Personal Portfolio Management -in a turbulent market

Step 1 : Get The Cash Portion of salary? Life savings? Inheritance? Loan? A mix of all?

Step 1 : Get The Cash ~16% Risk of Margin Financing Year Index Return (%) Margin Interest Rate (%) 2010 82.8% ~16% 2011 -36.6% 2012 -19.7% 2013 5.2% 2014 14.0% June, 2015 -5.8% Margin Interest rate was higher than market return since 2010

Step 2 : Set The Purpose And The Target Purpose of the portfolio Living expenses Provision for future event Retirement Target return

Step 3 : Investment Focus Growth Stocks High growth in business and profit Future expectation is the major driver; inherently risky Low dividend yield Relatively higher valuation Go well with long term purposes like retirement or provision for future event Value Stocks Slow growth in business and profit Existing business and assets backed valuation High dividend yield Relatively lower valuation Go well with regular cash requirement needs like maintaining living expenses

Step 4 : Stock Picking Fundamental Analysis Technical Analysis Analyzing financial statements and the health of company, its management, competitive markets and risks Making financial projections To arrive at stock valuation Study of charts of past price and trading action All information is reflected already in the stock price, so fundamental analysis is a waste of time. Trend persists. No random walk theory. Trends are your friends. History repeats.

Step 4 : Stock Picking Top Down Bottom Up The chart says it all. Fundamental Analysis Technical Analysis Top Down Bottom Up The chart says it all. Price + Volume = Fundamental + insider info + scam + greed + fear ++ Economy Industry Stock

Step 4 : Stock Picking Fundamental Analysis Technical Analysis Make money out of your stake in companies and how their products or services sell Make money out of movement from the market, with each movement often measured in pennies

Step 4 : Stock Picking Fundamental Analysis Technical Analysis How traders see investors How investors see traders

Step 4 : Stock Picking Fundamental Analysis Technical Analysis Grow rich slowly. It can actually be quicker than you think. Buy and hold. Get rich quickly scheme. Market timing rules your methods.

“Fundamental Never Goes Wrong” Step 4 : Stock Picking “Fundamental Never Goes Wrong”

Step 4 : Stock Picking

BDT 1 lac invested in 2007 in one of the stocks or in index Step 4 : Stock Picking Portfolio Value* in 2015 Stock Present Value*(BDT) BATBC 6,686,569 BATASHOE 1,996,398 GLAXOSMITH 1,820,197 RENATA 1,844,394 BERGERPBL 1,409,687 SQURPHARMA 1,203,338 Index (Jan, 2007- Jun, 2015) 275,002 *with re-investment assumption BDT 1 lac invested in 2007 in one of the stocks or in index

Step 4 : Stock Picking "We want businesses to be one (a) that we can understand (b) with favorable long-term prospects (c) operated by honest and competent people (d) available at a very attractive price” -Warren Buffet

Step 4 : Stock Picking Governance Business First thing to know “the level of corporate governance.” Business Then comes “What does the company do?” Ask next “Does it have competitions? Is it doing the job better than its competitors?” Make sure that “the company has a sustainable business demand in foreseeable future.”

Step 4 : Stock Picking Financials Valuation Find out “whether the company is profitable”. And “whether it compensates YOU”. Valuation If all the things are right, ask yourself “Is the company ‘cheap’, ‘fairly valued’ or ‘overvalued’?”

Step 5 : Understanding Valuation In an investment ‘We pay now to get in future’. You pay Price now to get Earnings in future. Price/Earnings tells how much we are paying for BDT 1 of earning.

Step 5 : Understanding Valuation The rules of thumb are The higher the P/E, the more expensive the stock is. The lower the P/E, the cheaper the stock is. Higher growth deserves higher P/E The P/E ratio of any company that’s fairly priced will equal to its growth rate. - Peter Lynch

Step 5 : Understanding Valuation There are similar ratios like Price/Sales, Price/Book Value Make sure Earnings/Sales/Book Value reflects reality.

Step 5 : Understanding Valuation Trust on Financial Numbers Trust on Financial Numbers Tickr P/BV BRACBANK 2.9x DUTCHBANGL 1.9x IFIC 1.7x TRUSTBANK 1.5x MTB DHAKABANK 1.3x UCBL 1.2x ISLAMIBANK BANKASIA 1.0x PRIMEBANK CITYBANK EBL UTTARABANK 0.9x SOUTHEASTB 0.8x NBL PREMIERBAN STANDBANKL 0.7x MERCANBANK NCCBANK Tickr P/E GREENDELT 28.7x PRAGATIINS 18.8x JANATAINS 14.9x FEDERALINS 14.0x PARAMOUNT 12.3x ASIAINS 11.9x RELIANCINS 10.9x PIONEERINS 9.7x SONARBAINS 9.1x PRIMEINSUR 8.6x AGRANINS 8.5x PROVATIINS 8.4x PEOPLESINS 7.3x RUPALIINS 6.0x BGIC PHENIXINS 5.9x STANDARINS 5.6x CONTININS 5.5x NORTHRNINS 4.8x

Step 6 : Portfolio construction Diversification is the most powerful risk mitigator. But, over-diversification might dilute return potential. Under-diversification Over-diversification

Step 6 : Portfolio construction Bias - Herd behavior Bias – Overconfidence Overconfidence

Step 6 : Portfolio construction Bias - Anchoring

Step 6 : Portfolio construction Two Most Important Things to Remember Be contrarian Know and recognize mistakes You want to be greedy when others are fearful. You want to be fearful when others are greedy. It's that simple. - Warren Buffet

Stock went nowhere in following 1.5 year Step 7 : Trading Tactics Frequency Frequent trading increases commission and over a long horizon, powered by compounding dents portfolio. Dollar Cost Averaging Stock went nowhere in following 1.5 year

Step 7 : Trading Tactics Stop Loss

The most important slide!!! Discipline!!!

Happy Investing!