Deva Panambur, CFA®, CFP® is the founder of Sarsi, LLC. Sarsi, LLC is an independent, fee only, Registered Investment Advisor, serving individuals and institutions. We primarily provide the following services: 1.Financial Planning: Overall financial situation of the client including cash flow, debt management, risk management/insurance, estate planning and tax planning. 2. Investment strategy 3. Asset allocation and risk management 4. Manager/Investment product selection 5. Investment monitoring and reporting.
Prior to founding Sarsi, LLC in 2010, Deva was a Senior Vice President/Partner at Executive Monetary Management (EMM), a wealth advisor with over $2Bn in assets that was a part of Neuberger Berman, before being spun off into an independent firm in 2009. At EMM, Deva led manager selection and due diligence and had joint responsibility for economic analysis, strategy analysis, portfolio management and risk management pertaining to investments of ultra high net worth clients and institutions.
Prior to joining EMM, he was a portfolio manager at the alternative strategies group of Merrill Lynch; a research analyst at Chesapeake Capital Corporation- a hedge fund; and a risk and business analyst at Deutsche Bank Asset Management where he supported various investment groups. He began his career at International Seaports Pte. Ltd. in international project finance in the Far East and the United States.
Deva earned a Bachelor of Technology from the Indian Institute of Technology, India, a Master in International Management from the Indian Institute of Foreign Trade, India, and an MBA from Thunderbird School of Global Management, Glendale, AZ. He has been awarded the Chartered Financial Analyst designation and is a CFP® professional.
He regularly provides expert advisory services to top consulting firms and asset management companies regarding the business and investment aspects of the investment industry. He is an Adjunct Professor of Personal Finance at Montclair State University in New Jersey and in his spare time trains candidates appearing for the CFA exam.
MBA, Finance, Thunderbird (Arizona State University)
BTech, Metallurgy, Indian Institute of Technology
Fee only. Asset based and/or fixed.
Sarsi LLC (“Sarsi”) is a Registered Investment Advisory Firm regulated by the State of New Jersey in accordance and compliance with applicable securities laws and regulations. Sarsi does not render or offer to render personalized investment advice through this newsletter. The information provided herein is for informational purposes only and does not constitute financial, investment or legal advice. Investment advice can only be rendered after delivery of the Firm’s disclosure statement (Form ADV Part II) and execution of an investment advisory agreement between the client and Sarsi.
Sarsi, LLC Introduction
Hi, one has to differentiate between cryptocurrencies such as bitcoin and the technology behind it ie Blockchain technology. Blockchain technology is arguably very innovative and offers elegant solutions to a number of problems such as transactions, supply chain, information management etc. Firms such as IBM are now offering solutions to clients using Blockchain technology and large banks are adopting it for their transactions.
Cryptocurrenceis themseleves are a bit more unclear and I would argue, are in their infancy. Bitcoin is just one cryptocurrency and there are over a 1000 other cryptocurrencies and many more are being offered every day.
Bitcoin has had a incredible run over the large few years and stories abound about how much money you would have made had you bought it a few years ago. What those stories don’t touch on is the gut wrenching drops the currency has had between then and now- it was almost 90% down a few years ago. So, if you do plan on buying bitcoins remember that for a variety of fundamental reasons and especially because of the price volatility it is speculative with a very high volatility and there is a chance that you could loose a large percentage of what you put in.
Best wishes for your retirement and all kudos to you for paying attention to your investments.
You bring up a good point, in that although dividend yields on stocks are higher than interest rates on fixed income, they come with equity risk as reflected in the beta of 0.91 relative to the S&P that you mention. Additionally, because investors have rushed into dividend paying stocks in a low yielding environment, some of these stocks are priced for perfection and maybe volatile if rates rise and/or stocks fall.
If you have dividend paying stocks in your portfolio it must be considered as equity not fixed income and should be weighted accordingly. If your overall portfolio is constructed to match your risk profile then the individual volatility of the dividend stocks should not matter over the long term.
While stocks have run up a lot there are concerns that they may correct, nobody can tell for sure when that is likely to happen. Tactical allocations can help at the margins. A better way to construct portfolio is to match it to your risk profile and objectives. If you are planning on withdrawing money from this portfolio (And you will have required minimum distributions at 70.5 in any case) you may want to divide the portfolio into short term (Very safe low duration fixed income), medium term (Higher yielding fixed income) and long term (Equities) and rebalance. Your dividend stocks would be part of the third bucket. If your portfolio is all in stocks then yes, you may want to reduce risk.
