Sector Funds, African Diplomacy and Freelancing Schedules

I’ve always felt that the fear of looking stupid is a pretty big fear for most people, and that keeps us from asking many questions that we should.

I also feel that the most potent antidote for it is the knowledge that you’re not stupid, and the confidence that others will realize that sooner or later.

I’ve lost count of the number of times I’ve asked a question knowing fully well it will sound silly. Once I was sweetly rewarded when someone followed my question by saying that she wanted to know that too, but was too scared to ask, and you could see most people in the room nod to that! It still scares me to ask questions in a room where there are more than 5 people but I’m working on it.

For this reason, I loved this incredibly simple and powerful graphic from Indexed, though from the headline, I feel that was not the original intent behind this.

Among other good stuff – Hemant has written a pretty comprehensive article on Sector Funds, and it covers a lot of aspects about them, definitely worth checking out.

I also felt really inspired by Kim’s post on how she balances freelancing with being a single mom, and thought it was a really good read.

YouTube turned 6 this week, and I was amazed to learn that it gets 6 billion page views a day! Yes, that is a b, and a day.

Two good links from Economist:

One where it weighs on India’s diplomacy measures in Africa.

And the other where it discusses where will the next 10 trillion dollars for World GDP come from?

Enjoy your weekend!


All ETFs are not created equal

Continuing with the theme of ETFs this week, today I’m going to write about something that doesn’t impact Indian investors yet, but will surely impact them in the years to come.

Currently, the name of the ETFs pretty much lets you know what it means and there’s not much difference between different ETFs of the same category – for example you can look at the performance of any gold ETF over a certain period of time and find that all of them were fairly close in their performance.

This is because their underlying is the same and all of them buy the same gold, and it’s price movement is the same for everyone.

However, this won’t remain the same forever, eventually there will be fund providers who will create a gold ETF that doesn’t actually own physical gold but only replicates its performance by buying Futures contracts, and there may also be gold ETFs that own shares in the companies engaged in gold mining, trading or dealing with jewelery.

For example – I took 4 oil ETFs that trade in the US market, and saw how they performed in the last year.


Oil ETFs Last Year
Oil ETFs Last Year

You will be amazed to see the variance in performance of these funds. While the best performing went up by about 50%, the worst performing went by just 22% or so.

OIH is a fund that invests in oil producing companies whereas USO is the ETF that tries to replicate the performance of oil with Future contracts.

The lesson here is that even though you’d think of both these ETFs as oil ETFs, the performance between them varies a lot, and before buying into any ETF you need to see what they are going to buy, and then keep an eye on how the fund is performing relative to its peers.

The big question here is how to know which fund will perform well without the benefit of hindsight, and apart from looking at a fund and finding consistent patterns I can’t think of anything else. This is probably another case where you can spread your investment between funds of different kinds and diversify a little.

7 ETFs I’d like to see in India

Arif commented on yesterday’s post that I had misinterpreted the question, and it was in fact a question about variety of ETFs, and not Options on ETF.

I don’t know if I misinterpreted or not, since Amruta who originally posted the comment hasn’t responded yet, but I think that the question of which new ETFs should be introduced is an interesting one, and I’ve often thought about this.

Here is a list of 7 ETFs that I’d like to see launched in the Indian market. Apart from the silver ETF, I haven’t ever read about anything else being considered so think of these as just my wish-list, and not something that’s likely to be launched in the near future.

1. Silver ETF: There’s been a lot of interest in silver for the last year or so, and I think this is one ETF that a lot of people want. Like the gold ETFs, this will hold physical silver and will be like SLV that trades in the US.

2. Oil ETF: There are no oil ETFs in India, and I think this will also be a good product that will give people exposure to oil. It will be good if the oil ETF actually owned oil barrels, but I don’t know of any oil ETF in the US that does it, so I don’t know how feasible it will be to launch such an ETF in India.

3. Copper ETF: People say copper has a PhD in Economics since it tracks the economy so well, and I think this will be a good ETF as well. I’d like this to be similar to the gold ETF, and own physical copper instead of just owning stocks that engage in copper mining.

4. Canada ETF: I’ve always felt it strange that most of the international ETFs and mutual funds in India track other emerging countries and not developed countries. The stocks of developed countries are less volatile and have the scope of offering diversification to Indian investors who have to deal with a lot of volatility in their domestic market.

