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Some observations on smallcases

The smallcases entice many investors due to ease of investment, delight factor, and continuous monitoring. However, it may not be suitable to many investors if used incorrectly. And in many cases, there is mis-selling too. The following considerations are important while subscribing to any smallcase: Subscription fee : Currently, most of the smallcases offer subscriptions on a fixed-cost basis that ranges between ₹3000 to ₹18000 annually charged monthly or quarterly. Let us assume that your investment capital is ₹50000, and you have subscribed to a smallcase charging ₹12000 pa. This amounts to a humongous expense ratio of 24%. Typically a mutual fund has an expense ratio of 0.5-1.5%. It also means that the smallcase has to provide a 24% CAGR to break even, which is quite difficult. Therefore, the takeaway is that unless your capital is large, subscribing to smallcases doesn’t make sense . If a typical smallcase charges ₹12000 pa, then a capital of ₹1000000 would result in an expens...
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Musings on Cryptoassets

Blockchain is going to change many things that we are used to do in traditional ways that many people find it difficult to grasp the magnitude of revolution that blockchain is bringing. Some areas where the change has already begun include: Lending & Borrowing: Lending and borrowing, which is the backbone of banks and financial institutions is going to be shifted onchain. MakerDao is the pioneer of this field. There are many other projects that are emulating the breakthrough of MakerDao. Payments: No need to hold govt issued depreciating currency. There are multiple alternatives that include Bitcoin (with lightening)and fiat stablecoins (like Tether, USDC), and algorithmic Stablecoins (like DAI and UST). Exchanges: All digital assets that are native to blockchain can be exchanged on-chain so the business of all financial intermediaries related to exchanges are going to be affected. Uniswap is the leader of this area that pioneered the successful implementation of Automated Market...
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Islamic Principles of Equity Investing

 Islamic principles of equity investing Just like other matters, people do ifrat (immoderation) and Tafreet (negligence) and avoid I’tedal and iqtesad (moderation, middle way) in equity investing also. On one hand, there exists a tribe that is indifferent to the Shariah’ guidelines and indulges in all kinds of transactions without delving into its permissibility. On the other hand, some see too many Shariah issues and consider it better to avoid them. Such is the importance of moderation Quran says about the immoderation of the previous communities in the following words: وَلَوۡ اَنَّهُمۡ اَقَامُوا التَّوۡرٰٮةَ وَالۡاِنۡجِيۡلَ وَمَاۤ اُنۡزِلَ اِلَيۡهِمۡ مِّنۡ رَّبِّهِمۡ لَاَ كَلُوۡا مِنۡ فَوۡقِهِمۡ وَمِنۡ تَحۡتِ اَرۡجُلِهِمۡ‌ؕ مِنۡهُمۡ اُمَّةٌ مُّقۡتَصِدَةٌ‌  ؕ وَكَثِيۡرٌ مِّنۡهُمۡ سَآءَ مَا يَعۡمَلُوۡنَ “If they had observed the Torah and the Gospel and that which was revealed unto them from their Lord, they would surely have been nourished from above them and from beneath t...
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Equity Participation

 Equity Participation The purpose of this write-up is to draw attention to an important issue that is being neglected. Misunderstandings are as much a reason for this non-participation as ignorance. We usually keep the savings in the form of a bank balance after spending from our earnings. Due to inflation, the value of this continues to deplete. Inflation is a reality of the current world that is reducing the value of most of the currencies in the world. The main reason for this is the printing of money irresponsibly by all countries since the Bretton Woods Conference. If the growth rate of money supply (that includes money printing) in an economy exceeds the growth rate of goods and services, the natural consequence will be inflation. For example, if the current value of a product is one lakh. And if the inflation rate is 7.5%, then after 10 years the product will be priced at Rs 206,103. According to the latest figures from MOSPI, the inflation rate in May was 6.2%. However, the...
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Should i buy a property/flat on installments?

Suppose, a real estate firm approaches you to pitch for the sale of  its upcoming “tower” apartments. The rates quoted by them for a 3-BHK is as follows: Payment Plan Plan-A 1140 sqft (126 sq.yards) Price: 27.50 Lacs Booking amount Rs. 7.5 Lacs S. No. Instalments Amount (Rs) 1 60 months × 30 thousand 1800000 2 1 Jan 2023 100000 3 1 Feb 2023 100000 Total 2000000 They are repeatedly stressing on the Price: 27.5 Lakhs and peripherals including the park, gym, cafeteria, community hall, prayer hall along with imaginary photos of the future facilities to distract you from the actual price. And of course, the friendly payment schedule . The question one must ask is “is the price of the flat really 27.5 Lakhs?” (the actual money you will pay them including the booking amount of 7.5 lakh, 60 installments of ₹30000 each and two in-betweeners of ₹100000). Or in other words, will th...
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A reading of Skin in the Game-Hidden Asymmetries in Daily Life (2018)

Book Name: Skin in the Game-Hidden Asymmetries in Daily Life (2018) Author: Nassim Nicholas Taleb This book is from the author of The Black Swans which was termed as one of the 12 most influential books since World War II by The Sunday Times. My expectations from this book were already very high because of his previous book which impressed me a lot. Especially the idea that only few extreme events/things which are insignificant, numerically and statistically, can make a gigantic effect on the world, life and systems, appealed to me. To bring this point home Professor Taleb borrowed examples from various fields of life including science, technology, history, finance, economics etc. The variety of his examples made a boring subject like statistics an interesting reading for everyone. The present book is also linked with the idea of Black Swans. The central idea in this book, as the name itself suggests, is that systems work efficiently when the actors have their skin in the ...
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The Case of Over-hyped Indian IPOs.

Such is the extant of IPO under-performance in India that in a sample of 77 IPO’s during 1994-2015 there is a growth of only 2.26%. The sum of their offer prices per share is ₹18559 and the sum of their market prices as on 31 st March 2016 is ₹18977 which translates to only a marginal growth of 2.26%. This is known as “Hot Issue” market phenomenon where companies take the advantage of a short “window of opportunity” in the form of overoptimistic investors as first reported by Ritter (1991). This long-term under-performance is contrasted by the short-term under-pricing where prices rise substantially on the listing day as compared to offer prices which is generally known as “IPO under-pricing”. In other words, IPO subscribers who get allotted shares earn a substantial profit on average in just a single day (around 15%) which if they keep holding those stocks instead of selling would decline only in the long-term (3-5 years). This doesn’t’ look right. Isn’t it? So beware of over-...
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