Its such a blessed feeling to have an index launched in my name

Dow Jones Indexes has tied up with Dharma Investments, a leading private investment firm pioneering the development of faith-based investment, to launch the Dow Jones Dharma Index.

The new indexes will measure the performance of companies selected according to the value systems and principles of Dharmic religions, especially Hinduism and Buddhism. The objective
is to provide the investment community with the most comprehensive benchmarks that comply with these principles. The Dow Jones Dharma Indexes are the first faith-based indexes created to measure faith-compliant equities. Previously Dow Jones Indexes had pioneered this space by launching the Dow Jones Islamic Market Indexes in 1999, which today has become one of the leading Islamic market indexes worldwide.

The Dow Jones Dharma Index series includes the Dow Jones Dharma Global Index, as well as four country indexes for the US, Britain, Japan and India. Bringing our religious values onto the global stage offers sustainable solutions to the problems confronting the world today. The principle of dharma contains precepts relevant to good conduct and the implicit requirement of mindfulness about the sources of wealth - and thereby responsible investing.

The Dow Jones Dharma Index plans to screen the company on a combination of environmental, social, governance and traditional sin sector filters. If one has to be included in the listings, the company must pass a set of industry, environmental, corporate governance and qualitative screens for Dharmic compliance.

Dharma Investments has clarified that environmental screens would include company's impact or policies with respect to emissions, climate change and carbon footprint analysis, oil and chemical spills and waste management and recycling.

Companies from sectors where the nature of their business activities and operations have been termed unacceptable are excluded form the index. An illustrative list of prohibited sectors like Brewers, casinos and gaming, pharmaceuticals, tobacco, alcohol, adult entertainment, animal testing and genetic modification of agricultural products will never form part of the index

So all in all I feel elated to have become one of the "Dogs of the Dow"

The NFO vs IPO debate

Last week while going out for my regular late evening walks, i came across two gullible investors who were discussing the events of the stock market for the past week that had gone by. I was very happy at the first instance to know the levels of interest the markets have created even among bystanders or the lay man on the streets of India. Investing being my favourite topic, as usual i eavesdropped into their tete- a-tete. The word " Reliance" and the prospects of that stock being a multibagger figured frequently in their conversation. One of them (an old man must be atleast 65 plus..we can safely call him a senior citizen..he runs a cyber cafe at the street corner) was issuing his own target for Reliance Industries to reach 5000 by this March end. The thought bubbles that ran in my mind at that moment are reproduced below "Yes ...old man..Reliance will touch 5000 by March end, only and only if crude oil prices were to touch $ 200 per barrel by that time"...i continued to listen to them...Then the old man fires the next sweetener by talking about how NFO's and IPO's are a quick way to make a buck or two.

For the uninitiated an NFO is known as a "New Fund Offerring" of any mutual fund that wishes to raise money from the public at large and deploy it into various asset classes like equities, debt and money market instruments. An IPO is an "Initial Public Offerring" made by companies to raise money for the first time from the public at large through capital market channels to fund their expansion and diversification plans.

Now there is a huge difference between an NFO and an IPO. While an IPO may result in quick profits for an investor provided the valuation of the company coming out with a public issue is right and its fundamentals are strong enough for the company to attract a hefty premium in the stock market, the same cannot be said about an NFO. NFO's take time to invest or deploy their money into the market. They dont take investment decisions in a haste. Sometimes there can be a significant lag effect from the time of collecting the funds to its investment in the market. Its ultimately the asset management company's call and the fund managers prerogative as to when he wants to utilise the funds collected. However in case of an IPO, clear provisions have been demarcated by SEBI which require companies to get listed on the bourses within 18 days from the close of the offer.

Also another wrong notion of the old man was that investing in an NFO that is offerred at a par value of Rs. 10 is better than investing in a Mutual Fund scheme with an NAV of Rs.50. This view is totally absurd as any scheme of a mutual fund will command a higher NAV only because of its superior Investment dynamics and its fund manager's track record. At the end of the day the movement in NAV is determined by the performance of the investments of the scheme.

An existing scheme will atleast have a performance record or a report card to show unlike a NFO which if not managed well will have its NAV dropping below its face value.

Therefore before selecting a particular scheme of a mutual fund these basic test checks will help a long way in ensuring the safety of your hard earned money :

1. Study the Offer document end to end and page to page
2. Compare the performance of various other schemes of the mutual fund and benchmark the
same with the returns of the index (Sensex or Nifty).
3. Study the fund managers track record, previous schemes managed and how each of them
have fared in the past.
4. Identify your time horizon and investing temparament
5. Identify the focus areas or sectors that the fund is bullish on

Lastly, think long term and be long term greedy!!!

Investment Philosophy

It's a bitterly cold day. You have lost all feeling in your nose. Your ears are hurting. You hunch your shoulders together to bury your head under the raised lapels of your greatcoat. You turn a corner and you see a frozen pond. Can you risk taking a short cut across? Or would it be safer to walk to the bridge half a mile down the road? You notice a man on the other side of the pond. He gingerly steps on to it. It holds the weight of one foot. He carefully places the other foot on the ice. A young woman behind follows his lead. As you watch, some children arrive with skates, and more adults follow them. Soon, the whole village is having a party on the ice. Each person has given the next person the confidence to join the party. The more people clambering on to the ice, the safer it feels. It's logical, isn't it? Or is it? Something makes you stop. You turn around. You walk away. Behind you, you bear the crack and the first scream.

Yes, you could say it is a dark vision, but it does the opposite of what most sunglasses do. Instead of increasing obscurity, it introduces clarity. As an increasing number of heavy bodies add themselves to the ice, human nature makes them feel the safety factor is increasing. But the clear-thinking observer realizes that their added weight means that the opposite is true. Each fresh body on the ice makes it more - not less - likely that the ice will crack. The global investment business today is a business in exactly the same way as the street market in Camden Town or Bangkok is. It is manned by salespeople who all have products they want you to buy. They make sure that what they sell is attractive. They tell you uplifting stories of how buyers of their services have generated wealth for themselves. They attract you to the ice ...

This is what has happened in the international financial markets right from the days of great depression to the 1987 crisis in US (Black Monday) to the 1997 East Asian Crisis to the latest subprime meltdown…the gullible investors who have followed the greater fool theory in the right earnest in the greed for short term money.

The lesson and the moral.. be greedy but be long term greedy!!!