Short Takes

The P/E Ratio

The What, How and Why of the P/E ratio in the context of Indian listed shares. The Price to Earnings Ratio is a way to value companies, instead of depending on purely their share prices. 

Deepak Shenoy talks about what the ratio is, how you can obtain it in India or calculate it yourself, and finally, why it is used. A quick introduction to the concept, and will be followed by more short takes on the P/E ratio's use.

(6 minutes)

What are Bond Yields?

Learn about the term "Bond Yield". When they say "The 10 year bond is at 8.19%" what do they really mean? Deepak Shenoy takes you through:

  • The ultra basics of bonds
  • The concept of Yields - it's simply a way to indicate what bonds return.
  • Current Yields and Yield to Maturity (YTM)
  • The Price, Yield/YTM and Time relation
  • How to use Excel to calculate Yields
  • Why Yields and Prices change in the Bond Market.

(9 Minutes)

The Physical Gold Con Job

How they rip you off when you buy jewellery, or, indeed, physical gold. Actual case from a reader who mailed in.

He exchanged 35 grams of gold for 25 grams of gold (as ornaments) and still had to pay Rs. 4,000 extra! See how it works, and why jewellery is a terrible investment.

(7 minutes)

Mutual Funds Are Not Just For Equity Investing

There's a popular misconception in India that Mutual funds are too risky because they invest in stocks. But mutual funds can invest in debt too, from the ultra-liquid money markets, to the ultra-safe government bond market. Some of these markets are not even available to you, as a retail investor.

With mutual funds, you can also choose a variety of risk exposure: want a half equity, half safe exposure? Choose a balanced fund. You can also determine the term of your investment - if you're looking to hold something short-term, then a short term debt mutual fund might tickle your fancy. For long term safety, you might choose an LT Gilt fund that invests in government securities.

In the video we list different combinations, and what your options are. Watch and comment away!

(7 minutes)

No more third party cheques for Mutual Funds

Mutual funds will no longer accept cheques from someone else to open an account in your name. This is to avoid a scam that has been going on with advisors taking cheques from people and filing an application in their own name instead.

The repurcussions, for all of us, is that now we must invest in mutual funds with a cheque from our own account. While this may sound obvious, there are some reasons why we may want it differently - for instance, investing in the name of your children, or for mutual fund "gifts". We talk about the different reasons for, and implications of this rule.

(5 minutes)

STT and Option Prices

Why do in-the-money options seem to have no time value?

Options have a time value component to account for the time remaining to expiry, and an "intrinsic" value - the difference between the stock and the strike price (called the "ITM" or in-the-money amount). On expiry day, with nearly no time remaining, you would expect the option to trade at it's intrinsic value, or whereabouts. Yet, most in-the-money options trade below intrinsic value!

The reality is that a regulatory cost, the Securities Transaction Tax (STT), eats up too much that it leaves options quoting at less than intrinsic value. Deepak Shenoy tells you how.

(6 minutes)