“Subra you are very lucky that you got a chance to buy shares at low prices in the 1980s and 90s, but today it cannot work”.

So said one famous TV anchor.

That brings us to the question: “Is the buy and hold strategy no longer a good strategy?” is the strategy finished? Should you trade? Well even people who do not like to call themselves speculators (active traders is what they call themselves) feel that in a market where the market has gone nowhere in the past say 5 years, active trading WOULD have improved their results. Well then fund managers too would have done that and improved their returns, right? I do not know of any of the decent fund managers whose returns have been improved because of active trading. So why this feeling? Why does a retail share player (I am not clear whether he is a trader, investor, or fun seeker) feels that he can do it? Why do these people get a feeling that they can do a better job than a fund manager (other than the obnoxious costs of course)? Trading is not easy and the costs of trading — brokerage, spreads, market impact, capital gains taxes — do not go away in a down market. Shuffling from one investment to another is EXPENSIVE, and costs loom at least as large in down markets as in up markets.

Unless you have an extremely good broker adviser (I do not mean relationship managers working for big brokers) who has tons of trading experience, contacts, nimble feet, chances are you will lose money in equity trading. I keep saying equity trading is a great profession and a very very expensive hobby.

I am of the old thought and have not seen too many amateur traders doing well on their own. People who almost never trade stand a very good chance of outperforming the professionals who almost never sit still. The longer the time horizon over which performance is measured, the more likely this is to hold true. So if you decide to create  a portfolio (means buying 2 scrips a year from the Sensex) over a 10 year period you will build a good portfolio. Chances are that you might just beat a large cap fund manager because you get dividends and you do not pay the charges. HOWEVER, I am assuming at least 10-12 hours a week spent on learning how to do this, not just by reading some random blog, fb post or hoping that your RM will create money for you. I recently heard of a woman losing her father in law’s Rs. 10 million in some FnO trades. He is rich enough to forgive her is a different matter 🙂

My portfolio of 2016 is virtually undistinguishable from my 2006 portfolio – yes I do trade – in a fertilizer stock and a sugar stock – very regularly, and that is because they are commodities. However the Asian Paints, Mindtree, Oracle, Hdfc, Hdfc bank…have just not changed. Yes more contribution may have added more of the same or a new one like Equitas, but these will remain there for a decade – unless of course some better opportunity shows up.

So long live trading, for the professionals.

I am a lazy investor. Rip Van Winkle , if you may.

 

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  1. I’m not sure if you mean fund managers to mutual fund managers. The reasons why fund managers can never make money is because the markets are not still so mature that investing hundreds of crores in a single scrip makes it difficult to trade while selling. But this is not entirely true either as there are private fund managers who does active trading too.

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