5. Germany ETF: Reasons are similar to the Canada ETF, and this is a developed and probably the strongest European country of the day. It may be a good idea to get exposure to this.

6. Australia ETF: In addition to being a developed country – Australia is big on natural resources, and a natural beneficiary of China’s rise, and this might be a good asset to own in the future.

7. INR – USD ETF: There are no currency ETFs right now, and this can be another area that can be useful for people, especially those who are invested in stocks abroad, and want some currency exposure as well.

So, this is my wish-list and some of the ETFs that I’d like to see in India; what about you? Which ETFs would you like to see launched in India?

Lack of ETF Options in India

This is another post from the Suggest a Topic page, and it’s about Options trading on ETFs, or rather the lack of ETF Options in India.

Here is Amruta’s comment.

ETF Options are widely traded in US markets. Would like to know ur take on their introduction in Indian markets? which etfs should they b introduced on?? Thanx..

I feel that it’s only a matter of time when Options are introduced on ETFs in India. In fact a few months ago there were plans to create Options on the popular Benchmark Gold BeeS ETF on NSE, but then the FMC (Forward Markets Commission) wrote to the NSE (National Stock Exchange) saying that they should have jurisdiction over Options trading on the commodity based ETF since they already regulate commodities future, and this is quite similar to that product.The launch was then stopped, and since then I haven’t read anything on the matter, but I think this will happen in due course, and after that Options on other ETFs will be launched as well.

I think that it’s good to have Options on these ETFs, as it allows people who are so inclined to take positions and test out their theory.

I have no doubt that a lot of people will lose money in trading Options, but that is no different than trading in stocks, and I’m sure there will be people who make money on them as well.

It also allows you to take short positions which you can’t do without Options. For example, currently, there are no easy ways for small investors in India to take a short position in gold if they’re so inclined but if there were Futures and Options on Gold BeeS they could have sold a Future or bought Puts.

Compare this with the US where a small investor can easily buy long dated Puts on either the popular gold ETF GLD, or even gold mining companies like ABX, and I feel that the Indian investor is at a disadvantage.

Options are not for everyone, but there is a segment of investors who understand these products, can use them, and even eagerly awaiting them, and I feel that it’s only a matter of time before which their wish is granted.

Olympic Gold, Chinese Officials and PlayBoy Archives

This was a short week for me as I was out of town for a part of it, and hence didn’t get to read much. As part of my short vacation I met a cousin of mine, and he introduced me to a friend who had read OneMint.

She is a PhD from Stanford, so I was over the moon when she said she liked the site and enjoyed and appreciated the simplicity! It’s obvious to anyone who reads the comments that this site attracts quite an intelligent audience, so it’s always good to see some proof of that in real life! We spoke about the site for less than a minute, but that was one of the highlights of the trip for me.

Now, on to a few links from this week.

First, a story about an Indian literacy program that may be fastest in the world from the WSJ. The program is called Tara Akshar and teaches to read and write in 35 days!

A backhoe operator looks at 80 @ Random Roger: Next up a very inspiring story about an 80 year old man which teaches the values of thrift, hard work, and doing the right things in life.

Indian investors seek Olympic gold @ Beyond Brics: Beyond BRICS on a group of private individuals coming together and pooling some funds to help athletes compete in Olympics and improve India’s chances of winning Olympic gold

First Day IPO Pops @ Big Picture: The Linked In IPO was big news this week as it scorched during listing. Here is a list of other IPOs that did great on listing.

How else are you supposed to take it? @ Seth Godin: A good post on getting people to not take things too much to heart, especially useful for people whose job exposes them to public criticism.

Bhutan’s King Jigme tells parliament he is to marry @ Riding the Elephant: Great post and excellent picture!

A few links that I shared on Twitter this week.

Eight out of China’s Top 9 Government Officials are Scientists

PlayBoy Archives coming to iPad tomorrow

Please wait 10 months for your aluminum

Market Research Agency Speak Asia’s shady ownership unearthed

Enjoy your weekend!

Can I open a fixed deposit without opening a savings account?

From time to time someone leaves a comment inquiring if a fixed deposit can be opened in a particular bank without having to open a savings account there as well.

