Wednesday, December 26, 2012
Friday, December 21, 2012
Friday, December 14, 2012
The Fall & Rise of Arvind Mills:
Sanjay Lalbhai (M) with sons Kulin (L) and Punit (R) at the Arvind headquarters in Ahmedabad
Punit and Kulin Lalbhai were schoolboys, aged 16 and 13, when Arvind Mills came close to bankruptcy in 1998. The Lalbhai group flagship had piled up huge debts to finance capacity expansion, just at a time when demand for its main product, denim, went on a decline and managing director Sanjay Lalbhai was in negotiations with 85 domestic and international lenders to restructure the debt. What was it like at home? "Dad absorbed the stress like a sponge," says Punit. "He protected us all from what was going on at Arvind. We weren't exposed to the pressure."
Now designated executive director in charge of Arvind's new advanced textile materials business, the 30 year old Punit has inherited a valuable asset from his father - a deep resonant voice, which he combines with a wry wit gained from his years as a would be activist doing environmental studies at University of California Davis. The 27 year old Kulin, on the other hand, has inherited the Lalbhai enthusiasm for business. A graduate of Stanford, with an MBA from Harvard, the younger sibling in also an executive director on Arvind's Board, with specific charge of the new Arvind store business. He remembers very little from the tough days the group went through. "Punit and I are working with a clean slate. We have the privilege of looking to the future," he says.
Sanjay Lalbhai has made the going easier for his two sons by putting them in charge of nascent projects where they can choose their own teams, though it also means they will have no one to blame if the projects don't succeed. Succession planning has come a long way since Lalbhai's own days, when he was inducted into the family business as purchase manager, which he quite hated.
That's when he went off and started a series of business ventures of his own, like Amtrex air-conditioners and Anagram Finance. These ventures have since been sold, but valuable lessons were learnt in getting them up and running, the same lessons Punit and Kulin are now imbibing. "They are entrepreneurs with their own projects and the businesses they handle are important to our overall strategy. Now they have to create a track record and earn the respect of other senior managers," says Lalbhai.
The company that the two brothers are set to inherit will certainly be very different from what it was when they were teenagers. Arvind has always had an uncanny knack for reinventing itself, first as one of the world's biggest denim manufacturers, then as a marketing-led company with a large roster of famous apparel brands and more recently as a major player in retail. "The company has never been resistant to change," says Lalbhai. "We are now in the whole value chain of textiles and we have a presence in real estate, telecom and engineering, which we will grow.
Eventually, we want to be a conglomerate.
In a growing economy, there are opportunities beyond core competence."
Observers say Lalbhai's plan to be a conglomerate is part of his succession strategy - he wants to create something that can be divided without being torn apart. But all that is still far away. At 58, Lalbhai is not exactly patriarch material.
He's recently lost a massive amount of weight through a crash diet and looks fighting fit and very much in control.
"After a long time I have a feeling of comfort that comes from having the right people in the right position. We had to experiment and make changes along the way, but now things have fallen into place," he says.
One of Lalbhai's 'right people in the right position' is Suresh J, managing director & CEO of Arvind's two Bangalore based subsidiaries, Arvind Lifestyle Brands and Arvind Retail. A former Hindustan Unilever (HUL) man, he visualises Arvind as the 'HUL of apparel', with a brand strategy for every segment. The company currently has a portfolio of 25 brands, of which 13 (such as Flying Machine, Excalibur) are homegrown and 12 (like Arrow, US Polo Assn) are lisenced.
Suresh is in conversation with a dozen more global brands that want to enter India and says, "We want to tie-up with those that operate in a growth segment that doesn't clash with our existing portfolio.
For example, we've just tied up with Nautica, so we're not looking at men's sportswear brands right no."
One of Arvind's big successes has been in transforming its Megamart 'factory outlets' into a Rs 550 crore value-store brand operating mostly in the southern states and Maharashtra. Megamart has given the company credentials in the retail brand space, recently leading to a tie-up with British department store Debenhams and Next, which has a kidswear range that Arvind is particularly keen on leveraging. In womenswear, it has tied up with Elle, of the magazine fame. "These are good times for branded apparel. People are spending more on looking good. It's a very profitable business if you get the business model right," says Suresh.
