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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  1. Just one person can himself have a number of vantage points. Liked the following lines –
    “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?”

  2. 70% cagr for 10 years… why not promote his name sir. Ready to pay 50% of return from anything he make above the index.

  3. Dr M Chandrashekhar

    Iam somehow convinced over the years that gut feeling & LUCK matters a lot in making sustained money in share trading. Whether you technically analyse a scrip analysing Beta, Alpha , Mean , Sharpe Ratio etc with a microscope, yet you go for a massive toss. If you watch TV channels , one expert says “Sell ” & the other guy says “Buy” in a different channel– for the same scrip–each one rattles out supporting Technicals

    I know of CAs in my family losing money heavily whereas not so well educated home makers making money consistently.

    There are far too many variables in our Stock market system –also there are far too many internal manipulations.

  4. Excellent article Subra sir!

    But, will agree to some extent with Dr Chandrashekhar as well. Reminds me of what I read in Random Walk Down Wall Streat!!

  5. if gut feel and luck mattered, great. Let us start publishing the photos and horoscopes of fund managers. I would rather choose lucky managers.

    Alas, luck cannot be repeated.

  6. Most CA’s, have less clue about personal finance. They may be good at accounts & number crunching, but don’t know enough about Personal Finance. Its a myth that CA’s are good at investing. Even Subra himself has said this before. And this extends to all IIT, IIM etc.

    In Personal Finance, you require a combination of number crunching, temperament, knowledge of market’s workings (why it busts, why company share value goes up) which comes with experience in markets & ability of think contrary i.e. not conforming to rules (and to think, CA’s are supposed to be very definition of conforming to rules). A CA has an advantage acquiring these skills faster than others, but most stick to number-crunching.

  7. Shinu

    Wealth is not created by advisers alone. Clients have to have the guts to take calls, hold, take risks and then gets returns. Anyway he is not looking for clients.

    Dr. C’shekar: we underplay the role of luck,and over play the role of skill. A CA degree is just a tag which says he understand accounts, but people have to have an aptitude for wealth creation.

    Agree broadly with Pandu.

    Over educated people do an analysis paralysis. Many a times you need to act with 70% info and 30% gut. Over educated guys wait for Perfect Information. Economic Value of Perfect Information is normally zero.

  8. Markets can modify behaviour in short-term positive ways that are simultaneously long-term negative ways. Hence, not confining to any one theory and always keeping options open is useful. Great piece!!! Hats offf!!!

  9. Dr M Chandrashekhar

    Yes– I appreciate that.

    What I meant in my post was –Market is a complex factor– so many unknowns even if I pore diligently into balance sheets with my thick glasses.

    Whilst I was investing in Stocks, lady luck happily smiled on me but I knew I was walking on thin ice. Moved on to MFs keeping my age profile & a stern warning from my spouse.

    Presently, happy with MFs– hope Prashant Jains & Sukumar Rajas to continue working hard to ensure that I make my money !

  10. As what Dr. Chandrashekhar says all the Beta, Alpha, Gamma ratios go for a toss when the market goes into free fall. Someone coughs in US and we all catch a collective cold.

    To add to the confusion, all the financial news channel anchors and the investment websites have their own number crunching as to what works and what does not. Something like a pre-election poll. No one actually has a clue.

    As Mr. Subramanyam keeps pointing out steady, disciplined investment in well managed funds over a period of time definitely yields better returns than churning the portfolio and doing day trading and calling it investing. Bangalore Turf Club would probably give better results!

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