I checked this with someone who works in a public sector bank, and he told me what I suspect most of you already know.

He said that most (if not all) public sector banks require you to open a savings account before you open a fixed deposit because that makes it easy for them to deposit the interest and then the final proceeds at the time of maturity.

This may not be true for private sector banks, but based on the conversation – I think it is wise to assume that if you want to open a fixed deposit with a bank they will require you to open a savings account as well.

While this never appeared to be a big issue to me, it seems that there are people who find it a hassle to open a savings account for a fixed deposit.

My guess is that they already have a few bank accounts open and don’t want to add any more complexity to their life.

However, with RBI planning to deregulate savings rate there will be difference in the interest rates that various banks offer on the savings account, and at that time this question will gain more importance.

I’d like to open this up for discussion and see if you know of any banks that allow you to open a fixed deposit account without a savings account?

This question may not affect you right now, but might be something to watch out in the next year or so.

Free MoneySights Portfolio Tool Invite and Review

In the past I’ve written about portfolio tools like Rediff Money Portfolio and Moneycontrol portfolio, and today I’m going to write about a new web based portfolio tool from MoneySights.

Regular readers may recognize this name because I’ve mentioned them earlier when I used them to research mutual fund data for the post about calculating returns from mutual fund SIP.

The tool is still invite only, and they’ve been gracious enough to give our readers a special link to open an account immediately, and I’ll recommend taking advantage of that since this is a good tool, and is free as well.

You can go here and register your account.

I’ve used this for about a week, but only rigorously used it for the last hour or so, and based on that I’m writing my thoughts here.

1. Look and Feel: The look and feel of the site is simply awesome, and you will love using it. The interface is very intuitive and the response time of the site is great as well. This is an important aspect because some of you complained that Moneycontrol portfolio was cluttered. The interface on MoneySights is quite good, and there’s no clutter anywhere.

2. Mutual Fund Options: There are several very good options to analyze and evaluate mutual funds. You can enter mutual funds from a past date, and also own them as you would’ve owned them if you had done a SIP.

You can also compare the portfolio returns with Sensex over a period of time which tells you when your funds did well, and when the Sensex did better.

3. Quick: The site is quite quick to load, and even when you make changes mid-way the response times are pretty good, and overall I was quite impressed with how intuitive and quick to respond the site was.

4. Can’t add cash to the portfolio: I was disappointed to see that I can’t add cash to my portfolio – this is quite an important thing for me as I want to keep track of my liquid assets too. I’m sure there are several other people who want to do this as well.

In fact you can’t add anything other than stocks or mutual funds right now, so you can’t create custom assets or track ULIPs  on this tool.

5. Stock advice: The portfolio tool gives you stock advice in terms of “Top 5 Stocks to Buy”  and “Upside Potential”.

I’d recommend my readers to ignore this completely because I don’t quite understand how they know which 5 top stocks to buy and the upside potential of it. And though I don’t know how they are arriving at these conclusions I doubt if there is anything that can convince me of their utility. I wished there was a way to turn them off, but ignoring them is just fine as well.

There is another indicator there called “Financial Strength” and if you own a stock which is low on that then you can look at the numbers again to see if there was something that you missed earlier.


On the whole I like this tool, and I think it makes sense to create an account now, and play with it. Even if it doesn’t fulfill all your needs now they are still building it and in time it can become your primary portfolio tool.

You can go to this here and register for your account.

FISN: Global X Fishing Industry ETF

I first came across the concept of investing in fishing related themes on Roger Nusbaum’s blog a few days ago when he wrote about Global X launching a fishing ETF.

Global X has launched the first global fishing ETF in the US a couple of weeks ago.  The FISN Global X Fishing Industry ETF trades on the NYSE Arca and it has around $3 billion in assets already!

Though Indian investors don’t have access to this ETF, I thought I’d write about it since it’s an interesting theme, and it’s good to be aware of such themes before (if at all) they become red hot. As you may imagine this type of fund draws extreme reactions from people. They either think it’s downright silly, or they think it makes perfect sense, so far I haven’t seen a lot of people in the middle.

