Investing basics
How the Magic of Compounding works?
Compound Interest is the 8th wonder of the world. He, who understands it, earns it; he, who doesn’t pays it! – Albert Einstein
Successful investing means growing your money through compounding—your entire Investable Surplus – and not taking high risks, making bets on finding multi-baggers and big winners. You don’t need to take high risk or expect 20% returns, you need to allow the compounding to happen.
To allow compounding to make its magic work on your investments, do these 3 things,
1. Have patience!
Look at this graph. If you invest 1 lac and allow it to compound at 8%, you will have Rs. 2.15 lacs after 10, Rs. 4.66 lacs after 20 years and Rs. 10 lacs after 30 years. In the 1...........Read More
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Start Now →MoneyWorks4Me method for rating and ranking mutual funds for SIP
MoneyWorks4Me rating and ranking of funds for SIP is available to subscribers only. Moneyworks4Me is not a rating and ranking agency, however it is required that users have a way of selecting funds and building a Portfolio. The method used by it are described below to enable users to understand the logic behind the rating and ranking Subscriber will find more details on this in the various content made available from time to time. In case you need more please write to besafe@moneyworks4Me.com
MoneyWorks4Me rates and ranks mutual funds based on the following data-driven system:
- Performance Consistency: This is measure based on whether the fund has beaten the benchmark index consistently. For this we compare the 3-year rolling returns of the fund with the benchmark for a minimum of 5 years and preferable 10 years. The period of rolling is one month and holding period is 3 years. Fund are color-coded Green on Performance when the fund beats the benchmark more than 90% of the time. It is Orange if it beats 80% to 90% of the time and Red if less than 80%. Funds with less than 5 year data are color-coded Grey.
- Quality of Portfolio Holding: Moneyworks4Me has color-coded stocks as Green, Orange and Red based on whether the company's performance has generated a ROCE above a threshold level (cost of capital) over 10 years (minimum 6 years) and generated positive Free Cash Flow. For Banks it checks whether ROE is greater than 15% and sales has grown over previous year. Stocks that perform consistently on these combined metrics are color-coded Green (min score 14 out of 20), Orange (between 8 and 14) and Red (less than 8 out of 20). Fund are color-coded Green provided the portfolio has 70% holding in Green stocks but not more than 20% in Red stocks. Funds with more than 20% Red stocks in the portfolio are color-coded Red. The rest are Orange funds
Funds ranking in screeners: Performance Consistency and Quality are two parameters used for ranking funds for SIP. The ranking as follows GG, GO, GR, OG, OO, OR, RG, RO and RR.
With the same color-coded funds, the one with the higher Average 3-year rolling returns (over 5 to 10 years), the number that appears in the Performance tag, ranks higher.
Here is the summary:
The third tag Upside Potential is not relevant for SIP. It is relevant for lumpsum investments in Mutual Funds.
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Why Buy Quality Stocks
Winning and long lasting portfolio is made of Quality Stocks, but how simple is that?
Important Questions while Buying Stocks
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Q Very Good
Q Somewhat Good
Q Not Good
V+UnderValued (UV)
V Somewhat UV
V Fair Value
V Somewhat OV
V+ OverValued (OV)
Buy quality Stocks when they are available at reasonable prices and supported by an upward price trend and Sell when they are Overvalued using the Decizen Rating System. Covers 3500+ stocks
Make an informed decision for Funds
14 Very Good
14 Somewhat Good
12 Not Good
Less than 5 year data
Q Very Good
Q Somewhat Good
Q Not Good
*Color code for outperformance consistency
*Number is average 3 year rolling returns
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