Portfolio: Introspection

post repeated with some re-writing on request by a few ‘Satsang’ friends …who wanted to read about what I told them about life, portfolio creation and ghee….some of you would have read it earlier..sorry for the repeat…

Life, wealth, milk and ghee.

Have you wondered what is the connection between creating a portfolio, ghee, life and Hindu mythology? Have you wondered why we use ghee as a ‘purifier’ in all our poojas that we do? Even Jains who do not use animal products use milk and ghee!

Have you wondered why many Indian communities take a small portion of ghee in our day to day meals even though we have doctors saying that ghee creates heart trouble?

Ghee is got by a process – somewhat similar to the portfolio creation process. And some what how you live your life. Removing sad incidents, negative thoughts, failures to make way for success is a never ending process. They day you think the process has ended, you are in trouble. It is like striving for that ‘perfect’ portfolio.

They day you feel you have created the perfect portfolio, the market shows its true color – as THE GREAT HUMILIATOR – as Mr. Fisher calls it TGH.

When you get milk you want to keep it with yourself for life –well it is not possible. You and I both know that!

So you need to heat the milk, and reduce the water content in the milk. Then bring milk to boil.  Similarly in your portfolio, you need to research a lot of stocks, read about it, meet the management, and then buy it. Then you do bring it to boil. You sell not only because the company is not performing to potential of what it said, but also, because you have other opportunities. Bad luck! Who said life is fair?
This is just boiled milk. Then you cool it, add a little bit of curd and ferment it. The whole thing turns to curd. (L O L the only useful derivative is curd – it is a derivative of milk and I do not know of anybody who has lost billions or even millions by this derivative).
Then you skim the curd (of course you could have skimmed the milk also) and remove the ‘fat’. This fat is then churned – and some more water is removed. What you get is butter.
This butter is very pure and on the day it is produced it is called ‘Navneet’ – and is said to have been the principal food of Lord Vishnu during his avatar as ‘Lord Krishna’.
This ghee still has some water and some impurities which have to be removed.
So this BUTTER is brought to boil – and you find some black particles floating on the top. This also has to be removed.

Once all this process is done, you have ghee. Just like some portfolios that I have seen. Hindalco held for 50 years, Tata Steel held for 35 years, Colgate held for 33 years, Reliance Industries for 32 years, P&G for 30 years Hdfc for 30 years, Hero Honda held for 25 years, Infosys held for 16 years, EID Parry, Cholamandalam, Coromandel Fertiliser, Larsen & Toubro, Tata Power, Tata Motors, Tata Chemical, Grasim, HUL, Cadbury, Kodak, Franklin India Bluechip held for 12 years, Top 200 (not sure whether to call it Zurich Top 200 or Hdfc Top 200) held for 12-13 years.

During the process you make mistakes like acquiring Orkay, Pentamedia, Silverline, Indiana Dairy, ….and many others. Use the process to get rid of water and the black particles. Faster the process, and greater the rigor, greater the ghee that you and your family can use. For your own consumption and for friends and loved ones’ consumption.

This is ghee. After the milk has been boiled, churned, cooled, etc. This ghee can feed you for a long time – as long as you are sure that you choose to watch Animal Planet and take only one spoon of it a day. Too much ghee creates health problems, I agree with the doctor. Live only off the dividends. Even your grandchildren can. Somebody needs to keep repeating the process. Hindalco may have to be replaced by Gillette, ABB maybe taken private, some gold company may turn out to be mud, teach your kids the process of creating a good portfolio. Managers cannot do it for you.

Even if you get a priest, you do the Pooja, right?

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13 Responses to “Portfolio: Introspection”

  1. Nice analogy of making ghee and equity holding for long 🙂


  2. What a brilliant analogy !! 🙂
    Keep rocking.

  3. And the danger is that the Priest (aka Consultant/Advisor) takes all the ghee!! 🙂

    Immensely enjoyable and useful post. Thanks!

  4. Superb…

  5. What an analogy! And it sounds so correct. Nice to see ‘original’ articles by Subra – obviously with a philosophical touch, or from an eating example or from common sense stories.

    It is not easy to adapt tales, stories, jokes,…from other areas and apply it to finance – hence i said ‘original’.

    Good work …Subra you should be getting a wider audience. One blog is too small a canvas for you. Will MOneycontrol, Economic Times, Utvi Bloomberg site, …take note?

  6. But, u are 48, how u can say that u are holding since 30,32,33,50 years?
    Might be in your father’s portfolio, i guess.
    With ghee can we add some hot spices like aban,educom,sesagoa,titan,lic hsg fin. in our plate?

  7. there is no law against optimism, stupidity, or foolhardiness. So players in the market can do exactly what they want. It is a market where 1% of the players make 99% of the gain. The others, who are in the majority normally know everything else :).

  8. Subra,

    Very good article. Thanks for your effort to share knowledge through this blog. Can you share some thoughts on the Hot topic “Base Rate” by banks for loans and how it will help/distress us.

  9. Nice article.
    Could you please give us CAGR figures for some of these jewel stocks which were held for such long duration?
    This will give idea to readers about what kind of % growth was obtained.

  10. Over the long run, does it matter if someone buys these selected picks when NIFTY PE is 12/17/23+ ? Or buying at regular intervals is recommended due to averaging?

  11. Please..read all this with a big caveat. THIS WAS DONE BY PROFESSIONALS – see the page about me – I am a CA and was a member at NSE. DO NOT COPY. And I may actually be selling some of these shares and buying new ones. You cannot do portfolio management by seeing somebody who has been doing this for 31 years..WITH HELP FROM A VERY, VERY SUCCESSFUL FUND MANAGER – his company name is a household name. Just because he does not like publicity I do not talk about him in public. So please do not copy. Returns from these shares should be in the range of 30-60% with some even at 70% – but please remember 2001 to 2010 has seen one brilliant bull run from 2002 to 2007 (700% jump in sensex) one quick fall and one super quick recovery. If you take the returns over a 30 year basis it should be in the region of 23-24% including dividends – still superior to the index.

  12. Rakesh jhunjhunwala holds none of the above stocks. It is said he has grown his wealth from meagre 5000 rupees to 5000 crores(its one billion dollors,now a days its fashion to quote in million and billion)
    so, there is opportunity cost of holding colgates and gillette’s of the world in your portfolio…LOL

  13. […] http://www.subramoney.com/2010/06/portfolio-introspection/ […]

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