Vittae Blogs

Tag: stocks

  • The Dot-Com Bubble: From Internet Gold Rush to $5 Trillion Wipeout

    In the late 1990s the internet landed like a rocket in Wall Street’s lap. Suddenly everyone believed the web would rewrite the rules of business, forever.
    What followed was one of the most spectacular booms and busts in market history.

    The Spark: Internet + IPOs + Wild Hopes

    The moment came in August 1995 when Netscape Communications Corp. went public. Its shares doubled on Day 1. That told the market: the name “.com” itself could generate value.
    From that moment, plenty of companies believed they could skip earnings, ignore profits—they just needed a website, a URL, and a story.

    Between 1995 and 2000 the number of internet-related IPOs exploded. Some data points:

    • The Nasdaq Composite (heavy in tech/internet stocks) rose from under 1,000 in 1995 to 5,048 by March 10 2000. (Wikipedia)
    • Analysts estimate that more than $5 trillion in market value was wiped out when the bubble burst. (International Banker)
    • The Nasdaq’s peak was on March 10, 2000. From that peak to the trough in October 2002 the index fell ~78%. (Goldman Sachs)

    In short: A new economy arrived. Everyone wanted a piece. The betting got extreme.

    Gold Rush Phase: Money Everywhere, Fundamentals No One Asked

    What caused the surge?

    • Cheap money: Interest rates were low; capital was flowing.
    • Hype: The internet was sold as “everything will be online”.
    • VC & IPO frenzy: Thousands of startups launched; many had no revenue but massive valuations anyway.
    • Retail participation: Ordinary investors jumped in, buying tech stocks because “this time is different”.

    Some metrics:

    • From early 1995 to March 2000 the internet sector’s public equity returns exceeded 1,000% in some cases. (pages.stern.nyu.edu)
    • According to the Corporate Finance Institute, the Nasdaq went from ~751.49 in Jan 1995 to ~5,132.52 by March 2000—an increase of around 582%. (Corporate Finance Institute)
    • Margin debt (borrowing to buy stocks) peaked around 2000’s dollars at ~$300 billion (equivalent ~500 billion today). (Modern Wealth Management)

    Here’s how the fever pitch looked:

    “We’re all going online. This company sells pet supplies via the web? It’s the future.”
    Sound ridiculous now? Yes. But then investors bought it—and rewarded the narrative with big money.

    Valuations Went Mad

    By 2000, the market wasn’t asking “What’s the price-earnings ratio?” The question was “What’s the story?”
    Companies with little or no revenue were valued like banks. Stock prices jumped even when the business was still figuring out how to survive.

    To give you a sense:

    • The Nasdaq’s peak of 5,048 in March 2000 was more than 5× the level of just five years earlier.
    • Some tech stocks had P/E (price to earnings) ratios of 200× or more—unheard of for sustainable businesses. (Risk Concern)
    • Many IPOs opened with huge first-day gains or floated at high valuations before meaningful profits.

    The mindset: Growth at all cost. If you’re losing money today, you’ll make millions tomorrow.
    Except many never did.

     The Turn: What Went Wrong

    Booms don’t last forever. The dot-com era had several under-the-surface cracks:

    • Many companies burned cash fast and had no clear path to profit.
    • The Federal Reserve raised interest rates around 2000 (tightening money). (Modern Wealth Management)
    • Investors began asking tough questions: “How does this business make money?”
    • Margin loans, speculative bets and IPOs all started turning into risk.
    • Lock-up expirations (once insiders could sell) began, and optimism began to fade. (pages.stern.nyu.edu)

    The crash kicked off when the Nasdaq peaked (March 10, 2000). After that the slide started.

    Crash Stats

    Metric Peak Trough Approximate Drop
    Nasdaq Composite 5,048 (Mar 10 2000) (Goldman Sachs) ~1,114 (Oct 9 2002) (Wikipedia) ~78% down
    Market Value Lost — — ~$5 trillion + (International Banker)

    When the large tech stocks fell, many smaller companies collapsed entirely. Some examples:

    • Pets.com (famous mascot, huge hype) folded within months of its IPO. (encyclopedia.pub)
    • Many startups that seemed like legends disappeared into nothing.

