Wealth Building Basics - 021 Trade

Wealth Building Basics

A collection of 10 posts

Absolute Return, CAGR, and XIRR - 3 numbers every investor encounters

Beginner's Guide

Absolute Return, CAGR, and XIRR - 3 numbers every investor encounters

You invested ₹1,00,000 in a mutual fund three years ago. Today it's worth ₹1,42,000. Your app says you've earned 42%. Your friend says the fund gives 12.4% per year. But if you invested via monthly SIPs instead, your chartered accountant might

What PE ratios don't tell you

Wealth Building Basics

What PE ratios don't tell you

Last week, I wrote about how Amazon's heavy spending on growth kept profits artificially low, making it look optically expensive. Nick Sleep saw past that and made it a career defining investment. BYD, the Chinese EV maker, does something similar. BYD spent 135% of profit on R&

The do-nothing price: how Amazon with a PE of 60x became a value investment

The do-nothing price: how Amazon with a PE of 60x became a value investment

PE ratios are probably the most abused tool in investing. Aggressive investors project them decades into the future, slap on wild growth assumptions, and use them to justify buying companies with no earnings. Or no revenue at all. The real work is in doing the opposite. Take historical financials, apply

Your distributor's IRR is 39%. Yours is 9%

Wealth Building Basics

Your distributor's IRR is 39%. Yours is 9%

Your mutual fund distributor earned a 39% IRR over the last decade. You earned 9%, even though both of you invested in the same fund over the same period. Here's how. You invest ₹100 in a fund returning 10% annually. The distributor takes a 1% commission on your

Futures vs Options: What's the Difference?

Wealth Building Basics

Futures vs Options: What's the Difference?

Futures and Options are two of the most commonly traded instruments in the derivatives market, used for hedging and speculation. Before exploring more about Futures and Options, it's important to understand derivatives. A derivative is a financial contract whose value is based on an underlying asset such as

How to war-proof your portfolio

Wealth Building Basics

How to war-proof your portfolio

The 1990s and 2000s were an unusually peaceful era by any historical standard. Since then, fatalities from organized violence in 2024 were nearly five times the level recorded in 2010. That said, even 2022, the deadliest recent year on record, was far better than the war-torn 20th century. We looked

The cure for high prices is high prices

Wealth Building Basics

The cure for high prices is high prices

In my last post, I wrote about how high valuations led to record promoter sales in India. That, combined with rupee depreciation and stagnant markets, triggered huge foreign portfolio investor exits. Which in turn put further pressure on the rupee. But there's a less obvious consequence of current

Nifty has been flat for a year and a half. Or has it?

Wealth Building Basics

Nifty has been flat for a year and a half. Or has it?

Comforted by the belief that the Indian financial markets will inevitably continue to rise, tens of thousands of crores of retail investor money pour into the markets each month. 3.34 lakh crores in 2025, to be precise. The result has been a market that has been optically resilient through

Fishing where the fish are

Wealth Building Basics

Fishing where the fish are

India is the market I know best. It’s also where I’m most comfortable investing. Unfortunately, 2024 and 2025 were a time of peak valuations in the Indian markets, especially compared with other markets that have similar growth outlooks. Rather than compare valuations with industry peers (usually even more

The “Don’t Put All Your Eggs in One Basket” Rule: What It Really Means

Wealth Building Basics

The “Don’t Put All Your Eggs in One Basket” Rule: What It Really Means

You’ve heard the saying before. Probably from a parent, even that one financial podcast you didn’t finish, or maybe that one friend who seems to have a quote for everything. The Old Story That Still Works You’re walking home from the market with all your eggs in

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