My holy grail of investing

Trying to talk to wannabe investors is getting very difficult. People come with a pretty bruised life. They have lost money in options, they have lost a lot of money in trading, they have a ‘portfolio’ which is really a dhobi list of a few shares bought, and there is no logic. They have made one or two brilliant investments but that is pathetic quantity – 2 shares of PnG in a portfolio of Rs. 18,00,000+. So even if a Rs. 2000 becomes a Rs. 13000 in 2 years, it does NOTHING to the portfolio.

How do I invest?

My holy grail of investing is simple: Have no Holy Grail of Investing. 

What was good for Warren Buffett in the 197os may not be good enough for you and me in India in 2015. However WB is a businessman, and not a fund manager. I like Sameer Auroa’s approach, Vallabh Bhansalli’s approach, Rakesh, Naren, Prashant, Warren Buffett, Ken Fisher, …seriously there is so much to learn from each of these persons, and none of them worth copying! For example Sir John Templeton believed in a lot of international diversification, but Warren Buffett did not. Of course WB made money in companies like Coke – which had international operations, but he himself did not diversify too much.

The rate at which people want new shares, new strategies, scaling up, is difficult to fathom. The worst thing about long term investing is during times of huge volatility NONE of the theories work. So to give up your path and try a new path is pretty foolish – and mostly dangerous. George Soros is a big speculator with an amazing conviction – but Warren Buffett does not play that strategy. Both make money – and at some stage both would have looked foolish – albeit for a short period of time. However at that point in time we need conviction to stay the course. Not very long ago EiD Parry was quoting at Rs. 130 and I was wondering whether I had too much of sugar in my portfolio. However in a commodity stock you do not track the stock but the price of the commodity, suddenly sugar is up and so are the prices of the shares. You need conviction. And flexibility.

I am in the Buffett camp as far as gold is concerned, however gold works from time to time. I know, the gold strategy looks so very good in the short-run.  Some hedge fund strategy MUST have outperformed even since the S&P 500 peaked, and the dollar continues to be strong. The short only fund looks really smart when the markets are down.  However most of these fancy sounding strategies are charging you high fees – and as Buffett says these will under-perform 80% of the time.  However, brilliantly, they lure in most of their assets during that 20% of the time when the markets look weak. It is in this time that the media will tell you what a brilliant strategy and how this hedge fund has out performed a Franklin Blue Chip or an I Pru discovery!! We need not make money, but we need to look smart, is it not?

So stick to a menu that suits you. Yes Idli, daal chaval is good for you. Suits you? stick to it. Once in a while a bhel puri is fine, but a diet of just bhel puri will hurt your stomach soon. Having a wider menu is fine, but be careful about the difference between being diversified and being diworsified (remember L&T used to be in cement, shipping, making glass bottles and exporting leather shoes?). Does not work. Diversification is best done when you understand why you have Ramdeo Agarwal and Naren in your portfolio. When it’s simple, less fees, growth option and really long term.

And most importantly, find a good strategy, a good equity adviser, or a fund and stick with it. In the long-run if you find a diversified, inexpensive, tax efficient and systematic investing process instead of trading without much of a strategy. Or searching for strategies which work in all conditions. There is nothing like that. Prashant Jain had good performance in 2014, but a poor performance after that. Currently I am still invested in Hdfc Equity and Top 200 (they look alike anyway) more as a contrarian strategy because I do not have SBI, Icici, and Infosys in my portfolio.

So do not search for the non existent Holy Grail of Investing. There  is none…

 

 

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3 Responses to “My holy grail of investing”

  1. Carefully know oneself and evolve a method that works for oneself over a longer period of time, and then stick to that method. Good one, Subraji

  2. Does one need a more clear direction than indicated here? Almost handholding.

  3. I agree that finding a good strategy and a quality advisor is a key to become a successful investor.

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