     The Broader Effect: This Was a Stock-Market Event, Not Just Tech

    The dot-com bubble wasn’t confined to a few internet companies it pulled in the whole market.

    • The S&P 500 hit a record close of ~1,527.46 in March 2000. (Barron’s)
    • After the crash, the S&P lost about half its value by late 2002. (Barron’s)
    • The Dow Jones also dropped for several years. The correction dragged the economy into recession in 2001. (Wikipedia)

    So this wasn’t a niche event. The technology mania pulled in mainstream markets, investor wealth, and expectations.

     Recovery and Lessons: What Survived and What From It We Learn

    Recovery took time. For example:

    • The Nasdaq didn’t see comparable highs again until April 2015. (Goldman Sachs)
    • Many tech survivors: Amazon.com, Inc. evolved into a gigantic business; others vanished.
    • Many workers, investors and entrepreneurs learned the hard way: hype doesn’t equal value.

    Here are some key lessons:

    A) Fundamentals still matter.
    Even if you’re building the “next big thing,” revenue, profit, and business model eventually matter.

    B) Valuations matter.
    The higher you pay, the harder it is to justify. Buying at peak valuations gives little margin for error.

    C) Beware the narrative.
    When “everyone” believes, the risk is often already baked in. The line between vision and hype becomes thin.

    D) Patience is underrated.
    Some companies survived because they focused on building real businesses, not just chasing the next IPO.

    Why It’s Still Relevant Today

    It’s 2025. Tech valuations are high. AI, deep-learning, Web3, and other buzzwords dominate headlines. So the dot-com bubble matters for this reason: history doesn’t repeat exactly—but it rhymes.

    • The Shiller CAPE (cyclically adjusted P/E) ratio recently hit levels comparable to 2000. (markets.businessinsider.com)
    • Margin debt, speculative flows and hype machine appear again in different form (e.g., crypto, SPACs, AI).

    So if you’re investing today, keep one question close: when the story is glowing, what are the numbers saying?

     The Human Element

    Beyond the charts and data, the dot-com bubble is a story about raw human emotion greed, fear, belief.

    When valuations soar because “everyone knows this will work,” that’s when risk is often disguised.
    When investors stop asking “How does this make money?” and start thinking “How fast can I make money?”, things get dangerous.

    Innovation is powerful. But even disruptive ideas must cross the bridge of business success.
    The internet changed everything but it didn’t bestow infinite value on every startup that called itself “.com”.

    So as you face the next big wave, remember: great technology doesn’t guarantee great returns but great discipline, business sense and strategy often do.

    Understanding the dot-com bubble is not just history it’s a guide to recognising the next one.

     

  • What is the difference between NSE & BSE?

    What is the difference between NSE & BSE?

    India’s stock market is a dynamic and vibrant hub that attracts both domestic and international investors. 

    Within this bustling ecosystem, the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) stand out as the two primary stock exchanges. While they share a common goal of facilitating the buying and selling of securities, these institutions differ in various ways. 

    In this blog, we will discuss the main difference between NSE and BSE in India, offering you a comprehensive understanding of the Indian stock market landscape.

    The History of NSE and BSE

    Before we get into the nitty-gritty details, let’s explore the historical backgrounds of these two iconic exchanges:

    Bombay Stock Exchange (BSE)

    Imagine a time when stock trading in India happened under a banyan tree. That was in the 1850s. As the demand for a more formal exchange grew, the Bombay Stock Exchange was founded in 1875. It’s the oldest exchange in Asia and the first-ever stock exchange in India. Today, BSE is located in Mumbai and houses thousands of companies.

    National Stock Exchange (NSE)

    The NSE, on the other hand, is a more recent arrival, established in 1992. The Indian government wanted to modernize the stock exchange system, leading to the birth of NSE. It quickly became a significant player in the Indian stock market, and its headquarters are also in Mumbai.

    Key Differences

    Ownership and Governance:

    BSE is a corporatized and demutualized exchange, meaning it is run by a corporate entity and no longer owned by trading members.