It’s easy to see why someone may think this is a silly theme, so let me dwell on why people think this makes sense. The idea is that as a large number of people around the globe move to higher incomes and demand protein rich food – fishing related companies will be one of the beneficiaries of the trend.

To take advantage of that – FISN tracks the Solactive Global Fishing Index and the aim of the index is to track the performance of large global companies engaged in the fishing industry.

The index has 20 constituents out of which 18 companies are based outside the US. The index contains a mix of emerging and developed countries, and Norway and Japan are the two largest country components of the index.

Here is the weight of various countries in FISN.


FISN Country Weights
FISN Country Weights

As you can see, Norway and Japan form more than half of the index constituents, and the USD – YEN or USD – Norwegian Krone currency rate movement will seriously impact how the fund performs.

Currency rate movements can have significant impact on ETFs that invest in foreign stocks as we saw in the case of INDY (iShares S&P India Nifty 50 Index Fund) which outperformed its underlying index by quite a bit because favorable exchange rate movement.

Next, let’s take at the top 5 companies that companies that form part of this index.


S.No. Company Country Percentage Brief Description from the Company Website
1. Cermaq ASA Norway 10.75% Cermaq’s vision is to be one of the global leaders in the aquaculture industry, with main focus on sustainable farming of, and production of feed to salmon and trout.
2 Marine Harvest Norway 10.65% Marine Harvest is the world’s leading seafood company and world’s largest producer of farmed salmon.
3 Toiyo Suishan Kaisha Ltd. Japan 9.78% Toyo Suisan Kaisha, Ltd. engages in the purchase, distribution, and exporting of food products in Japan and internationally. The company operates in four segments: Seafood, Processed Foods, Cold-Storage, and Other.
4 Cia Pesquera Camanchaca SA Chile 8..45% Camanchaca Chile began operations in 1965, with activity focused on conventional fishing and processing of shrimps and prawns. 


In 1980, a change of direction in the company resulted in a diversification strategy drove a steady and constant growth

5 Dongwon Industries Co Ltd. South Korea 4.92% The sun never sets on the ocean of Dongwon Industries. Dongwon Industries cultivates the oceans ranging from the Indian Ocean all the way to the Antarctic Ocean. The tuna that they catch in the world’s waters is kept under the temperature of -60degrees Celsius and delivered fresh to the customers’dinner table. We export our marine products to Japan, United States of America, Russia and so forth, with the best quality, which proves the world recognition of our high-quality products.


The fund has an expense ratio of 0.69% so not very highly priced either.  In summary, the fund has a lot of international stocks that are large companies in the fishing sector.

I have absolutely no clue how this will do in the future, but I think this is a very interesting theme, and one that is at least sure to capture the imaginations of people if not provide them good returns.

It’s also the kind of thing that people enjoy telling others that they invested in, so that may be another reason why the fund has grown in size so rapidly.

What are your thoughts? Do you think it silly or does it make sense to you?


My Top 10 iPhone 4 Apps

The iPhone 4 will soon be released in India, and I thought this is a good time to write about some great apps on the iPhone 4.

I’ve moved from the iPhone 3G to iPhone 4 some time ago, and for me the best improvement has been how quickly the iPhone 4 switches to wireless internet. In the iPhone 3G even if you had the wireless configured (like your home or office) you still had to wait a few moments before it could move to the wireless from the phone internet, and that wait however small it may be was quite annoying.

In the new phone the switch is almost instantaneous and that marks a great improvement. The screen resolution and camera are much better too, but those are facets that get talked about a lot anyway.

Now, let’s take a look at some of my favorite iPhone 4 apps.

1. Official Twitter App: This is by far the most used app on my iPhone 4. In fact, I hardly ever use Twitter on the computer now. Even when I’m near a computer I use the app the keep a tab on Twitter. This is a free app.

2. Facebook: Perhaps not surprisingly, this is the second most used app on my phone, and I log on to it multiple times in a day. This is free as well.

3. Bloomberg: The Bloomberg app is great for financial news as well as keeping a tab on stock quotes. You can add stocks and ETFs from a lot of different markets, and that makes it especially useful for people who may be interested in tracking stocks across different markets.This is a free app also.

4. Reuters: Great app for keeping up with the news, and I especially like the pictures section of it. This is a free app too.

