Word on the Street - Monkey Portfolio

Have you heard of the proverbial Monkey Portfolio. Surprisingly, it was an experiment conducted in the US using a monkey. A monkey was asked to throw darts at random on the prices page of the Wall Street Journal and a portfolio was created by including all the stocks on which the monkey's darts fell. The collection of stocks became known as the Monkey portfolio.

What was more surprising was that when the performance of the Monkey Portfolio was compared with the performance of fund managers in the US, the Monkey Portfolio actually outperformed more than 85% of the US fund managers apart from beating the major indices in the US. What are the issues that arise from this experiment and what do they mean to an investor trying to selecting a portfolio management. 

Source - http://www.karvy.com/articles/monkeyport.htm

Here's an interesting read on "Why a monkey throwing darts could boost your returns?"


Read more at http://www.forbes.com/sites/davidmarotta/2014/08/06/why-a-monkey-throwing-darts-could-boost-your-returns/

This word is suggested by Vinita Jagannathan (PGDM 2013-15)

Is ‘Make in India’ possible?

Mr. Narendra Modi’s maiden I-day extempore speech was indeed a call to restore optimism among the citizens, with good and noble intentions. Mr. Modi is known to deliver good speeches as was evident during his election campaign. This time he took it to new heights by delivering an hour long no paper address, following the trend set by Mr. Barrack Obama of delivering speeches extempore style. He hit the right note by focusing on Financial Inclusion for the poor, by facilitating bank accounts under the Pradan Mantri Jan Dhan Yojana, providing free debit cards and insurance cover of Rs.1 lakh. His call to the global industrialists to ‘Make in India’ and revive growth in the manufacturing sector is laudable and fair enough. However, what remains to be seen is how this could be implemented. For foreigners to come and invest in our manufacturing setup will require that our infrastructure and business atmosphere is right.  In simple terms our cost of production should be low enough to achieve economies of scale and thereby, make the prices internationally competitive. Mr. Modi and the Government have done well to improve the business atmosphere. With the Sensex and Nifty reaching new highs every other day, there seems to be resilience in the stock indices. The Industrial Production Index and the Consumer Price Index too are in revival stage.

But what remains to be seen is development in infrastructure, which is substantially hampering the production costs. It includes the speed and ease in transporting goods to the ports or to the consumers. Do we have the transport facilities to match the speed of response required to be internationally competitive? Do we have the modern port facilities like in China or Japan to help industries send them with speed, without damages and to all ports around the world? Our freight handling is pathetically slow and inefficient, with age old equipments to handle the load. Our roads as we all know are in terrible conditions, where mere pedestrian movement from one area to another itself is cumbersome, so forget goods movement. Truck transport has become synonymous with delays and not to forget damages. With infrastructure being the structural issue in our economy, it might be unlikely that FDI would continue in the long run. May be the FIIs and the FDIs are just reigning on the Modi wave. Mr. Modi has certainly sold and reinstated the long standing ‘Made in India’ dream but what remains to be seen is a roadmap from the Government to deliver this dream. 

This Article is written by Vishak (PGDM 2013-15)

Does Money Matter?

Yes, I think it does. From the moment we open our eye in the morning till we sleep, and I mean, actually sleep. Most of you must have understood where my discussion is headed, for others – I’m talking about Money becoming the lifeline to our existence. I know some of you are nodding as you agree with me. I also know that some of you must have eaten bitter-pills and shaking your head in disagreement saying that what this girl is talking about, no, we are too ethical and true believer that money isn't everything. But, believe me you are saying that because of your still-existing, over-powering principles otherwise you are with me. *smile*

A baby needs a toy or a lollipop to stop crying. A girl needs a barbie to keep herself busy. A 12 year old boy needs a video game or a cricket kit to be occupied for the entire day. An 18 year old girl needs some super-expensive dresses and same age boy needs a bike, to actually talk straight to their parents. As we go to next 20 years, we will be looking at expensive cars, lavish houses, high-class kitties to attend and a lot many things like this, which will make people think straight and accomplished.