    NSE, on the other hand, follows a similar structure and is also a demutualized exchange.

    Trading Platform:

    BSE’s trading platform is known as BOLT (BSE OnLine Trading), while NSE uses NEAT (National Exchange for Automated Trading) and NOW (NSE’s trading software).

    Benchmark Indices

    BSE: BSE’s most famous index is the SENSEX (Sensitivity Index). It consists of 30 of the largest and most actively traded stocks on the BSE. The SENSEX is like a thermometer for the overall health of the Indian stock market.

    NSE: NSE’s equivalent to the SENSEX is the Nifty 50 or Nifty. It is a benchmark index that includes 50 of the largest and most liquid stocks listed on the NSE. These indices help investors gauge the performance of the stock market as a whole.

    Technology and Infrastructure:

    NSE is widely popular for its cutting-edge technology infrastructure and high-speed order execution, making it a preferred choice for many active traders.

    BSE has made significant technological advancements in recent years, but it has historically lagged behind NSE in terms of technology.

    Listing and Securities:

    Both exchanges facilitate the listing of various financial instruments, including equities, derivatives, mutual funds, and debt securities.

    BSE has more regional presence with a significant number of companies from Western India, while NSE is more dominant in Northern and Southern India.

    Trading Hours:

    BSE: BSE opens for trading at 9:15 AM and closes at 3:30 PM. There’s also a pre-open session from 9:00 AM to 9:15 AM.

    NSE: NSE has similar trading hours, starting at 9:15 AM and closing at 3:30 PM. The pre-open session runs from 9:00 AM to 9:15 AM, in line with BSE.

    Retail vs. Institutional Focus

    BSE: Historically, BSE has had a stronger retail investor base due to its longer presence in the market. It’s seen as more traditional and appealing to individual investors.

    NSE: NSE has positioned itself as an exchange that caters to both retail and institutional investors. Its advanced trading technology and services have attracted a wide range of market participants.

    Market Capitalisation

    BSE: The Bombay Stock Exchange (BSE) has been around for a long time and is an important part of India’s financial world. It’s like a home for many famous companies. In the latest data we have, BSE is worth about 140 lakh crore rupees.

    NSE: The National Stock Exchange (NSE), even though it’s newer, has become really popular and has lots of big companies, too. It’s worth around 182 lakh crore rupees, according to the most recent data we have.

    Popularity and Trade Volumes

    BSE: The Bombay Stock Exchange, given its history, has a broad investor base, including many retail investors and traders. However, it has a smaller share of the trading volume compared to NSE.

    NSE: The National Stock Exchange has grown to become the preferred choice for many traders and institutional investors due to its robust and efficient trading platform. It generally enjoys higher trade volumes compared to BSE.

    Regulatory Oversight:

    The Securities and Exchange Board of India (SEBI) regulates both NSE & BSE.

    Global Recognition:

    NSE is often recognized more globally due to its advanced trading systems and the Nifty 50’s international appeal.

    Which Exchange Should You Choose?

    The choice between NSE and BSE ultimately depends on your investment preferences and goals. Here are some considerations to help you decide:

    • Liquidity and Trading Speed: If you prefer highly liquid markets with faster order execution, NSE may be your go-to choice.
    • Historical Data and Research: BSE with its rich historical data and the Sensex, is a valuable resource for investors who prioritize historical analysis and trends.
    • Geographic Preference: Consider the regional presence of companies listed on each exchange. BSE has a more significant presence in Western India, while NSE is dominant in other regions.
    • Sectoral Diversification: Examine the sectoral composition of indices. BSE Sensex represents a different set of sectors compared to the Nifty 50, so your choice may depend on sectoral diversification preferences.
    • Technology and Trading Experience: If you are an active trader looking for advanced trading technology and a seamless trading experience, NSE might be more appealing.

    Conclusion

    NSE and BSE, though both critical players in India’s stock market, have distinct characteristics and histories. Your choice between the two should align with your investment objectives, trading style, and the specific features that matter most to you.

