Price tag...
🧵
One Sunday morning in pheonix mall at mumbai something unusual happened.
Customers noticed shirts with price tag of Rs. 20k+, pair of trousers for Rs.15k+.
A leather wallet for Rs. 13k and a jacket for mind-blowing Rs. 40k.
1/11
One curious customer went to a sales staff and found that she was showing a man Rs. 225/- 24 carat 7gm gold chain. When he looked inside the counter he saw a real diamond ring for Rs.95/-
2/11
Shocked at this he asked the sales staff "How could a gold chain sell for Rs.225, and a normal shirt sell for Rs. 20k. This is ridiculous".
3/11
The sales staff said "last night a group of mischievous teenagers broke into the shop and changed the price tag on everything ".
4/11
She said since morning everyone is confused, people are acting like they have lost their sense of value.
They are willing to pay lots of money for cheap things of little value, and almost nothing for things of great value.
5/11
It's like they don't know what is really valuable and what's not.
She said, I hope we get the price tags back right soon as I really feel sorry seeing people pay way too much for things of little value.
6/11
This incidence at Pheonix Mall may sound like a dream and wud never happen in reality.
But this happens everyday in our stock market.
A group of mischievous people slid into market everyday and change the price tags.
7/11
They mark up the value of things that are actually cheap and of.low quality and put a huge discount on things that are really valuable.
And sadly many people fall in trap, before someone corrects the price tags.
8/11
But it is often too late by then and many people lose a lot of wealth buying cheap things while they are ready to pay almost nothing to real valuable things.
9/11
It is important to figure out such mischievous activities in stock market and stay away from them.
Spot things that are valuable but people are paying almost nothing. Just because someone changed its price tag doesn't mean it isn't valuable.
10/11
Ultimately someone will come and put the correct price tag. Keep eyes open and senses alive.
**End**
11/11
Reference from a whatsapp forward on life.
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Long term yields are attractive than short term yields.. how to benefit from this without getting caught wrong footed.. A 🧵
Thanks to a steep yield curve, (situation where long-term yields are higher than short term) many investors today are left confused.
1 year maturing bonds are yielding around 4% to 4.5%, while longer maturity bonds are yielding around 6.5% -7%. The term-spread (1 yr. over 10 yrs. maturity bond yield) of over 2.5% is at decadal high levels.
The dilemma amongst investors is on 2 counts:
Investing in long-term bonds does look attractive as yields are higher, but it also seems risky for many as they expect RBI to reverse policy stance at some point in future. And if yields rise, bond prices may fall.
A 🧵 on how negative real rates impact economy, savings and markets.
What should investors do during periods of negative real interest rates like now?
1/n
Real interest rate is
(Nominal interest rate - inflation)
If RBI policy rate is 4% and inflation is 2%, then the real interest rate in the economy is 2%
On the other hand, if inflation is 6%, then the real interest rate is -2% (negative real rate)
2/n
Today, we are in a negative real rate territory.
RBI policy rate is 4% (actually lesser than this due to excessive liquidity) and inflation is inching between 5% to 6%. Hence, the real rate in the economy is negative in the range of 1% to 2% since months now.
3/n
1. Don’t bother to track every penny you spend. You'll lose focus on the big picture.
Instead, focus saving big on those big ticket items. Cut down on large, recurring purchases and then later, if necessary, focus on penny items.
1/n
Spend money on things that you really enjoy and not on those you don’t. As Ramit Sethi said best “live a rich life by spending EXTRAVAGANTLY on the things you love, and cut costs mercilessly on the things you don’t”.
2/n
2. Pay off your high interest credit card and personal loans before you start saving. Saving high with debt yet to be paid off gets you on the wrong side of the compounding.
3. Start saving and invest that savings as soon as you start earning. Taking risk becomes comforting
3/n
A thread explaining difference between ETFs and Index Funds.
What are ETFs and Index Funds?
Both are from the same family called passive funds, which mirror the index that they follow.
They both aim to track the performance of the underlying index as close as possible.
1/n
What is the difference between Index Funds and ETFs?
The key difference is unlike index funds, ETFs are listed on exchange and one can invest at real time NAV. 2/n
How it works?
ETFs have a unique structure. There are 3 parties involved - AMC, Exchange and Market Maker.
Most retail investors can buy/sell ETFs on exchange, whereas large investors can invest through AMC also if they are investing large amount (usually above 50 lkhs)