I do equity advising for a few people – frankly just 5 people other than immediate family. And being able to do it for a fee is far far more difficult than what people think. I wonder how so many big companies do PMS for piddly amounts. To me it is not worth the time, effort, and reputation risk.
– the share that I recommend could fall AS SOON AS I ask you to buy. Last year I recommended EiD Parry at 145. After people bought it, it fell to 130, then 120 and I think it went even to 109. I bought at 119 ALSO.
Now for a new client (new to me and to equities) this experience would have been traumatic. I had bought at 150, 128, and 119.
Now such a scenario played out in Ashok Leyland, and Force Motors too. Even Tata Motors fell from 125 to 95 – I am talking about the DVR. Most of these shares have doubled (eid and FM) or tripled (AL, Sona and Ta Mo). Not bad over a 30 month period – or a little lesser.
The typical client reaction would have been to say:
– you also do not know the top and the bottom (I surely did not when I sold Wheels India for 750, 820 and 855) – it went to 869).
-you are taking a chance with our money also – I switched from Coro International to EiD parry, and then at an appropriate time I will switch back. This is a difficult to explain arbitrage.
– for me Value investing works, but requires patience. Clients, especially new ones have no way of judging me.
– look at the play in Wheels India, Wendt, Ricoh, – it is not easy playing these violent movements. I cannot risk client money, but the returns (for me) have been awesome. There is brilliant financial logic to what happened, but I do not expect clients to understand or think about that. Afterall they have given me the money, why should they get into the nitty gritty..?
If I were a broker, at least I would have earned brokerage…in an advisory, the next year’s cheque would be impossible to get.
And one disgruntled client going to the Regulator would have s….d my sleep. Hey I eat well and sleep well.
I will not give that up. So exactly why I cannot, will not and should not do equity advising.
Mutual fund advising – I suggest simplicity – and yes I charge a fee 🙂
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