    Whether you prefer the established legacy of BSE or the cutting-edge technology of NSE, both exchanges contribute significantly to India’s robust and thriving financial market.

    In the end, as an investor, your focus should be on your individual financial goals. Like how you would decide whether to invest in mutual funds or stocks, you should be thinking about the performance of the specific securities you wish to trade or invest in, rather than the exchange on which they are listed.

  • Mutual Funds vs. Stocks: Which is Better for You?

    Mutual Funds vs. Stocks: Which is Better for You?

    Are you looking to start your investment journey? We’ll take a guess. You’re confused about which is the better option for you – mutual funds or stocks? Right?

    You’ve come to the right place. We’re here to educate you about both, so you can take an informed decision. 

    At Vittae, we want to empower everyone with financial growth and wellness.

    Every money story matters. We’re excited that you want to build your money story. 

    Be it mutual funds or stocks, it is the mindset of growth that is key to financial freedom. And you, my friend, are on the right track! 

    Read on to know in detail about mutual funds, stocks, how to invest in them, differences, risks involved about the same. 

    What are Mutual Funds? 

    A mutual fund is like a big basket of money that is collected from many people who want to invest their money. The money is then used to buy different types of investments like stocks, bonds, or other assets, depending on what the fund is trying to achieve.

    The goal is to make money for the investors by buying and selling these investments.

    When you invest in a mutual fund, you buy a small piece of that big basket of money. This means you are investing in various investments, which can help reduce your risk.

    A professional manager is in charge of deciding which investments to buy and sell, based on the fund’s goals.

    The value of your investment in the mutual fund goes up or down based on the performance of the investments in the fund.

    You can buy or sell your shares in the mutual fund at any time, and the price you get is based on the value of the investments in the fund at that time.

    Mutual funds are a way to invest your money in a diversified portfolio of investments, managed by professionals, to earn a return potentially.

    What are stocks? 

    Stocks, also known as shares or equities, represent ownership in a company. When you buy a stock, you are buying a small piece of ownership in that company.

    Stocks are bought and sold on stock exchanges. In India, the Stock Exchange Market is the NSE or BSE (National Stock Exchange or Bombay Stock Exchange).

    When a company sells stocks to the public, it is called an initial public offering (IPO). After that, the stocks can be bought and sold by anyone on the stock exchange.

    The price of a stock can go up or down based on many factors, such as the company’s financial performance, industry trends, and global economic conditions.

    Investing in stocks can be risky, as the value of a stock can be affected by many unpredictable factors. However, over the long term, stocks have historically provided higher returns than other types of investments, such as bonds or savings accounts.

    Investing in stocks requires knowledge, research, and a long-term perspective. It’s important to do your own research or work with a financial advisor to determine which stocks are right for you and your investment goals.

    As the below image shows, there’s been explosive growth in Demat accounts in the last decade. From 2020 to 2021, the number of Demat accounts has almost doubled. The information from SEBI shows how the public is aware of the long-term benefits of investing, to achieve their financial goals.

    Growth of Demat Accounts from FY10-11 to FY20-21
    Growth of Demat Accounts from FY10-11 to FY20-21

    Are Mutual funds and Stocks different? 

    Around this time, it’s all about cricket fever in India because of IPL (Indian Premiere League). Everyone roots for our favourite teams!

    Investing in stocks is like picking individual players for your fantasy sports team. You do your research, pick the players that you think will perform well, and hope that they do.

    If they do, your team succeeds and you make a profit. But if they don’t, your team might lose, and you might end up losing money.

    On the other hand, investing in mutual funds is like drafting an entire sports team for your fantasy league.

    Instead of picking individual players, you choose a team of players with different strengths and weaknesses. When combined, you create a well-rounded and competitive team.

    In the same way, a mutual fund is a collection of different stocks, bonds, and other investments that are managed by a professional fund manager.

    By investing in a mutual fund, you are essentially investing in a diversified portfolio of different assets, which can help expand your risk and potentially increase your chances of success.

    So, investing in stocks can be exciting and potentially lucrative. But, it is also risky and requires a lot of research and expertise.