5. The Economist: I’m not a paid subscriber of The Economist, but still get access to quite a few articles on it, and it’s good to resource to check out once a day or so.


My Top 10 iPhone 4 Apps
My Top 10 iPhone 4 Apps

6. Link Shortener by David Pollak: I come across several links while reading on the iPhone and if you want to shorten them then you need something like this app. The Link Shortener app simply takes your link, shortens it and copies it for you to paste it wherever you need. This is a handy tool for people who use Twitter a lot and feel the need to shorten URLs. This app is free as well.

7. BuzzFeed: BuzzFeed is the app of the popular website which has links to things going viral or rather likely to go viral on the web. This is a good app for a laugh and take a break from whatever you’re doing. This app is free.

8. Flixster: This is a good app for reading movie ratings and reviews, and comes in handy whenever a new movie is released. This app is free.

9. Camera +: The iPhone 4 camera is quite good, and since owning this phone I’ve stopped using my digital camera altogether. I bought the Camera + app one day when I was having trouble connecting to Facebook and uploading pictures there with the regular app. It worked and I stuck to it. The app costs $1.99 and I feel it’s an improvement to the camera app that’s already comes with the iPhone 4.

10. Google Authenticator: This is not really an app but I have turned on secondary authentication on my Google account which means that I can’t access my Google account with just my password. This app contains a timer that has a number which changes every 45 seconds or so, and I have to input that number in addition to the password to log in to Gmail. This provides extra safety and you have to enter the key just once in every 30 days so it’s not that much of a hassle either. This is of course free.

These were my top 10 iPhone 4 apps and though I use many others, they are not as frequent as these ones.

How to calculate returns from a SIP (Systematic Investment Plan)?

About a week ago I exchanged comments with a reader who was comparing returns from a lump-sum investment in a mutual fund with a SIP (Systematic Investment Plan) in the same fund.

Basically, seeing whether Rs. 36,000 invested 3 years ago, amounted to higher or lower than Rs. 1,000 invested every month for 3 years in the same fund.

This is not an accurate way of comparing the two returns because in one case you have this massive capital that compounds for you for 3 years, whereas in the second case, you just have Rs. 1,000 that gets invested for the whole 3 years.

In my opinion, this is like comparing a fixed deposit to a recurring deposit. If you invest Rs. 36,000 in a fixed deposit for 3 years at 10% then at the end of 3 years you will get an amount of Rs. 47,916.

However,  a recurring deposit for Rs. 1,000 for 3 years at 10% will only give you Rs. 41,841.

Use IRR to calculate returns from a SIP

Since returns from a SIP involve outflow of cash at different time periods, and then a large inflow of cash at the end – you can use IRR to calculate the returns percentage from a SIP.

I have a very detailed post on IRR, so you can read that post to understand the intricacies of IRR, and then come back to read the rest of this post.

How to calculate returns from a SIP?

Let’s say I made a SIP in Canara Robeco which features as one of the funds in my post on the best balanced mutual funds.

Suppose I invested Rs. 1,000 every month for the last 3 years  – Moneysights has this calculator that shows me that this investment resulted in Rs. 47,927.79.

I use Excel and type in -1,000 in 36 rows followed by 47,927.79. Then I select this range and use the IRR formula to find the IRR value which I have to multiply by 12 to annualize this number.

This value comes out to be 17.93%.

To cross check this number I go back to the recurring deposit calculator and enter Rs. 1,000 per month enter the interest rate of 17.93% compounded monthly to get a value of Rs. 47,930.

This confirms that my calculation is accurate.

Just for reference – Rs. 36,000 invested in this fund 3 years ago will give you Rs. 48,171.60 today.

This is very close in absolute terms, but if you look at the CAGR then this fund only returned 10.19%.

As a side note – I’ve seen several websites use these type of calculations to tout the benefit of SIP, but they fail to mention that they’re working with the benefit of hindsight.

In general, I’d say SIPs will work better than lump-sum investment for most people but this is not the way to prove it.


Let me conclude by saying that this is a post about what I feel is the right way to calculate returns from a SIP, and not that a SIP is always better than a lump – sum investment. That’s a whole different discussion altogether, and it simply happened that the fund and time period I chose returned a higher rate of return by the SIP mode than the lump – sum mode.