Part 4: Strategy or How the heck do I get to Financial Freedom?
4.12 Invest in Equity in a way that ensures your success today and, in the future
It all boils down to investing in equity successfully, so how do you ensure that? How do you take informed investing decisions and improve upon them with time? How do you prevent your emotions from hijacking your decisions? How do you take your equity investing to the next level?
How do you choose the Investing Process let alone a System that is suitable for you? And how do you with limited knowledge of investing in equity improve on it. Is it possible? Let’s find out.
First you need to know what exactly do you do when you invest in equity? You make these decisions:
Which stocks or Fund to buy?
At what price or NAV?
How much?
At what price/NAV to sell it?
And then act on it. In short, build and manage your equity portfolio to achieve the desired returns.
Now, can you know in advance, with certainly which stocks/MF will deliver your targeted CAGR? You cannot, no one can. Then how can you judge? Good question. This sounds like a problem faced by people working in the corporate world at least the good ones, who hold one another accountable and responsible for meeting their targets and goals, despite not knowing how things will pan out in the course of the year? How do they handle this and can we do the same for investing?
Essentially, they follow the PDCA : Plan-Do-Check-Act Process or Cycle. How does this work?
First, they agree to a plan of action, then do the actions as per the plan, check what results they have got and whether it is in line with what was expected or not, in short how well it worked. Then, and this is the game changer, they reflect on why the results were not up to the expectations and what is required to get there. It could be a better implementation of the plan itself, maybe some skill improvement or a better...........Read More
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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Best Buy Stocks
Do you want to Invest in Undervalued Handpicked stocks and earn high Returns?
Why Buy Quality Stocks
Winning and long lasting portfolio is made of Quality Stocks, but how simple is that?
Important Questions while Buying Stocks
As an Investor most important decision making questions are?
Make an informed decision for Stocks
Invest using an intelligent system with powerful data-driven tools that help you identify opportunities and make informed buy-hold-sell decisions
You can make an informed decision based on:
Q : Quality :- Q Very Good
Q Somewhat Good
Q Not Good
V : Valuation:- 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
You can make an informed decision based on:
P : Performance (%)* 14 Very Good
14 Somewhat Good
12 Not Good
Less than 5 year data
Q : Quality of Holding Q Very Good
Q Somewhat Good
Q Not Good
*Color code for outperformance consistency
*Number is average 3 year rolling returns
Want to invest successfully in stocks?
How the heck do you select a solution that ensures it?
Does it get you focused on meeting your financial goals?
Does it get you focused on meeting your financial goals?
Investing is to means to funding your goals. Your solution must help you get clarity of your goals and how you should invest to reach them. Does your solution include Financial Planning?
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What The Heck is Financial Freedom in my case, exactly?
How the Heck do I get to Financial Freedom?
How the Heck do I Invest in Equity?
How the Heck do I ensure I reach Financial Freedom come what may?
How the Heck to really enjoy this Journey to Financial Freedom and Nirvana?
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