|»5 Minute Wrap Up by Equitymaster|
On This Day - 23 DECEMBER 2010
Investment method: You choose it or it chooses you?
In this issue:
------------------------------ 25,394 Investors are already plugged in... ------------------------------
Now, the question that remains to be answered is whether these extremely successful investors knew themselves all too well and hence, chose the philosophy that fitted well with their personalities and behavioural traits? Or did they choose the philosophy that made the most sense to them and over time, altered their behavioural traits to suit the philosophy? Well, we don't have a definite answer to this.
As far as we are concerned, we believe it is the latter. Value investing as an investment philosophy makes the most sense to us and hence, we try and discipline ourselves to the rules of value investing. However, there is no harm in adopting the other route as well. One can most certainly choose an investment method that goes well with one's traits. The most important thing though is the fact that once one has chosen an investment method, one must be extremely meticulous in following it and not violate its rules under any circumstances. And this is the key to successful investing more than anything else we believe.
What about you? Do you choose your investment method or your investment method chooses you? Let us know your views
After being net sellers of stocks for almost the entire of 2010, mutual funds have been net buyers in the current month (at least till the 16th of December). What it means is that this is the first month in 2010 when funds have bought much more than they have sold. We however fail to understand the rationale of the same, if not for the purpose of pushing up performance as the year comes to a close and thus doing everything possible to get a better return.
Indian markets have not fallen much so as to generate a higher interest from fund managers. And there has not been outstandingly good news that could make them think that the future will be rosier than what it was seen last month or the month before that! So this behaviour is perplexing for us, like most behavior is from the fund management industry!
But as we have said earlier, the RBI cannot be the lone soldier tackling the inflation issue. If the government is caught napping while traders use the demand supply dynamics to their favour, inflation is but a given. Globally nature has played truant in unduly raising commodity prices. Cartels like the OPEC have done their bit in keeping oil prices high. Thus, try as it might, the RBI is unlikely to succeed in its price control measures in the near term.
We feel that some amount of attrition is good as it helps to get fresh ideas and develops the organization. But if it is too high, then it has a negative impact as employees may not understand the organization and have time to optimize their strengths. Another issue is that higher pays and attrition rates lead to higher wage bills. But unless revenues grow in line, this would start to impact margins. This was seen in the Indian IT industry over the past few quarters, wherein the higher attrition rates had started to show in the margins. But we are sure that the employees won't be complaining about getting fatter paychecks which are definitely expected in 2011.
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