Brands and retail currently make up 27% of Arvind's Rs 5,000 crore turnover and 12% of its Rs 436 crore net profits. With new brands being acquired every year, the company has made an ambitious projection that this business alone will grow to Rs 5,000 crore in five years time. Fabrics, once the company's mainstay, are projected to play a smaller part in the company's business portfolio in the years ahead. Take denim, the fabric Arvind is famous for. Its share in total turnover has reduced from 60% five years ago to 35% currently and this is expected to reduce further to less than 20% in five years.
That's hardly good news for Aamir Akhtar, CEO, denim, but he speaks up bravely in his fabric's defense, saying, "The denim business has actually grown at an average of 10% annually, though the company's dependence on it has gone down. We have moved out of commodity denims to differentiated denims where we have developed knowledge and expertise that others can't match."
There's seemingly no limit to denim innovation.
Stretch denim is already passe, and the latest products coming out of Arvind's design studio include linen denims, jacquard denims that can be worn or used in furnishings, denim coated to look like leather, denim coloured on the inside. Meanwhile, Arvind has reduced its dependence on the fickle export market which once let it down so badly.
Today, half the company's denim sales are in the domestic market and most of this goes to the unorganized sector, finding its way into the unbranded jeans sold on streets. "These guys have a low cost structure, but they don't compromise on fabric quality. The mass market is the growth market. In the developed world, each person buys six pairs of jeans a year. In India the figure is only 0.3, so we have a way to go," says Akhtar.
Arvind has always kept an eye on the mass market, its luxury brand portfolio notwithstanding.
In the mid-90s, it launched a brand called 'Ruf'n'Tuf', which consisted of a length of denim with accessories like rivets and a zip, which the aam admi could get stitched. It was a great initiative that failed, mainly because it was found that the tailor-made jeans didn't quite make the grade. The company is now making another attempt to reach out to small-town customers, this time through a chain of Arvind stores. Modelled on the Raymonds stores, these outlets will stock fabric in thaans, as well branded apparel.
"We have brought so many iconic global brands to India, while our own brand has lost mindspace," says Kulin Lalbhai, who is in charge of the project. "People in my age group haven't been exposed to the Arvind brand, though we have actually been in the retail space for 80 years. Arvind still has strong brand equity and we are capitalising on that through new format stores."
Over the past two years, Arvind has been testing the concept in Andhra Pradesh, with 30 stores in places like Attapur and Anantapur, where rural incomes are relatively high. These stores stock cotton fabrics as well an outsourced range of wool and poly-wool blended fabrics and each store has its own tailor.
The Andhra experiment has been successful and the company now plans to open stores at the rate of five a month.
"India will never give up bespoke clothing," says Kulin. "The idea is to give this segment styling services through our tailors, who will offer them the latest cuts, supplied by our design studios."
The dynamics of the global fashion industry have been changing since the economic downturn, with top brands now leaving fabric design to suppliers like Arvind. Susheel Kaul, Arvind's CEO for knits and woven fabrics, consequently has a big say in what the world wears, season after season. Knits and woven fabrics have now overtaken denim in terms of turnover and Kaul says, "More than 80% of our designs are accepted by our customers, which include brands like GAP, Zara, M&S, Marco Polo. We have developed the capability to make intricate fabrics that give us an edge. For example, we make indigo dyed fabrics that go into shirts and dresses which give us an EBITA of 25%."
While denim is made in the Arvind's old mill in Ahmedabad, non-denims are made in the new Santej textile complex (the project which nearly drove the company bankrupt).
Santej is also home to the company's new advanced textiles business, which is developing materials that go into bullet-proof jackets and fire-proof clothing. The division, headed by Punit Lalbhai, has recently signed up for a joint venture with Germany's PD Fibreglass group for making glass fabrics for the automobile, energy and aerospace industries. At his first Board meeting as an executive director, Punit's time was spent explaining what the business is all about. Though he's settled into his role in the family business and even done an MBA from INSEAD, Punit can't resist talking about his other vocation. "Our Board might benefit from having an environmentalist.
Our global customers certainly do appreciate my environmental concerns," he says.
On surplus land located near its facilities in Santej, Arvind is executing a Rs 1,400 crore low cost residential housing project in equal partnership with Tata Housing. In Ahmedabad, Arvind Realty has redeveloped what was once a mill property into a residential and commercial complex, and in Whitefield, Bangalore, the company has developed a parcel of land that was previously a garment factory into a residential complex called Arvind Expansia.
