Flame Newsletter - March 07 2012

A fund manager's expertise doubles an investor's money in a year's time and triples a company's stock in six months.

March 07, 2012 2:38 IST | India Infoline News Service



“The only sure thing about luck is that it will change” - Francis Bret Harte

Nothing can continue in the same manner permanently. The same logic applies to the markets and stocks. They will neither only move up nor down. The situation is bound to change at some point and so is your luck.  Investors often mistake luck for skill. There are times when they may invest in a particular asset without understanding its fundamentals and the risks involved and may actually gain from it. However, emerging unscathed from a bad investment is not always possible. One should not rely on luck for investing but on research, knowledge and advice to some extent.




Luck or Skill - Which matters the most in finance?



Here is a question: A fund manager's expertise doubles an investor's money in a year's time and triples a company's stock in six months. Was it luck or skill that aided the fund manager to get the best out of the investment? If your answer is luck, the fund manager should be entitled to a portion of both the investors' profits.


Success is not clearly defined in Finance:

Luck and skill stand at two extreme ends in finance. If some view any superior performance as vindication of skill, others prefer to call it just pure luck. There are others who attribute all ‘superior performances’ in portfolio management as the personification of luck. Success is not clearly defined in finance. A portfolio manager cannot be called ‘successful’ only because he makes money for his investors. Nor can a company be termed as ‘good’ because it delivers better returns than its competitors.


In Finance, it is truly success when someone beats his own benchmark, and this too depends on the evaluator. Moreover, it is easier being successful with just luck. There is no guarantee that an investor would see higher level of returns from his portfolio selections the next year than those of his friend who chooses stocks based on astrological signs and has no financial sense. In Finance, one cannot afford to take too many trials and cannot expect to get lucky always.


However, traits such as consistency, transparency, awareness and humility will always help in determining whether a person is successful. An investor should look for a fund manager who has beaten the market for an extended period.


The manager should be transparent and make available a process of measuring returns and risk, and allow investors to observe that process. To get an added edge, he should also display his awareness of market developments by bringing up topics that others have not even touched upon, such as better information and analytical tools.





The term Black Friday was coined first on September 24, 1869, the day of the stock market crash in the US. Following it there have been several instances where days the markets have witnessed a deep fall have been prefixed with ‘Black.’ 




It is an act of fixing or stabilizing the price of something through manipulation or regulation of the market.




The outcome of the elections of five states on Tuesday shed light on the diminishing popularity of the Congress. Barring Manipur, the Congress put up a dull performance in other states. Concerns are looming that the setback the Congress has suffered will reflect in the policy agenda by the UPA-II at the Centre. One can only wait and watch to see the truth that fear holds, with the Union Budget, RBI Credit Policy Review and the Budget Session of Parliament all scheduled for the next power-packed week.


The hand fails to rock...SP pedals to glory



It is a common belief that one can only stand to make big gains if the amount he invests is huge. Also, many put off investing for a later stage in life thinking they are too young to invest. The following calculator will help you break such myths and understand how even a small amount invested each month can translate into big gains in the future. What’s more…the younger you start investing, the better.


Long run worth of my SIP 



FLAME (Financial Literacy Agenda for Mass Empowerment) is an IIFL initiative to promote financial literacy amongst the masses in order to make them an integral part of India's spectacular growth story.


In an era of accelerating GDP and rising per capita growth, financial literacy has become more critical than ever before such that we all reap the tangible benefits of the nation's economic prosperity. Financial inclusion has been quite high on the governmental agenda, given its emphasis on widening the Banking & Financial services network across the country. IIFL's FLAME initiative stands committed to complement this effort by helping common people gain financial growth and security though better awareness and education on the variety of financial products while avoiding the lure of and loss from unrealistic claims made by unscrupulous agents and ponzi schemes.


Our objective is to light a FLAME, as the name suggests, which will set ablaze a chain of FLAMEs across the country. The new-found light of knowledge will undoubtedly dispel the dark clouds of financial illiteracy and ensure the bright sunshine of financial growth and prosperity.


This portal is but one of the various IIFL initiatives that would be part of FLAME.



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