CAGR Insights is a weekly newsletter full of insights from around the world of web.
| Index | 13-Apr-23 | 06-Apr-23 | Change |
| Nifty 50 | 17,828 | 17,599 | 1.30% |
| Nifty 500 | 14,954 | 14,759 | 1.32% |
| Nifty Midcap 50 | 8,677 | 8,551 | 1.47% |
| Nifty Smallcap 100 | 9,337 | 9,198 | 1.51% |
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CAGR vs XIRR
CAGR represents the average annual return between two specific dates. It considers the start date and the end date only. Therefore, if you have a lot of transactions between the start date and the end date, the CAGR may not give you a correct representation of returns.
XIRR on the other hand considers date-wise inflow and outflow and therefore gives a more accurate picture of returns.
This is relevant for all kinds of investments. For people investing in residential real estate, if you have annual costs that you incur on the property and rental income that you continue to get, an XIRR may give you a much better idea of the returns you make on the investment.
Here’s the list of curated readings for you this week:
Personal Finance
- The case for Index funds over active large-cap funds – In 2022, 88% of actively managed large-cap equity funds underperformed the S&P BSE 100, as per the S&P SPIVA India scorecard. Read here.
- SEBI to incorporate all expenses and taxes within TER – Currently, fund houses charge GST of 18% on the fund management component, which is over and above the maximum TER limit. In addition, fund houses pay brokerage to the security companies on MF transactions, which is over and above TER Read here.
Investing
- Buying right but selling wrong – A recent study has documented a striking pattern in the investment world: while investors display clear skill in buying, their selling decisions underperform substantially. Read here
- Optical illusions in Equity Investing – Psychological biases tend to affect an investor’s decision making in subtle ways which are usually detrimental to long term investment returns Read here
- Focus on signals provided by companies but filter out the dishonest ones – A dishonest signal is one that does not reliably communicate the trait it is supposed to. Lend credence to only those signals that are costly to produce. Read here
- Avoiding Landmines: Focus On Free Cash Flows – With rising interest rates and tightening liquidity, the environment is becoming tougher for many dodgy businesses. These are companies that use all sorts of accounting shenanigans to report accounting profits even though the business truly does not make any money. Read here
- Interesting Annual Phenomenon – PSU banks dump gilts after shift from HTM books– “There is the natural build-up of stock in the available-for-sale book after shifting,” a treasury official at a state-owned bank said. “This paper is all in-the-money, and would have to be offloaded eventually; it is an annual ritual. It is just that the rate pause has allowed us to do it quite aggressively.” Read here.
Economy
- Indian banks well placed to manage the risks in volatile global environment- Structurally, Indian banks deploy their assets mainly in advances, resulting in a higher Credit to Deposit (C/D) ratio in the range of 65% to 90%, while investments constitute around 25% of their total assets. As of March 31, 2022, Indian banks had a C/D ratio of around 72%. In contrast, their US counterparts have nearly one-third of their assets in investments and a credit-to-deposit ratio that is in the range of 45% to 70%. Read here
- Rising milk prices becoming a headache – The average retail price of milk in India has increased by 12% from a year ago. India accounts for almost a quarter of the world’s milk supplies. Read here
- Apple Triples India iPhone Output to $7 Billion in China Shift – Apple Inc. assembled more than $7 billion of iPhones in India last fiscal year, tripling production in the world’s fastest-growing smartphone arena after accelerating a move beyond China Read here
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That’s it from our side. Have a great weekend ahead!
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The content of this newsletter is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction. The content is distributed for informational purposes only and should not be construed as investment advice or a recommendation to sell or buy any security or other investment or undertake any investment strategy. There are no warranties, expressed or implied, as to the accuracy, completeness, or results obtained from any information outlined in this newsletter unless mentioned explicitly. The writer may have positions in and may, from time to time, make purchases or sales of the securities or other investments discussed or evaluated in this newsletter.