    Investing in mutual funds, on the other hand, can offer a more diversified and potentially less risky approach to investing, while still providing the potential for growth and profit.

    Key differences between Mutual Funds and Stocks

    Ownership

    When you buy stocks, you own a share in a company. That means you have a direct ownership stake and the potential for capital gains and dividends.

    When you invest in a mutual fund, you own a share in a diversified portfolio of investments managed by a professional fund manager.

    This means you have indirect ownership and the potential for returns based on the performance of the underlying assets.

    Diversification

    Investing in stocks is typically more volatile and risky than investing in mutual funds. Mutual funds offer diversification across multiple stocks, bonds, or other asset classes.

    By holding a diversified portfolio of investments, mutual funds can help to reduce the risk of losses from the poor performance of any investment(s).

    Management

    Investing in individual stocks requires time and expertise to research and analyze companies, industries, and market trends.

    Mutual funds are managed by investment professionals who make decisions on behalf of investors, based on their expertise and analysis of market conditions.

    Fees and expenses

    Buying and selling individual stocks typically involves paying commissions and other fees to brokers. Mutual funds, on the other hand, charge fees for management and other expenses.

    The fees and expenses associated with mutual funds can vary widely. It’s important to research and compare different funds before investing.

    Liquidity

    Stocks are generally more liquid than mutual funds. This means they can be bought and sold quickly and easily on stock exchanges.

    On the other hand, mutual funds are priced once a day and can take several days to settle after a sale. This can limit their liquidity in certain situations.

    The main difference between stocks and mutual funds is that stocks offer direct ownership. They have the potential for higher returns but with greater risk and volatility.

    Mutual funds offer the diversification, professional management, and potentially lower risk and volatility but with slightly lower potential returns.

    Risk Factor in Mutual Funds v/s Stocks

    Investing in mutual funds and stocks carries different types of risks.

    When you invest in a mutual fund, you are essentially investing in a diversified portfolio of stocks or other assets that are managed by a professional fund manager.

    This means, when you invest in a mutual fund, you’re giving your money to a professional manager who invests it in a bunch of different companies.

    This can help reduce your risk because if one company does poorly, it won’t affect your investment too much. But, if the overall stock market does poorly, your mutual fund investment could still lose value.

    When you invest in a stock, you’re buying a piece of ownership in one company. This means that if the company does well, your investment could go up in value. But, if the company does poorly, your investment could lose value. 

    This is riskier than investing in a mutual fund because your investment depends on just one company instead of many.

    Investing in a mutual fund is considered safer than investing in individual stocks, but it may not offer as high of returns. The best choice for you depends on your goals and how much risk you’re comfortable with.

    Returns from Mutual Funds v/s Stocks

    The returns you can expect to get from mutual funds and stocks can vary widely, and it’s difficult to make a direct comparison because they are different types of investments.

    When you invest in a mutual fund, your returns will depend on the performance of the underlying assets held by the fund. 

    Mutual funds can invest in a variety of assets such as stocks, bonds, and real estate, and the returns will depend on how well those assets perform over time. 

    Mutual funds are considered to be a more conservative investment option than stocks, and they tend to offer more modest returns over the long term.

    When you invest in individual stocks, your returns will depend on the performance of the specific companies you have invested in. 

    If the company does well and its stock price goes up, your investment could also increase in value. 

    However, your investment could lose value if the company does poorly and its stock price goes down. Stocks can offer higher returns than mutual funds, but they are also considered to be a riskier investment option.

    Mutual funds are generally considered a more conservative investment option that can offer more modest returns over time, while stocks can offer higher returns but are also riskier. 

    The best choice for you depends on your investment goals and risk tolerance.

    In Conclusion

    We are sure you have financial goals that you want to plan for in the future. When you design your financial plan in line with these goals, remember to pick the investments that align with your goals.

    Now, that you understand the difference between mutual funds and stocks, we hope you make an informed decision.

    At Vittae, we learn about you, our client, and also conduct a risk assessment test to understand how much risk you can afford to take.

    These details help our certified Financial Experts give the perfect advice to achieve your financial goals, sustainably.

