Stocks for the long and short term portfolio

[Einstein]

@ Amit, do you think debt funds can beat the returns of common stocks??? have you invested in any debt fund yet?

 

[jamit_05]

@ Amit, do you think debt funds can beat the returns of common stocks??? have you invested in any debt fund yet?

If investment is done correctly, then they surpass Debt funds by a factor of 2. Atleast.

But, Debt Funds are better than FD (and much much better than Saving A/c). And myriads of LIC schemes. And they are just as safe, depending on the rating.

And yes, instead of putting money into the stock market at 6400, I would opt for Debt Funds while I wait for a decent correction.

 

[Mr.G]

Debt can never ever beat the returns of common stocks. I was reading a book which made a case for long term investing (i even messaged amit to clarify a confusion), using data from the past 200 years for equity,T bond, corp debt, gold and the dollar. It precisely showed the difference.

Short-term mein yes, there is a chance that in a time frame of under 10y, debt can beat common stock returns.

I personally don't own debt, but as a conservative investor should always have a bed of corp debt under their equity portfolio to provide a minimum rate of return.

Corp debt will bring higher return than other investments (except equity) IF the person know what hes doing.

 

[Einstein]

Looking at the facts http://www.moneycontrol.com/mutual-funds/performance-tracker/returns/debt-short-term.html

average return from 1 year short term debt is of about 5%. just 5%.

another thing to remember is that debt fund are also subjective to extensive research before investing into them, crisil AAA, crisilA1+ are of no use. credit agencies were not able to evaluate MBS in 2007-8 how can we trust them, they are not responsible for our investments anyways.. (crisil is not govt owned).

second thing i would like to point out that indian debt market is not yet developed, we don't even have a 10 year corporate bond yield index like they have in us (moddy, merill etc). its good for corporates to invest into debt funds to hedge against inflation. for average joe like us he should stick to the common stocks which offer both great security and return (depends on analysis).

 

[Mr.G]

Looking at the facts http://www.moneycontrol.com/mutual-funds/performance-tracker/returns/debt-short-term.html

average return from 1 year short term debt is of about 5%. just 5%.

another thing to remember is that debt fund are also subjective to extensive research before investing into them, crisil AAA, crisilA1+ are of no use. credit agencies were not able to evaluate MBS in 2007-8 how can we trust them, they are not responsible for our investments anyways.. (crisil is not govt owned).

second thing i would like to point out that indian debt market is not yet developed, we don't eve have a 10 year corporate bond yield index like they have in us (moddy, merill etc). its good for corporates to invest into debt to hedge against inflation. for average joe like us he should stick to the common stocks which offer both great security and return (depends on analysis).

Arre! Yeh chod! IIFL NCDs, Everyone is giving buy call on them! EVERYONE! I gave do not buy call on it. This is a prime example of band wagon we have in investment industry.

No one saw that IIFL is over- leveraged. And does not have even good enough earnings to service new debt, they are barely surviving after interest.

Considering the fact that when we buy corp debt is should be on the 5y side. People are pointing out to the horde of cash that IIFL has, I just see the same cash as a burden on the firm. This may provide protection to short term investors but for long term there is no hiding.

I can only see buying it if I get it for a discount.

Focus on individual debt, I dont like debt funds, I dont like institutional fund managers. 10%+ (On the lower side) is very much doable.

 

[jamit_05]

Sure, discretion on the part of the investor is required. Cannot blindly take-up any instrument.

I think the factor of safety is pretty much taken care of.

1) Taking up HDFC's Debt Mutual Fund should be a pretty safe bet.

2) If one chooses to apply for Debt issues of private companies then it becomes dicey. However, if one applies for GOI backed companies' debt programs then he not only gets a complete tax-waiver but also near 100% safety and returns that beat FDs. These coupon are now also tradeable in the secondary markets. So, liquidity is also not an issue anymore.

Sure returns will be small, around 5% to 7% after taxation.... but there won't be capital erosion like one would be exposed to due to buying expensive common stocks.

Where else should be money be kept if stocks are not suited for investment in a given time period?

 

[Einstein]

Wait for the right moment.

 

[Mr.G]

Sure returns will be small, around 5% to 7% after taxation.... but there won't be capital erosion like one would be exposed to due to buying expensive common stocks.

My friend I was actually playing with idea of showing capital loss after indexation for tax purposes. :rofl:

You get to pay no tax AND deduct loss from IT also.

 

[Einstein]

was just checking IIFL india infoline ltd. balance sheet, yes they are over leveraged (but again finance lease sector) without proper earnings. standalone they are clean 0 debt they have raised capital through their subsidiaries, 8,100 crore debt and 100 crore PAT/annum.

They have high chances of going bankrupt(if there is anything like this in india(kingfisher)).
such company raised 1000 crore through bond with no collateral (NCD). whom they are selling it to?? blind investors???

to Mr.G
1. Can I buy their NCD with 1 lakh rupee??(just assume)
2. If i hold them for 1 year and sell it how much should I get?? (in case they don't broke).

 

[Einstein]

IIFL NCDs have an option of monthly and annual interest payment and the yield works out to 12.68 per cent per annum for the monthly interest option and 12 per cent per annum for the annual interest option. The NCDs will be listed on NSE and BSE and will have a trade able lot size of 1 NCD.

as per my understanding it will give 1,000 per month income for 1 year(our target) or 12,000Rs income on initial investment of 100,000 and when sold have to pay short term gain taxes too. above 1 year no tax.

conclusion: Biyaj par chada do paise.