Real estate currently contributes less than Rs 100 crore to Arvind's top line, but it is set to grow. "We started with the idea of monetizing our own surplus land, but these projects have given us the confidence to become a fullfledged real estate player in Gujarat," says Kamal Singal, CEO, Arvind Infrastructure.
"We are now buying land in Ahmedabad with the idea of creating townships. Many people are also coming to us with proposals to develop their land. The internal rate of return in this business is 30%, so it is very attractive."
That would be music to the ears of long time CFO Jayesh Shah, who navigated Arvind through the stormy waters of 1998.
The company is in the pink of financial health now, having reduced its debt-equity ratio 0.9 (from 1.8 three years ago) on the back of increased net worth. It finally rejoined the dividend club this year and Shah says, "More than 27% of our shares are held by retail investors, who value dividend pay outs. But more importantly, it makes a statement that we can maintain this level of performance in the future."
Source: The Economic Times
Punit and Kulin Lalbhai were schoolboys, aged 16 and 13, when Arvind Mills came close to bankruptcy in 1998. The Lalbhai group flagship had piled up huge debts to finance capacity expansion, just at a time when demand for its main product, denim, went on a decline and managing director Sanjay Lalbhai was in negotiations with 85 domestic and international lenders to restructure the debt. What was it like at home? "Dad absorbed the stress like a sponge," says Punit. "He protected us all from what was going on at Arvind. We weren't exposed to the pressure."
Now designated executive director in charge of Arvind's new advanced textile materials business, the 30 year old Punit has inherited a valuable asset from his father - a deep resonant voice, which he combines with a wry wit gained from his years as a would be activist doing environmental studies at University of California Davis. The 27 year old Kulin, on the other hand, has inherited the Lalbhai enthusiasm for business. A graduate of Stanford, with an MBA from Harvard, the younger sibling in also an executive director on Arvind's Board, with specific charge of the new Arvind store business. He remembers very little from the tough days the group went through. "Punit and I are working with a clean slate. We have the privilege of looking to the future," he says.
Sanjay Lalbhai has made the going easier for his two sons by putting them in charge of nascent projects where they can choose their own teams, though it also means they will have no one to blame if the projects don't succeed. Succession planning has come a long way since Lalbhai's own days, when he was inducted into the family business as purchase manager, which he quite hated.
That's when he went off and started a series of business ventures of his own, like Amtrex air-conditioners and Anagram Finance. These ventures have since been sold, but valuable lessons were learnt in getting them up and running, the same lessons Punit and Kulin are now imbibing. "They are entrepreneurs with their own projects and the businesses they handle are important to our overall strategy. Now they have to create a track record and earn the respect of other senior managers," says Lalbhai.
The company that the two brothers are set to inherit will certainly be very different from what it was when they were teenagers. Arvind has always had an uncanny knack for reinventing itself, first as one of the world's biggest denim manufacturers, then as a marketing-led company with a large roster of famous apparel brands and more recently as a major player in retail. "The company has never been resistant to change," says Lalbhai. "We are now in the whole value chain of textiles and we have a presence in real estate, telecom and engineering, which we will grow.
Eventually, we want to be a conglomerate.
In a growing economy, there are opportunities beyond core competence."
Observers say Lalbhai's plan to be a conglomerate is part of his succession strategy - he wants to create something that can be divided without being torn apart. But all that is still far away. At 58, Lalbhai is not exactly patriarch material.
He's recently lost a massive amount of weight through a crash diet and looks fighting fit and very much in control.
"After a long time I have a feeling of comfort that comes from having the right people in the right position. We had to experiment and make changes along the way, but now things have fallen into place," he says.
One of Lalbhai's 'right people in the right position' is Suresh J, managing director & CEO of Arvind's two Bangalore based subsidiaries, Arvind Lifestyle Brands and Arvind Retail. A former Hindustan Unilever (HUL) man, he visualises Arvind as the 'HUL of apparel', with a brand strategy for every segment. The company currently has a portfolio of 25 brands, of which 13 (such as Flying Machine, Excalibur) are homegrown and 12 (like Arrow, US Polo Assn) are lisenced.