    We know it can seem a little overwhelming, but trust us. Take the first step towards investment and kick-start your journey to financial freedom.

  • How to pick the right Mutual Fund for you in 2022? 

    How to pick the right Mutual Fund for you in 2022? 

    Mutual funds have been proven to be a very successful way to begin one’s investment journey. As an investor, it’s the best investment avenue to begin your journey without having to know much about equity markets, indexes or even how the economy is performing.

    But as a new working individual I personally struggled with picking the right fund. And not surprisingly I, like many of you, would google “Best mutual funds for highest returns”. But is that really the right way to go about a personalized suggestive option?

    Of course not!

    But don’t worry, you don’t have to go through the same struggle I did.

    How to select right mutual funds?

    Investments are not a ‘One size fits all’ type of assets. They are supposed to be personalized based on your expectations, needs and comfort levels. Hence, these are some of the points that you should keep in mind while selecting a suitable fund for yourself:

    Right Mutual fund in 2022

    1. Your Personal Objective – Be mindful of what you are trying to achieve with your investment. Whether it’s a foreseeable major expense like your wedding, a future trip abroad, an emergency fund, your child’s education, your retirement, or even something for your family, make sure you have a clear reason for this investment.

    This objective will help you decide 2 things

    a) A timeline – What your investment’s duration should be.

    b) How risky/ risk-free should you be in order to choose the fund.

    2. Risk Appetite- Risk is a very interesting point here. People between the ages of 22 to 28 are generally ‘risk seekers’. To state the obvious, these are people who in general have lesser debt, lower obligations and have the bandwidth to take on additional risk.

    There after funds that contribute to over 85 to 90% of the funds AUM* to just equity. This makes the fund riskier but it is able to generate higher returns too. (Remember, an investor always looks for additional compensation when he takes more risk. Hence, a high risk to high reward ratio is seen amongst different funds)

    Now, for people over the age of 29, Risk becomes a critical factor. People in this age bracket are generally more cautious about their finances because of responsibilities, debt and other things.For them a fund that has a good balance of both Equity and Debt is preferrable. 20 – 35% of AUM may be dedicated to Debt funds making the fund safer & more stable.

    3. A Suitable Fund – Now that you have a goal in mind with the required time line and risk appetite, look for funds that help you reach the required returns percentage. 

    How do you do that? Well, an easy way is to compare the returns percentage that the fund has made over the required tenure (for eg say 3 years) to the returns made by the Indian Indexes such as Nifty & Sensex. If your fund beats or equates that return percentage, you are good to go. 

    For Example – My 3-year goal is to buy a car for  X amount of rupees. My money has to grow at a continuous interest rate of 15%. I would look for a fund that has been consistently performing well and one that gives me a return of at least 20% CAGR*.

    Types of Funds:

    • Equity Schemes – These are funds that are high risk and have a high return potential. These are ideal for investors in their prime earning stage, looking to build a portfolio with superior returns in the long term.
    • Money Market Funds – These are funds that invest in short term debt instruments, giving a sustainable and stable return. These types of funds are suitable for investors with low risk who are looking to park their surplus over a short term.
    • Fixed Income or Debt Funds – These funds would have majority of their investment in debt instruments such as government securities (G-sec), bonds and debentures. Ideal for low-risk investors who are looking for a steady income.
    • Balanced and Hybrid Funds – Funds that have a good mix of both Equity and debt. The allocation of the AUM would keep changing based on how the sectors are performing in the current market sentiment. Since it’s a combination, the returns would be moderate to high depending on the allocation.

    So do your research to identify the right mutual funds that match with your expectations, needs and comfort levels. 

    If you find this whole process overwhelming, you can always hire an Advisor who can help you with this!

    Glossary

    AUM – Asset Under Management means the total value of the fund being invested by the fund house.

    CAGR – Compounded annual growth rate is the annualized average rate of revenue growth between two given years, assuming growth takes place at an exponentially compounded rate.

    NAV – The performance of a particular scheme of a mutual fund is denoted by NAV (Net asset value). NAV is the market value of securities held by the scheme.