Happiness to everyone comes with either money or things they got from this money. We all are so much into this that now it has become normal for us. And then here are few of us, who believe that money isn't the sole provider of Happiness. It is. Only thing is we do not want to see it that ways. I’m not an exception. And neither am I saying it’s a crime. It is a truth in current times. I have specifically used the words ‘in current times’ and not ‘for current generation’ because our elders are also not an exception. They are smarter, they are following the waters. They know it’s normal now, so they can also enjoy knowing the fact that it isn't a crime. Not that they are wrong, that’s why I said they are smarter. *wink* 

Today was your introduction to Reality, I’ll be writing more to actually get praises from you. Yes, you have read it correct. I’ll be writing more to get your praises, because the editor might pay me to keep you guys hooked with the blog. And as you all know by now – Money does matters! *wink* *wink*

This Article is written by Nishtha Sharma (PGDM 2013-15)

Word on the Street - Voodoo Accounting

Creative rather than conservative accounting practices. Voodoo accounting employs numerous accounting gimmicks to artificially boost the bottom line by inflating revenue or concealing expenses or both. The origin of the term “voodoo accounting” probably lies in the fact that once the accounting gimmicks come to light, the purported profits disappear like magic.

Investor reaction to news that a company has been engaged in voodoo accounting depends on the magnitude of the offense. While minor, one-time accounting gimmicks may be ignored by investors, substantial repeat offenses would affect the company’s market value and reputation.

Source - http://www.investopedia.com/

In a recent development in Nigeria "The Nigerian National Petroleum Corporation (NNPC)" came under heavy criticism over the voodoo accounting methodology it seeked to use to explain away the $10.8 billion missing oil revenue.

Read More on this story - http://www.newsexpressngr.com/news/detail.php?news=4107

Concept Explained

Some of the voodoo accounting practices identified by former SEC chairman Arthur Levitt at the height of the dot-com bubble in September 1998 include:

“Big bath charges,” in which a company improperly reports a one-time loss by taking a huge charge to mask lower-than-expected earnings.

“Cookie jar reserves” used by a company for income smoothing.

Recognizing revenue before it is actually collected.

“Merger magic,” whereby a company writes off all or most of an acquisition's price as “in process” research and development.

For example, a company may employ voodoo accounting to prematurely recognize $5 million of revenue and conceal $1 million of an unexpected expense. These tactics enable it to report net income of $2.5 million for the quarter. But a diligent auditor discovers these items in a year-end audit, and the company is forced to restate its results to show a net loss of $500,000, rather than the net income of $2.5 million reported earlier through voodoo accounting.

Source - http://www.investopedia.com/

This word is suggested by Nishtha Sharma (PGDM 2013-15)

Introducing "The Moolah Matters"

Did you know that there are more people afraid of investing in the stock market than they are of dying? Well, statistics say so. This was one of the implausible outcomes of a survey conducted by Harris Interactive on behalf of Nationwide Financial. 

Most of us would never express this fear out in the public since this kind of phobia doesn’t even appear in the consideration list. The underlying reason could be that the very thought of trading, hedging and speculating were synonymous to a mystical black box. And this box staged the fight between the mighty bull and the sluggish bear.

But hey, it’s time that we break this myth and reveal the bounty opportunities that lie dormant in this mystical box. On this note, we introduce you to “The Moolah Matters” which will serve as a platform to unlearn and learn, discuss and discover, develop and share ideas, incidents, trends, concepts and much more in the world of Finance. This is a one-stop shop where “Fin” revolves around Fun and “U” play the pivotal role.

This weekly blog will essentially comprise of articles contributed by enthusiasts on topics ranging from events which grabbed the limelight to recent instances which are creating a buzz in the Banking and Financial circles. And the various add-ons like Word of the week, Interesting facts and Comic strips will be the icing on the cake. 

The official mascot for “The Moolah Matters” is Uncle Scrooge of the Duck Tales series who is the richest Disney character. His witty one-liners are sure to have you in splits!

Finitiative, the Finance club of XIME – Bangalore, has come up with a host of events this year which started off with a bang with its inaugural event “Stock Hawks” which had 198 registrations. This turned out to be a feather in the cap by breaking all participation records ever in any of the club events. The second event “Vinimaya” was launched on 30^th July. The upcoming events will be in the lines of Dream Merger, Lock Stock Negotiate, Industry Barons, Stock minds, etc. We will ensure that you are updated on the schedule.

Let this saga continue. We invite all amateurs and aces to chip in their ideas to make this blog as lively and engaging as it can be. So why wait? Put on your thinking caps and let the ideas flow!

Happy Blogging 

This Article is written by Sonika Krishnan (PGDM 2013-15) & Sritama Ghosh (PGDM 2013-15)