Suresh is in conversation with a dozen more global brands that want to enter India and says, "We want to tie-up with those that operate in a growth segment that doesn't clash with our existing portfolio.
For example, we've just tied up with Nautica, so we're not looking at men's sportswear brands right no."
One of Arvind's big successes has been in transforming its Megamart 'factory outlets' into a Rs 550 crore value-store brand operating mostly in the southern states and Maharashtra. Megamart has given the company credentials in the retail brand space, recently leading to a tie-up with British department store Debenhams and Next, which has a kidswear range that Arvind is particularly keen on leveraging. In womenswear, it has tied up with Elle, of the magazine fame. "These are good times for branded apparel. People are spending more on looking good. It's a very profitable business if you get the business model right," says Suresh.
Brands and retail currently make up 27% of Arvind's Rs 5,000 crore turnover and 12% of its Rs 436 crore net profits. With new brands being acquired every year, the company has made an ambitious projection that this business alone will grow to Rs 5,000 crore in five years time. Fabrics, once the company's mainstay, are projected to play a smaller part in the company's business portfolio in the years ahead. Take denim, the fabric Arvind is famous for. Its share in total turnover has reduced from 60% five years ago to 35% currently and this is expected to reduce further to less than 20% in five years.
That's hardly good news for Aamir Akhtar, CEO, denim, but he speaks up bravely in his fabric's defense, saying, "The denim business has actually grown at an average of 10% annually, though the company's dependence on it has gone down. We have moved out of commodity denims to differentiated denims where we have developed knowledge and expertise that others can't match."
There's seemingly no limit to denim innovation.
Stretch denim is already passe, and the latest products coming out of Arvind's design studio include linen denims, jacquard denims that can be worn or used in furnishings, denim coated to look like leather, denim coloured on the inside. Meanwhile, Arvind has reduced its dependence on the fickle export market which once let it down so badly.
Today, half the company's denim sales are in the domestic market and most of this goes to the unorganized sector, finding its way into the unbranded jeans sold on streets. "These guys have a low cost structure, but they don't compromise on fabric quality. The mass market is the growth market. In the developed world, each person buys six pairs of jeans a year. In India the figure is only 0.3, so we have a way to go," says Akhtar.
Arvind has always kept an eye on the mass market, its luxury brand portfolio notwithstanding.
In the mid-90s, it launched a brand called 'Ruf'n'Tuf', which consisted of a length of denim with accessories like rivets and a zip, which the aam admi could get stitched. It was a great initiative that failed, mainly because it was found that the tailor-made jeans didn't quite make the grade. The company is now making another attempt to reach out to small-town customers, this time through a chain of Arvind stores. Modelled on the Raymonds stores, these outlets will stock fabric in thaans, as well branded apparel.
"We have brought so many iconic global brands to India, while our own brand has lost mindspace," says Kulin Lalbhai, who is in charge of the project. "People in my age group haven't been exposed to the Arvind brand, though we have actually been in the retail space for 80 years. Arvind still has strong brand equity and we are capitalising on that through new format stores."
Over the past two years, Arvind has been testing the concept in Andhra Pradesh, with 30 stores in places like Attapur and Anantapur, where rural incomes are relatively high. These stores stock cotton fabrics as well an outsourced range of wool and poly-wool blended fabrics and each store has its own tailor.
The Andhra experiment has been successful and the company now plans to open stores at the rate of five a month.
"India will never give up bespoke clothing," says Kulin. "The idea is to give this segment styling services through our tailors, who will offer them the latest cuts, supplied by our design studios."
The dynamics of the global fashion industry have been changing since the economic downturn, with top brands now leaving fabric design to suppliers like Arvind. Susheel Kaul, Arvind's CEO for knits and woven fabrics, consequently has a big say in what the world wears, season after season. Knits and woven fabrics have now overtaken denim in terms of turnover and Kaul says, "More than 80% of our designs are accepted by our customers, which include brands like GAP, Zara, M&S, Marco Polo. We have developed the capability to make intricate fabrics that give us an edge. For example, we make indigo dyed fabrics that go into shirts and dresses which give us an EBITA of 25%."
While denim is made in the Arvind's old mill in Ahmedabad, non-denims are made in the new Santej textile complex (the project which nearly drove the company bankrupt).
