5 articles we wanted to share with you for weekend reading
Common ownership of multiple companies in the same industry by big diversified institutional investors should cause the companies to compete less: If all their profits are going to the same place (the investors who own all of them), then no one should care about which particular company earns the profits; all they should care about is that the total profits are as high as possible. So nobody should compete on price; they should raise prices, not care about market share, and make total profits as high as possible to please their common owners.
With greater amounts of data being available, the need to “storify” has increased. “How come you have been very clinical, neutral, almost detached about these companies, these countries, rather than give me ‘stories’ like how great these managements are; how the businesses have strong moats and will remain great almost forever, etc. That’s the way every other fund manager I know speaks about their holdings” asked an investor
Among Indian investors, SIPs (Systematic Investment Plans) are the rage. SIPs are great for investors with a regular income – it matches the frequency of savings with the frequency of income. Structural discipline is always a welcome thing. However, for investors who have lumpy incomes or a windfall, it is often a dilemma whether to invest as a lumpsum or to setup an STP (Systematic Transfer Plan.)
There are 6+ lacs users in Kuvera. And each have uploaded their entire historic transactions (through eCAS upload). Users are investing from various times in the past like 1994, 2005 etc. The idea is, what if we replicate each of their transaction (both buy and sell), but instead of their chosen active fund, it would be in a Nifty 50 index fund. And the objective is to see how many users have a larger corpus by investing in active funds instead of investing in Nifty 50. Guess what, only 1 out of 6 or 7 user is able to beat Nifty 50. Putting it other way, 5 out of 6 users would have been better off by simply investing in Nifty 50 fund. The value funds didn’t add any value, the emerging midcap didn’t emerge, the mutibagger smallcap didn’t bag anything and the sector funds didn’t get any vector. One simple Nifty 50 fund did all the trick. Phew, this is phenomenal and really an eye opener.
Quantitative investing attempts to reduce the investment process to its scientific and statistical core, eliminating emotional, human judgment from the equation as much as possible. This quantitative investment process is also known as systems based investing or rules based investing because the investment philosophy is not based on gut feel or discretion. It is based on data and statistics. Also the execution does not rely on human judgement and is rules based.