Quality of Earnings: Detecting When Reported Profits Don’t Translate Into Cash
Quality of Earnings: Detecting When Reported Profits Don’t Translate Into Cash Quality of earnings is a way of checking whether the profit a company reports is real, repeatable and backed by cash. A company can show a rising profit after tax (PAT) every year and still run short of money to pay suppliers, repay loans […]
Bond Duration and Interest-Rate Risk: How Rising Yields Affect Bond Prices
Bond Duration and Interest-Rate Risk: How Rising Yields Affect Bond Prices Bond duration tells you how much a bond’s price will change when interest rates move. When yields rise, bond prices fall, and the longer the duration, the bigger the fall. A bond with a modified duration of 7 loses about 7% of its price […]
Free Cash Flow vs Accounting Profit: What Investors Should Actually Analyse
Free Cash Flow vs Accounting Profit: What Investors Should Actually Analyse Most investors open a company’s results and look at one line first. It is the profit after tax (PAT), also called net profit. If it has grown, the quarter is called good. If it has fallen, the quarter is called bad. The trouble is […]
Economic Moats: How to Identify Companies With Durable Competitive Advantages
Economic Moats: How to Identify Companies With Durable Competitive Advantages Some companies earn high profits for twenty years in a row. Others see their margins collapse the moment a new competitor shows up with a lower price. The difference usually comes down to one thing: an economic moat. If you invest in Indian stocks for […]
Enterprise Value vs Equity Value: Understanding the Difference in Company Valuation
Enterprise Value vs Equity Value: Understanding the Difference in Company Valuation Two companies can show the same market cap and still be priced very differently. One may carry a heavy loan book while the other sits on a pile of cash. If you only look at the share price, you will miss that difference completely. […]
DCF Valuation in Practice: How Small Assumption Changes Can Transform Fair Value
DCF Valuation in Practice: How Small Assumption Changes Can Transform Fair Value DCF valuation (discounted cash flow valuation) is a method of estimating the intrinsic value of a stock by projecting the free cash flow a company will produce in future and discounting it back to today’s money at a rate that reflects risk. The […]
How to Stress Test Your Investment Portfolio Against Inflation, Recession and Market Crashes
How to Stress Test Your Investment Portfolio Against Inflation, Recession and Market Crashes Most investors check their portfolio on the way up. Very few check it on the way down, and that is exactly when it matters. Stress testing an investment portfolio means asking one plain question: if a bad year arrives, how much will […]
Portfolio Turnover: The Hidden Cost of Active Investment Strategies
Portfolio Turnover: The Hidden Cost of Active Investment Strategies Most investors check two numbers before they pick a fund or a strategy: last year’s return and the expense ratio. Very few look at a third number, which is how often the portfolio is traded. That number is called portfolio turnover, and it quietly decides how […]
Multi-Asset Portfolio Construction: Combining Equity, Bonds, Gold and Real Estate
Multi-Asset Portfolio Construction: Combining Equity, Bonds, Gold and Real Estate A multi-asset portfolio is an investment portfolio that spreads money across different asset classes, such as equity, bonds, gold and real estate, so that no single market decides your results. For an Indian investor, a common starting point is about 50% equity, 25% bonds, 15% […]
Benchmark Selection: Why Choosing the Right Benchmark Matters More Than Beating One in Investing
Benchmark Selection: Why Choosing the Right Benchmark Matters More Than Beating One in Investing Quick answer: A benchmark is the yardstick you use to judge an investment. If you pick the wrong one, every comparison after that is wrong too, whether your fund looks like a winner or a loser. In India, the right benchmark […]