Santej is also home to the company's new advanced textiles business, which is developing materials that go into bullet-proof jackets and fire-proof clothing. The division, headed by Punit Lalbhai, has recently signed up for a joint venture with Germany's PD Fibreglass group for making glass fabrics for the automobile, energy and aerospace industries. At his first Board meeting as an executive director, Punit's time was spent explaining what the business is all about. Though he's settled into his role in the family business and even done an MBA from INSEAD, Punit can't resist talking about his other vocation. "Our Board might benefit from having an environmentalist.
Our global customers certainly do appreciate my environmental concerns," he says.
On surplus land located near its facilities in Santej, Arvind is executing a Rs 1,400 crore low cost residential housing project in equal partnership with Tata Housing. In Ahmedabad, Arvind Realty has redeveloped what was once a mill property into a residential and commercial complex, and in Whitefield, Bangalore, the company has developed a parcel of land that was previously a garment factory into a residential complex called Arvind Expansia.
Real estate currently contributes less than Rs 100 crore to Arvind's top line, but it is set to grow. "We started with the idea of monetizing our own surplus land, but these projects have given us the confidence to become a fullfledged real estate player in Gujarat," says Kamal Singal, CEO, Arvind Infrastructure.
"We are now buying land in Ahmedabad with the idea of creating townships. Many people are also coming to us with proposals to develop their land. The internal rate of return in this business is 30%, so it is very attractive."
That would be music to the ears of long time CFO Jayesh Shah, who navigated Arvind through the stormy waters of 1998.
The company is in the pink of financial health now, having reduced its debt-equity ratio 0.9 (from 1.8 three years ago) on the back of increased net worth. It finally rejoined the dividend club this year and Shah says, "More than 27% of our shares are held by retail investors, who value dividend pay outs. But more importantly, it makes a statement that we can maintain this level of performance in the future."
Source: The Economic Times
Tuesday, December 4, 2012
Best Investment Strategy : An analysis
I was interested in a mail in my inbox this morning. The subject line read "IDFC Premier Equity Fund has doubled the investment amount over the last 7 years for an SIP Investor". That kindled my curiosity to study this fund further.
In 'olden days' there was an investment with Post office schemes called Kisan Vikas Patra (KVP), where the money you invest would double in 8 years. This was possible at a compound interest rate of 9%. And it was an one shot investment. But now KVP has been stopped. Many investors would thing that it is the end of the tunnel and gone are the days of money doubling schemes.
But here it is an Systematic Investment Plan ( just like an RD) which has doubled the investment. For this fund to double in value over 7 years means .... I made a small calculation. Along with that I tried to test VIP and STEP strategy. The results are summarized below:
This table shows some interesting facts:
- First and foremost : The fund has performed far better than the actual index. Hats off to the Fund Manager and Team.
- An SIP on the fund delivered 18%+ return Vs 6.5% by the index. That is a clear outperformance.
- And our VIP Investment Strategy scores far better than theSIP :
- By investing Rs.8,30,000, the SIP grew to 16,85,261, resulting in a profit of Rs.8,55,262.
- But in VIP, an investment of just Rs.4,43,083 grew to Rs.13,17,280 : resulting in a net profit of Rs.8,74,000 ( higher than SIP's profit).
- VIP grew at 27.84% compounded annually
- SIP's grew at 18.84% CAGR.
- Our Latest Investment strategy : STEP : grew by 23.16%.
- One facinating fact is :
- Investing lesser amount
- for same duration,
- in same fund
- - yields more returns
- - IF we adopt to superior investment strategies.
- STEP is primarily an investment strategy to accumulate and block higher capital on profitable investments.
- VIP is aimed at maximizing the investment returns and not deploying higher capital.
- SIP is simply a disciplined approach to investments. It works just like an RD. It is the easiest among the three to operate.
- One major contracting feature is : the returns out of investing in Index is meager for SIP/VIP/STEP. This is the actual return the market would deliver. The excess return you get out of the fund is because of quality fund managers and their ability to pick right stock.
- Going by global standards, till such time India is a developing economy you may get such outperformance in actively managed funds. But once economy gets matured, you need to expect only the returns of an index - In this case - anywhere between 6% to 8%.
- We expect the fast pace of growth in Indian economy to remain till Year 2018-2020 or so. After 2020, Investors needs to understand and and be prepared to brace for single digit returns.
