Investment buckets

I have been discussing my investment objectives in my various posts. Here in this post I am going to jot down a high level plan to meet my investment goals.

I have divided my total savings into four chunks majorly.

1> Bond Fund Chunk: This contains 30% of my total investment. I keep this fund in safe heaven such as AAA rating FDs, NSCs and PPF (yes I consider PPF a very good investment vehicle). In this bit of my investment planning, I am allocating money for my short term needs such as my education etc. I am happy with 8%-9% growth in this investment chunk.

2> Opportunity Fund: This is the most liquid part of my income portfolio and never exceeds 10% cap. I keep it in my savings account and use it to take advantage of news based sentiments. ICICI buying BOR, petrol prices etc. Since I am not a regular follower of complex news items, this part of the portfolio remains cash most of the time.

3> Medium to Long term Equity fund: This contains 30% of my investment capacity. I allocate this capital for various equity linked avenues. A part in Mutual Funds and a part in stocks. Here I choose companies which have good management and have wonderful business concept/moat and are to grow for sure. I consider Moser Baer, ABCIL in such category.

4> Dividend chunk fund: This consists my rest 30% investment chunk. Here in this part of the portfolio I would rather invest in a company that gives good dividends. My aim from this pocket of investment is to have capital appreciation and maintain a regular flow of income in terms of dividends.

Having said all this, I shall deliberate more on what to vehicle to choose for each investment chunk in further posts.

The Intelligent Investor: The Bible

Had reread the bible the first day of Diwali vacation. Cannot agree more with 'the Graham'; the basic principles he laid 50-60 years ago are so true even today.

I have extracted following main points from the book.

1. Beware of companies which are always interested in other people's money. They can be easily noticed by their acts of continuously diluting equity, issuing warrants, issuing convertible debentures (convertible bonds are double edged sword, Graham says. Companies management it betting on the fact that stock prices will always go up and people will eventually convert their bonds to stocks. This expectation gives them incentive to do financial alchemy to ensure that stock prices some how carry on going up. But we all know this is not sustainable).
2. Beware of companies' which have taken more loan than the cash they can generate. Take example of Rei Agro. They pay close to 340 crore as interest payment on the debt and generate net profit 150 crore. Are they sustainable? I don't think so.
3. Always look into the net profit and operating cash flow. Net profit should never be more than the operating cash flow. If a company continuously show such relation, beware!
4. A combination of high entry cost and good margin makes the company out smart the competition easily. TTK Prestige is an example from my kitty. No road side company can breach the brand Prestige easily.