial months varies wildly and is not useful for any analysis. But once the investments complete minimum of 1 year, XIRR gives me a much better picture. So I calculate ‘XIRR (>1 year)’ which calculates XIRR only for the investments which have completed minimum of one year while ‘XIRR’ continues to calculate for all the investments irrespective of how much time has been completed. There are some periods where ‘XIRR’ and ‘XIRR (>1 year)’ calculate to the same amount as for that time all my investments had completed minimum of 1 year.

  • Three years as shareholder of Havells

    Three years ago I started investing in Havells. During the first two years the gains were pretty average. But during last one year the stock has zoomed and so has my returns.

    Return

    I invested only four times in Havells and was planning to invest more, but at the current price I maybe overpaying.

    Profit

    At the current price levels, my amount invested in Havells has more than doubled. While the amount invested wasn’t significant but the profit percent surely is.

    XIRR

    The current XIRR of 45%—which is certainly impressive—is not sustainable in the long run. But with the good run that this stock is having I am hoping for fat returns of 20% over long term.

    NOTE: XIRR for initial months varies wildly and is not useful for any analysis. But once the investments complete minimum of 1 year, XIRR gives me a much better picture. So I calculate ‘XIRR (>1 year)’ which calculates XIRR only for the investments which have completed minimum of one year while ‘XIRR’ continues to calculate for all the investments irrespective of how much time has been completed. There are some periods where ‘XIRR’ and ‘XIRR (>1 year)’ calculate to the same amount as for that time all my investments had completed minimum of 1 year.

  • Financial independence

    I have been reading quite a few articles about achieving financial independence at age of 30, 35, 40 and 45. But all of them sound unrealistic to a middle class person like me.

    M. Pattabiraman from freefincal asks the question ‘Are we seeking work-life balance in the name of early retirement?’ and hits nail right on the head. With our already stressful lives and lack of work-life balance, we are actually seeking an escape route. At least I am.

    Seeking early financial independence comes loaded with sacrifices. We will need to invest each month anywhere from 2-3 times our monthly expenses. This means less splurging on devices, holidays, entertainment etc. Is this sacrifice worth it when you are young? Particularly if you do not have a clear plan of what to do after FIRE. I am not suggesting one way or another here. Only pointing out that the importance of such questions.

    Can we address work-stress and poor work-life balance with a change in outlook instead of FIRE? Can we work on our time management to find some leisure time each week? Can we convert “aimless time pass” to learning new things? Can we learn to develop a sense of detachment from the office? Will doing this regularly reduce our frustration? There is a good chance it might.

    I am not trying to say aiming for early financial independence is wrong. Just pointing out that is the not solution for our work frustrations if we do not know what to after. Extreme steps are not always necessary in life. A judicious mix of regular investing (an amount = monthly expenses), leisure, health, fitness can help us lead fulfilling lives.

    Are we seeking work-life balance in the name of early retirement?

    He ends with a pragmatic suggestion to achieve financial independence which will work for 95% of the folks. Worthy of putting on a refrigerator magnet and reading it every single day.

    Maybe I am over the hill, but this route to financial independence is a lot more appealing: Put your head down and work; smartly invest as much as possible; do not let the work get to you; do not deprive yourself of reasonable wants; stay fit and balance work, family and personal needs. Maybe one day, when you look up and take stock, you will become financially independent.

    Are we seeking work-life balance in the name of early retirement?