- Hence time is short. We are in December 2012. Make use of the remaining time to invest in Indian markets and maximize your returns by adopting suitable investment strategy like SIP/VIP/STEP.
For clarifications or assistance in understanding the above mentioned concepts, feel free to email us at : easyinvest@gmail.com or call us. We would be glad to explain the same in greater details.
Investors need to note that the returns out of equity market are subject to market conditions and past performance may or may not be repeated in the future. Investors need to read the scheme information document of respective mutual funds before investing. All we are advocating is that with suitable investment strategy, you can minimize risk and maximize the returns - just like the way it is illustrated above.
Sunday, December 2, 2012
Emotionless Investing:
Investor’s biggest enemies are not the volatile markets / unstable government / lack of reforms, but their own emotions. In many occasions, they are tempted to make investments when they SHOULD NOT HAVE made it and in other occasions they prefer not to invest when they SHOULD HAVE made it.
Theoretically speaking, an investor needs to:
- Invest when Purchase Price is ‘Cheap’ / Valuations are ‘Cheap’.
- Keep Investing (adding) as the price gets cheaper.
- With each price fall, you should be investing more for better Return on Investments.
- Invest with specific target price (profit) in mind and ‘Blindly’ sell when your profit reaches.
- Have clear distinction between Long Term Investments and Short Term investments.
- Invest only in Top Class companies with proven track record and good management.
- Not invest in penny stocks / fancy stocks (not to chase stocks) which may fly high due to media publicity.
- Above all – Research - before you invest – Not after investing.
All these facts are known to everyone. But when it comes to practical implementation, it is definitely difficult – all due to emotions. Investors turn pessimistic when no one is investing and Investors are hyper-optmistic (euphoric) when everyone is investing. By and large, Investing happens to be a ‘mass mentality’ process.
To overcome this 'EMOTION' problem, we need NEUTRAL, Unbiazed Strategies. At EASY Investments, we have deviced Investment strategies for specific requirement. Some of them may fit your requirements. Hence read our specific articles on following to know more:
"Trigger" Strategy:
- Logic
- It is usual for investors to make adhoc investment and book profit at later stage. But the problem is keeping watch of the portfolio and booking profits.
- Though at the time of investment investors expect a basic minimum return, many of us turn greedy and stay invested hoping for huge returns. And ultimately when the market collapses, all the accumulated profit gets washed away and sometimes even we incur capital loss.
- Hence we have a simple solution of fixing a trigger price / profit trigger percentage. Once the investment grows and hits this trigger, investments are redeemed either in part or in full as per the investors instruction and the profit gets credited to bank account.
- Advantages of Trigger based investments:
- Trigger can be set for both investing (switching into equity) and booking profit.
- At the time of investment itself we set this trigger. Hence human emotions donot disturb while booking profit. It is the best way to realize profits – without watching it everyday.
- Suited for :
- Vast Majority of investors - who make adhoc, one time investments.
- Investors who want to book partial profit can also consider these triggers.
- At EASY Investments, we assist you in setting these triggers and encash your profits.
VIP Strategy - For investing in Volatile Market:
- Logic:
- Markets are unpredictable and volatile. For those investors who are often caught in a dilemma of weather to invest now or wait, VIP is the best investment strategy.
- Typically VIP invests MORE when price is low and invest LESS when price is high and not invest at all when price is too high.
- By adopting a calculated approach, you would be able to make the desired investments.
- VIP theory was originally formulated at Havard University as “Safe and Easy Strategy for Higher Investment Returns”.
- Advantage of VIP:
- So far investors knew that they need to invest when price falls. But they did not have a tool to calculate how much to invest at various price. Hence they were investing ‘FLAT’ amount so far through concepts like SIP.
- For the first time, we have this tool called VIP which precisely calculates the EXACT amount to invest as the specific price.
- The out performance of VIP over other investment strategy is amazing. For an investment made since Jan 2011 an one time investment in a bluechip fund would have delivered a doubt digit negative return. Where as VIP Investments delivered double digit positive returns in the same period.
- Being engineered at EASY Investments, we have systems in place to track the market and maximize the investment returns through VIP. We have been practising VIP since 2009.
- Suited for :
- Anyone who has an investment horizon of three years+.
