Many people send me their portfolio and ask me to review it. These are the tell tale signs of a losing portfolio:

1. People who brag about their ‘success’ : One person who was so proud of his investment in one particular scheme. He said it had given him a 32% CAGR over the past 5 years. I thought he would have a significant amount in it. On a CTC of about Rs. 14 lakhs, he had done a SIP of Rs. 1000 (repeat Rs. 1000) that it did not matter. His other investments were much bigger and were performing poorly – and fairly obvious he had a lot of investments in debt instruments!

2. Extremely long portfolio: To me portfolios in excess of 12-15 direct equity stocks, and 4-7 mutual fund schemes are both too long. By definition such people under-perform the index over long periods of time. Of course if they had picked one Wipro, Hdfc, Tata Motors…their average still looks good, but again it is a size issue. Many people would have sold their winners along the way….and hold on to their under-performers. This again skews the portfolio…

3. Lopsided: Too much of one asset class – equity, debt, gold, real estate – using some past data they feel happy but on a realistic basis their performance is poor.

4. Not maintaining portfolio / accounts in WRITING: Mental accounting, heuristics, …other behavioral issues, not enumerating here.

5. Having their broker’s telephone number on speed dial. Need I say something?

6. Watching too much of business channel (financial porn addiction), subscribing to many newsletters, and not knowing the total brokerage paid for a month or a quarter (if you are in this category ask your broker for  a consolidated statement…for your family. This statement has been a behavior changing statement for many friends.

7. Fair weather friends: Asking people which years were they investing is a revealing question. If they were investing in 2005, 06, 07 BUT NOT in 2008, 2009 but started in 2010…you know why they are bleeding.

8. People with a net worth less than Rs. 2-3 crores (other than house and office being used) falling to pitches of PMS in equities, real estate, venture funds,….well less said the better.

there are more….will write about it

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  1. I did not understand the last point. What PMS in equities ? And doesn’t the range ( 2 – 3 crs ) you have given indicate portfolio at a certain age ?

  2. Vidya thanks for asking! What I meant is that people with a liquid net-worth less than Rs. 2-3 crores should not fall for any PMS scheme..that is all.

  3. nice article Subra. When you say only people with a liquid net worth of Rs. 3 crores should be doing PMS, you are correct, but nowadays PMS of rs. 5 Lakhs is also available! Personally I feel a fund manager should be able to understand a customer and then do portfolio management. Unfortunately many people fall for leveraged investing without understanding why they need it 🙂

  4. Nice one 🙂

    For people like me (wanting and working to be a good investor), these kind of articles is a tonic. Whenever I read articles like these, I make a mind mapping of my portfolio with these bullet points to check if mine is a winning portfolio over the long term or I am leaning towards the loosing side. So far I am a happy camper (started investing 3 years back. doing SIP’s without break the entire duration:-)) slowly started in direct equities as well.

    Thanks again
    Siva

  5. I like point 2. What should be the optimum number of mutual funds and direct stocks in an equity portfolio from a long-term perspective.

  6. Nice article. I recognized my portfolio is a losing one after reading this. I have around 60 stocks and at times it is difficult to maintain it.

    It will be great if you can also write something about, how would one go about correcting it.

  7. I think PMS can be avoided even if one has financial assets of more than 2 or 3 crores. PMS in the present avatar is designed to rob the investors. I definitely believe that you would have read the article about statusu of current PMS in India, which has appeared in the recent issue of Moneylife.

    If one can invest Rs.20 Lakhs in stocks or Mutual Funds, the same can be done for Rs.2 Crores also. ‘Exclusivity’ in investment is injurious to the financial health of the investors.

  8. Sir , would really appreciate your suggestions on my problem . My mom has just recieved Rs.27 lakhs as her retirement benefits , as she has no other liablities & any other income source , I was planning as follows , please review it
    A. Deposit Rs.9 lakhs in post office mis ,
    B. Deposit Rs.6 lakhs in sbi bonds opening on 18 this month ,
    C. Deposit balance in fixed deposit in sbi.
    I know i have not taken inflation in account but here lies the main problem , she is not in favour of direct equity or mutual funds by lump sum but i have convinced her to deposit interest of mis via sip in hdfc top 200(Rs.5000) & dspbr equity(Rs.1000). By the way she has medical insurance of Rs.2 lakhs. Sorry for this long comment , would really appreciate your advise.

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