War in the Middle East and possible investment implications The war has shaken the global economic equilibrium and threatens to cause stagflation, which means lower growth and higher inflation all across the world. With my limited understanding, I am sharing three possible scenarios and how these will have an impact on different asset classes: Scenario 1 (Best Case): Ceasefire announced shortly, and the initiation of talks to reach a solution. This scenario has a higher…
3 years ago, a family office in Europe hired a trader from a highly reputed bank in India to manage their family wealth after a significant liquidity event from selling the business. The corpus size was around $100 million. The family had a choice to hire a trader or a wealth manager for this role. They decided to hire the trader after hearing from him about lofty outcomes and a lower salary ask. The trader, being…
I met a promoter of an established large wealth management company recently and asked him about his thoughts on the fee-based advisory model. He was frank enough to tell me that he sees a sharp dip in his company’s revenue if they move to an advisory model. For managing a single portfolio size of INR 100 Cr, he gets commission in the range of INR 1-1.5 Cr per annum without the client exactly knowing about it. Whereas,…
Love and ego can’t stay together, but love and self-respect (along with humility) go a long way.It becomes challenging for humans to distinguish between ego and self-respect.Heck, humans most of the time don’t even know what emotion is driving them.Ego is proving oneself right. Without ego, one looks for what is right.Ego makes you feel that your point of view is the absolute truth. Without ego, you are open to the idea that your perception…
Gordon Gekko popularised the phrase Greed is Good when he said, “greed, for lack of a better word, is good” in the 1987 film Wall Street.Many people have lapped on this phrase, and a few justify their greed for money by giving this example. Human beings naturally get affected by greed and fear. Depending on person to person, the degree matters. Some people are extremely blatantly greedy on one extreme, and a minuscule number don’t get influenced by greed for…
The world order started changing in 2008 when significant quantitative easing (QE) – money printing and near-zero interest rates, was announced by major central banks led by the US Fed during the subprime crisis.Although, that provided stability to the financial markets and the economy, the US economy never recovered from the debt trap. Any attempts to reduce quantitative easing lead to stock market tantrums and economic slowdown.Actions taken during Covid accelerated the debt burden. 20%…
Equity markets are giving mixed signals. Many people are wondering whether the markets will go up or down from here.Here is my take.Below are the factors which could lead to further market decline:1. Tariff wars leading to retaliatory actions from different countries. In such wars, everyone suffers. It leads to inefficiency, unpredictability, and distrust in the system, leading to higher inflation and a slowdown.2. Disappointing corporate profitability: Uncertainty results in delayed decisions and outcomes. A correction in…
There has been a raging debate about active versus passive funds for many years.John Bogle, the father of index investing, has popularized the concept of passive funds. His idea was simple – most active funds underperform the index in the USA after costs (including taxes) and therefore one should invest in low-cost funds that mimic holdings of an index.These passive funds are also traded on stock exchanges and are known as exchange-traded funds (ETFs).The concept has…