PPF (Practical Personal Finance) Series

Hello all, We all know that diversification is a way to manage certain types of risks (not all types of risks can be diversified, but we will address that issue separately in future).  As an investor, we tend to invest in our home countries. And this is not limited to the investors from India. Indian markets (in terms of market capitalization) represent roughly 2% of the world (share) markets’ total capitalization. But still, on an average, all of us tend to limit our investment within India. While India is a great market to invest in (Even Investopedia agrees), it also means that by only investing in India, we are effectively ignoring 98% of the rest of the investable universe! This phenomenon is called Home Country Bias. It is understandable that people prefer to invest in their home countries as they are “aware of” or are “conversant with” the affairs of the home country and the companies of the same. One way to overcome this bias is to start investing outside India. When we loo...

  A lot of people debate about investing in IPOs. As a man, who is married to the school of behavioral finance, here are some reasons, why one can consider not investing in IPOs at all: 1. The company, that is looking to gather money from the market, has not got any track record to show, in terms of annual reports. All the information, that is available to the public, is only the disclosure by the company in the red herring prospectus. So, taking a call on its strategic business model is not going to be easy. Compared to that, there are hundreds of listed companies to choose from, with large amount of information available in the public domain. So, generally, it is a good idea to invest in a company by making an "informed choice", rather than trusting the self disclosures under red herring prospectus and the premium rate of the grey market. It is too risky to invest your hard earned money in that type of firm. 2. Some people argue that it is about making quick bucks by bookin...