When you have lived long enough on the planet, you have one great thing – the ability to look back.
Obviously I can look back on investing and can look back about 33 years – when I started. It is also the same age as the relationship with my friend / philosopher / guide / broker, so to some extent it is a common journey. Here are some observations:
1. There is no theory which holds for all times, for all persons: Many friends have tried copying my portfolio. Some have sold off due to various reasons, and some have not copied in full. Peter Lynch talks about an incident where in a school competition kids picked up stocks on what they knew – and did better than the fund managers.
Would it have worked in India? yes kids would have WANTED TO PICK up Colgate, Samsung, Nokia, State Bank of India, Mc Donalds, Suzuki, Honda, …..
You decide what would have happened to their portfolios.
Sure those who picked FB and lived to tell the tale have been hurt.
2. Invest in the Index, and you will be fine: Excellent in theory, but please do not say this in the presence of Prashant Jain, Sukumar, Naren Sankaran….these guys regularly beat the index.
Does it still make sense to invest in the index in India? Yes sure, especially if you do not want to look at the returns, compare it with what is happening, switch, etc. YOU WILL BE BETTER off with the index. Here is a caveat – I do not like the index construction, and personally WILL NOT INDEX as long as we are a market cap driven index. The best returns that I have got are from shares which CAN NEVER BE in the index – Cummins, Coromandel International, Gillette, many shares in the Tata group, P&G….My advice? If you are not directly investing in equities, please index.
3. Advisers have to make money for you: Period. : I saw one adviser who had made 70% cagr for his clients over the last 10-12 years. This is a fantastic return, but when I checked each of his real big time transactions, there was no great pattern. He also had done some transactions to which he could not ascribe much logic. BUT YOU CANNOT ARGUE WITH MONEY, and he had made money.
4. Journalists and TV experts have to look good THE DAY THEY SPEAK or WRITE: Many people who analyse data – or even those who write about fund performance – suddenly fancy themselves as fund managers. They then pretend that they can spot trends, they suddenly know which fund to follow, how they are suddenly picking funds (or stocks) better than the fund manager. Hey NOBODY tracks a journalists brilliant ‘foresight’ stories, it is always the post event 20/20 vision with which they write.
5. Nice to talk about research: it is customary to talk about research, macros, etc. HOWEVER research is a team work. If you are handling your own say Rs. 5 crore portfolio, you have neither the time, ability or willingness to do detailed equity research. To spend money on good equity research your portfolio has to be at least Rs. 20-40 crores, then you can expect YOUR BROKER to do some customized research for you. Otherwise it is the same report, with just the changed font and format that it is given to you. Recycled. And again recycled. It costs at least Rs 500,000 for a good quality research report. If it has come to you FREE, see why it is free…..
6. Journalists worry about consistency in theory, practitioners worry about making money: As the market moves your strategies change. It takes a great effort to tell the client ‘sorry I erred’. However an adviser HAS TO SAY THAT so that losses can be cut. I had bought GMR Infra at Rs. 61 because a broker’s research head had asked me to buy. When I checked with another person, he said ‘sell’ and I got rid of it at Rs. 59….then of course it plunged to Rs. 20..now it is at Rs. 24. An adviser has to say ‘I erred’.
7. All your portfolio need not follow a pattern – rather the ‘same’ pattern! If I buy any share a few people expect me to CLARIFY as to why I am doing something. This is scary. I can be a value investor for one share, a trader in one, a speculator in one, and of course a white knight in one more! Why should I allow anybody to classify me, when I myself do not want such stereotyping…but some of my friends and readers expect me to. Amused!
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