It may sound quite obvious, but ACCOUNTABILITY is vitally important for the success of an organisation or a PORTFOLIO. Many people who start their own business are never accountable to ANYBODY for their organisation’s success. Imagine a 32 year old leaving his job to start his own business. He can just rot and do nothing. He does not benchmark, does not draw up his/her own balance sheet and creates a feeling of being successful. Obviously, other than him NOBODY knows that he is a failure. If you have burnt your Angel investor’s money, venture capitalists money, and the IPO money and lived a nice life – who will know about your shenanigans? Only your conscious. These days even the conscience has got ‘practical and adjusting’.

Now come to your portfolio. Who is going to ask you how you have performed? Nobody. Not your spouse. Not your parents. Not your CA. Not your RM. Not… nobody.

So unless you create an Investment Philosophy Statement, and set some benchmarks you will not know whether you are successful or not. So if you are a Value Investor, and your benchmark is Icici Pru Discovery Fund, good for you. It could even be Templeton India Growth Fund. Or you could say ‘I am style agnostic’ – then the Hdfc funds (without any stated style) could be a better benchmark. Or you could use Sensex as a benchmark.

Even better you could set for yourself ‘absolute’ benchmarks – I should create an alpha of 4% over PPF. Simple. If  we do not create goal sheets in excel, we create our own ‘truths’ and start believing it ourselves. Self deception -by an entrepreneur / by a portfolio owner is one of the worst things for a business or a portfolio. Even companies run by a so called independent board can easily fall into this self deception, and often do.

Your investment philosophy statement – has to be vetted by a decent sized (bigger than yours) portfolio owner who has built his own wealth. So involve such a person and do a quarterly review, and keep the review notes with you. Now if you have an IFA you can get him to do all this – believe me not many IFAs are capable of doing this. So the people who can do all this will OBVIOUSLY charge you a fee in the range of 20-50,000 for a day’s effort and it is worth paying that provided you understand the value of doing this whole exercise. I am assuming that the portfolio is worth in the region of say Rs. 5 crores. At smaller portfolio levels like say 30L can you AFFORD all these services? I am not so sure – would you want to spend 2% of the portfolio in review charges? I dare say, no.

I have seen people get ANGRY when we do an ad hoc review – and get very defensive when it comes to choice of funds or companies. EVEN IF IT HAS JUST BEEN RECOMMENDED, and not chosen by them. This is a human tendency. If you see the recent politicially and economically foolish decision in the Indian polity. Once a person takes a stand, it requires tremendous Ego control to go back and say “It was a big mistake, I should not have done it”. A review should help you do that. Not easy, but worth doing.


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