- Though profit can be booked when the desired growth has happened, ideally VIP should be used to create a good long term portfolio. It does not make sense to cut a tree which you have grown another plant in the same place.
- A Basic model of VIP would require Rs.3.5 Lakhs and an inflation adjusted VIP would require 5 Lakhs.
- We had been practicing VIP Investments for past three years and their results have been AWESOME. Practically, it fits every investors needs, since there is dilema of whether to invest or not to invest. VIP guides us to invest through the up's and down's of market.
- To read our earlier publications on VIP Strategy, Click the following links:
STEP Strategy:
- Logic:
- Many investors would like HOLDING certain companies for LONG period– be it for various reasons like high dividend yield, promotes background or rich corporate benefits like bonuses. No doubt, LONG TERM WEALTH CREATION is purely due to holding the right share for long period.
- For instance an investment of Rs.10000 in pharma company CIPLA in 1979 got allotted 100 shares of FV 100. But after series of bonuses and stock splits this 100 shares has multiplied to 36,00,000 shares ( Yes, Thirty Six Lakh Shares !) of Rs.10 Face Value (FV) over a period of 31 years. And its current market price is Rs.142 Crores !!! Beyond the market value, the dividend received on these shares per annum itself is a whooping Rs.72 Lakhs!
- For better understanding, Rs.10,000 invested over 31 years at 15% compounded returns would have resulted in just Rs.7,61,435 – without any interest payments.
- We typically keep watch on the stock which you wish to accumulate and keep advising for investing as the price goes down. Since it is for long term investment, we donot recommend or advise you on selling.
- Advantages of STEP:
- It is logical to invest more in your favorite stock when the price is low and hold them for long term.
- If this STEP strategy is applied on good corporate benefit giving stock like CIPLA etc, then the investment has Triple benefit of Capital appreciation, stock multiplication and dividend yield.
- Someone needs to keep track of the stock which you wish to accumulate. At EASY Investments, we keep track of it and keep you informed only when the price comes down. Though this may sound simple, keeping track - that too on a daily basis and communicating to you only when the price goes down is a manpower consuming job.
- Investors who have intention to invest as and when the stock price comes down.
- Investors who have understood the stock fully and are willing to reap the benefits of long term investing.
- Long Term investing means - not selling or booking profit in short term. One must be willing to hold the investment for life time or atlest more than 10 Years. Hence any one with investment horizon of more than 10 years only need to consider this option.
- Moreover Investor needs to be aware that his investment would get blocked, since it is not a churning portfolio.
- Investment commitment would depend upon the degree to which the stock price falls. If the fall is more, then more investments need to be made.
- AIP strategy can be used for both shares and Mutual Funds.
- STEP Strategy could be part of anyones core portfolio building process.
MOST - STP : Short Term Profit Booking Strategy
- Logic:
- Under STP, bluechip shares are bought at lower price and sold at higher price. As simple as it is. This theoretical, easy to understand strategy has been put into practical use by MOST-STP.
- We advise investments in a gradual phase, as the price comes down by fixed percentage and we advise booking profits (selling) as the price goes up. Hence notional profits are realized as REAL profits.
- This investment strategy is more like a business, where in you invest a capital. The profit realized are being pulled out / paid out on monthly basis
- Advantages of this MOST-STP Strategy are:
- By adopting a staggered investment and profit booking strategy, the investment capital does not get blocked.
- By investing in bluechip shares, even if the stock price goes down, they turn out to be good investments which are bound to recover first when market revives.
- There is a constant cash flow as the profit gets booked.
- We avoid holding the stocks emotionally. We encash the higher price. What is bought, needs to be sold to ‘really’ gain.
- We donot rush in to invest all the funds. We invest gradually – thus avoiding getting trapped at higher prices.
- It is more like a business, wherein you expect some return on your investment (cash flow).
- At EASY Investments, we have tracking software to assist you in making MOST-STP Investments.
- Suited for :
- Investing in stock market to realize short term profits.
- Investors can hold same stock in short term strategy ( for short term profit booking) and have another part as part of long term investment strategy. We isolate STP stocks and advise on profit booking.
- Anyone who wishes to invest fixed capital : say Rs.5 lakhs and above and make use of short term opportunity to make profits.
Subscribe to:
Posts (Atom)
