Property ( Real Estate ) and Power IPOs

There have been a line of power IPOs this year and real estate IPOs are also lined up. This week we have JSW energy and Godrej properties opening up for public subscription.

Both these sectors( power and reality) come up with huge premiums on IPOs which are not justified by any means and they project 20XX- 20YY earnings to justify their valuations. The PE or institutional investors pressure to get their money out of the company may be the reason for over pricing of these issues.

Whatever may be the case and irrespective of the recommendations given by stock anlyast, we should try and stay away from these issues.

Reviewing what happened to the IPOs of real estate companies ( DLF, omaxe, purvankara, brigade ,etc), Power ( reliance power, adani power, PSU- nhpc,etc) , we can easily see how these sectors are mis-sold. May be in the long run these stocks may give reasonable returns but they should be bought when the valuations are sane enough.

There are various other stocks with good valuation stocks which our money can chase . So let's try and avoid the sectoral temptation of power and real estate.

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Real Estate Burst Again!!

The Dubai financial crisis has popped up. We all need to learn a lesson or two from the same. Irrespective of once income levels , one should always be cautious on debt and never over borrow.

Over the last decade, more and more people are committing to huge EMIs and consider their flats as an asset class that is going to fetch huge returns. Indian laws that do not regulate real estate and the black money that is available have so far been able to keep up this myth to a great extent.

But I think we are at a point where such growth without any fundamentals get burst.Most of the real estate stocks are trading at almost 1/3 rd of their IPO value also reflect a gloomy trend ahead. Although the demand of housing is genuinely high, the sky high prices keep away the mass buyers.

The real estate players should learn a lesson or two from their global counter parts or else they might be in a bad state very shortly!!

3rd Blog Anniversary

Easycrafts blog and Personal Finance blog celebrates its 3rd blog anniversary today. With a little less than 250 craft projects and about 265 articles on managing your finances, we thank you for your continued support extended towards these two blogs...

Here is a small cupcake in crochet to celebrate the occassion-

Telecom- the fall of tariff and stock prices

Reliance's "50 paisa for all calls" announcement and TRAI's per second tariff suggestion have brought down all the telecom stocks . The leader Bharti is down almost 23% in 3 days and idea is trading below it's issue price. So, is it an end of all situation for the telecom world?.

Telecom has the widest reach of customers and no one can beat them in reach ( bottom of pyramid). There is a lot of rural penetration left . 3G, Net usage over phone are in their intial years. Banking opportunities are also foreseen for the telecom operators in rural areas ( may be in urban India too).

Tariff war, reduction in ARPU and more competition waiting to jump in are definitely negative factors. But some how I see a great future for telecom.

With reduction in tariff over the years, my bill has never come down and Internet usage over telephone network is going up. So, I see a huge opportunity in these big falls of telecom stocks.

In the long run these companies ought to bounce back strongly. Let's keep our fingers crossed till then . Such chaos mostly provide great opportunities.

should I buy bhart, rcom, idea, MTNL, BSNL at this level? is it a good buy. what returns will telecom give

Active vs Index (Passive) Investing

Index Investing is a passive way of investing . Having a bunch of stocks in portfolio exactly mirroring a stock in an index is a passive way of investing. This can be done by purchasing stocks mirroring an index and tracking the weight and readjusting the portfolio whenever the constituents or weightage in the index changes. Better is to buy an Index fund. This ensures that you get returns close to index.

Example if you bought an index fund of sensex when sensex was at 10,000 , it would have appreciated 70% when sensex is around 17,000. ( Returns would be exactly similar to the index minus tracking error , of a fund or an investor).

If someone believes that actively choosing stocks from the wide range of stocks available, invests in them then it is active investing.

In India most equity funds are actively managed funds. The index funds generally involves a lesser cost. Actively managed funds have managed to beat indices (on an avg.) many a times, excepting 2005-07 period.

Investing in either of the type of funds should be made by an investor after understanding the nature of products clearly.It's also not a bad idea to diversify your investments between active and passive funds.