Part 4: Strategy or How the heck do I get to Financial Freedom?
4.5 Use with the Nature of the Market to your advantage
What are the characteristics of the Market that you can use to define your Investing Strategy?
And as it is nicely put in the Pirates of the Caribbeans about the code of Pirates, “these are not really laws but more like the guiding principles”. And they are common sensical really. Just like the seven commandments in the Ten Commandments. The first three are really the hopes of a God who sounds more like a Jealous Partner.
Your strategy to reach your financial goals is to earn inflation-beating returns for a long-long time with the help of Mr. Market. How? By following some commonsensical guidelines and not trying to outsmart Mr. Market or by trying to know him enough to predict his behaviours. Here are the important characteristics of Mr. Market and the guidelines based on it that define your strategy.
Mr. Market keeps swinging between two extremes like a pendulum but you cannot predict when the pendulum will change directions or how far it will go in one direction. However, the further it goes in one direction the greater the...........Read More
Warning: Investment in securities market are subject to market risks. Read all the related documents carefully before investing.
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MoneyWorks4Me method for rating and ranking mutual funds for SIP
MoneyWorks4Me rating and ranking of funds for SIP is available to subscribers only. Moneyworks4Me is not a rating and
ranking agency, however it is required that users have a way of selecting funds and building a Portfolio. The method used by it are described below to enable users to understand the logic behind the rating and ranking Subscriber will find more details on this in the
various content made available from time to time. In case you need more please write to besafe@moneyworks4Me.com
MoneyWorks4Me rates and ranks mutual funds based on the following data-driven system:
Performance Consistency: This is measure based on whether the fund has beaten the benchmark index consistently. For
this we compare the 3-year rolling returns of the fund with the benchmark for a minimum of 5 years and preferable 10
years. The period of rolling is one month and holding period is 3 years. Fund are color-coded Green on Performance when
the fund beats the benchmark more than 90% of the time. It is Orange if it beats 80% to 90% of the time and Red if less
than 80%. Funds with less than 5 year data are color-coded Grey.
Quality of Portfolio Holding: Moneyworks4Me has color-coded stocks as Green, Orange and Red based on whether the
company's performance has generated a ROCE above a threshold level (cost of capital) over 10 years (minimum 6 years) and
generated positive Free Cash Flow. For Banks it checks whether ROE is greater than 15% and sales has grown over previous
year. Stocks that perform consistently on these combined metrics are color-coded Green (min score 14 out of 20), Orange
(between 8 and 14) and Red (less than 8 out of 20).
Fund are color-coded Green provided the portfolio has 70% holding in Green stocks but not more than 10% in Red stocks.
Funds with more than 15% Red stocks in the portfolio are color-coded Red. The rest are Orange funds
Funds ranking in screeners: Performance Consistency and Quality are two parameters used for ranking funds for SIP. The
ranking as follows GG, GO, GR, OG, OO, OR, RG, RO and RR.
With the same color-coded funds, the one with the higher Average 3-year rolling returns (over 5 to 10 years), the number
that appears in the Performance tag, ranks higher.
Here is the summary:
The third tag Upside Potential is not relevant for SIP. It is relevant for lumpsum investments in Mutual Funds.
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