Recently one person closed down his equity advisory business. I have no clue why he started and what he wanted, so I cannot comment on his business or about why he shut it down. I guess it is his call and not mine. I always find it difficult to comment on anybody whose business model I do not understand. In some cases I do not know whether the person is a shrewd brilliant businessman or just a maverick.
However, I can say why I am not in the equity advisory business. That is my call. I can choose to be in the business, have a selective clientele, choose to cap the aum and the average holding size, ….tons of options. I choose not to take the advisory model because of the following:
1. If you take money, you get obliged: If I take a salary from somebody and work he has a right to call me for a meeting, ask me for my time-sheet, find out what else I am doing – he is after all the owner of my time. So I have chosen not to take money from anybody for ALL the hours of a month. I sell my time on a day basis and it makes sense for me to sell it in units of 8 hours.
2. I deal in shares, yes, but I know what I am doing. So I take a small investment position in Manali Petro and a big trading position. In Cholamandalam Investment I take a big investment position and a small trading position. Simply because I trust the Chola management and do not trust the Manali management. However explaining this to a customer is not easy.
3. I buy a share on the way up, sell on the way up or even hold till a particular target. Sometimes on reaching the target I may extend the target if circumstances change.
4. I have held shares like MRF, LMW for a couple of decades and then exited fully. Honestly I do not expect the client to pay me parking charges for 2 decades. However PMS works as a full portfolio, not as an investment portfolio and a trading portfolio. As I am no longer a member of a stock exchange I will have to interact with a broker and trust him. That is easy to do, but difficult to explain.
5. I take quick positions and close them in some cases. In some cases I hold for Eternity. At the time of buying one has a vague idea of what one is buying – then as you like the management you keep building position. Karjaria ceramics and Essel Propack are both such shares – but now I have very little of Kajaria and almost nil of Essel. Somewhere you get exhausted or feel that the growth that you wanted is enough and then get out.
6. I bought Apollo Hospitals at Rs. 8 or 9 -as a yield share. When it turned a 20 bagger I sold. After that it has become a 6 bagger. I actually know what happened. It was a yield share, then it became a growth story and now it is a service sector darling. Articulation is useless if you can do in retrospect. When I sold I had no clue that it will go up so much. Me culpa. A client will remember it for the rest of our lives.
7. Sometimes I think too much – so I spoil a trade. Sometimes I do not think enough. So I spoil an investment. A client may not like this and may want far better explanations.
8. I have done trades in companies that I just do not remember – just because a kid analyst said ‘Sir this looks nice’ and I have said ‘If you think so, do it’. My overall experience in such trades have been good. Imagine telling a client this!!
9. I love volatility. Fund managers baulk at volatility. It has worked both ways.
10. Some of my worst trades have been when I did not listen to an analyst but used my own emotions. Crest Animation is one such shit in which I lost money. In retrospect I feel like a fool – I ignored lots of signals telling me that the company is shit. If you saw the pedigree you will blame me less!!
11. One person who had tons of research on PSU stocks in 1990 was the brother of an infamous man!! One needs to be alert, and I suspect my alertness is lower.
12. I have to stay in a high caliber environment, have an office in downtown Mumbai and meet more smart people. I have shifted to a lower end place, and do not meet enough people who challenge me intellectually. Hey this is by choice so not complaining, just stating the facts.
13. Legal costs have gone up too much, procedures far more complex, and the method of compensation too wrong. The cost of doing business with me will go up for a client, and I will not be satisfied with the amount unless it is a reasonably big sized portfolio. Employment with a fund managing team does not attract me. Does not attract me at all.
14. Simple strategies which have worked in the past for a few people I know is to do a SIP in a self created portfolio. This group of people created a portfolio out of some top performing mutual funds, and they left out the PSU stocks for about 4 years. They beat the index by a mile. DIY people can try something like that if they feel adventurous. Those are cheaper options.
Repeating: He who pays the piper calls the tune. I refuse to dance to somebody else’s tune EVERYDAY. On days that I do training I listen to what the client wants and I (think!!) deliver the same.
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