It's great that you are putting the effort to learn about investing. I want to point out that you have mentioned terms that are fundamental (EPS), quantitative/statistical (Beta) and technical (MACD). I would suggest you pick the method that best suits you. Personally, I prefer fundamental analysis.
To perform fundamental analysis, you must analyze
1) How much the company is earning: EPS, cash flows, profit margins.
2) How they are earning it: Are they capital intensive (Capex), how much debt if any are they using (Debt/Equity, Net Income/Interest Expense), Operational efficiency (Turnover ratios), how do they make money?
3) How are their earnings expected to grow (Industry prospects, company's competitive strengths, earnings growth)
4) How much are you paying for the company (P/E ratios, Price/Cash flows, discounted cash flow analysis)
Not everything is based on numbers, there is also a lot of qualitative analysis such as understanding the product/service and quality of management.
One of the best source of information is the company's website which usually has a lot of information about the company. The 'Investor Relations' section usually has a lot of information such as presentations, earnings reports/transcripts, annual report and SEC filings such as 10K, Proxy statements etc. Other sources of information could be third party sources such as Morningstar, yahoo finance, google finance and if you can get it Bloomberg.
The first step to investing is to know yourself and then to have a plan. Knowing yourself means knowing your current financial situation (Set aside money for emergencies and reconcile your cash flows) and your risk profile (Ability and willingness to take risk). Planning inolves making your life comfortable for the present and the future within your means. Once you have this in place invest for the long term to achieve your goals. Short term goals should be met with your earnings and funds in cash and other stable assets.
I recommend having 6-12 months of your expenses in highly liquid cash equivalents.
Assuming you have taken care of all that- the best strategy is to build a portfolio of stocks and bonds based on your risk profile. For eg: If you are relatively younger and have a good job, you can take on more risk for the long term. (Your ability to take risk is relatively high). On the other hand, based on your personality your willingness to take risk may be low. So, you will have to build a portfolio at a risk level that balances the two (Your risk profile).
In terms of asset classes, consider Large Cap versus Smaller Cap, US versus non-US, Developed versus non developed. For bonds, you should consider interest rate sensitive versus other less interest rate sensitive. US versus non-US.
Portfolio construction really depends on your beliefs, ability and how much time you want to or are able to spend (In addition to your risk profile). You could have a broad allocation to the above asset classes and simply rebalance (I recommend yearly and if there has been a 5% or more deviation in allocations) or you may want to supplement the broad allocation with 'tactical tilts' depending on your views. In your case, it seems the former is better. The exact allocation to stocks versus bonds really depends on your risk profile.
Then there is the question of whether you want to use active managers or passive managers. If you have a strong view against active, you may want to stick to passive vehicles like ETFs. Although, the press has more or less dismissed the ability of active managers to add value- it is not that simple. If you put in the work you can find talented managers. If not, stick to passive investments such as ETFs
The first step to investing is to know yourself and then to have a plan. Knowing yourself means knowing your current financial situation (Set aside money for emergencies and reconcile your cash flows) and your risk profile (Ability and willingness to take risk). Planning involves making your life comfortable for the present and the future within your means. Once you have this in place invest for the long term.
You will have to forecast your expected income (Social security, pension, other sources) and your expected expenses in retirement. If your expenses are covered by your income, then you only must have set aside some money for emergencies and invest the rest for the long term. If not, your portfolio will have to account for the fact that it will have to generate income towards your expenses.
Expenses should be best covered by cash and other stable assets. I recommend having 24 months of your expenses that is not met by your income in highly liquid and stable investments. You can use a mix of cash and other short duration, high quality fixed income. Make sure you also have some cushion for emergencies.
The rest of the portfolio can then be constructed for higher long-term growth with some income that can then be used for your expenses beyond 24 months. You can use a portfolio of stocks, including dividend paying stocks diversified across industry, size and geography.
Portfolio construction really depends on your beliefs, ability and how much time you want to or can spend (In addition to your risk profile). You could have a broad allocation to the above asset classes and simply rebalance (I recommend yearly and if there has been a 5% or more deviation in allocations) or you may want to supplement the broad allocation with 'tactical tilts' depending on your views on the market.