When you play the game by your own rules, you should be willing to create your own measure sticks. Honestly, I have had the guts to live my life by my own rules. So I do not get invited to parties where the cocktails start at 9pm. That is my bed time. Sounds ridiculous, you look stupid maybe but YOU made the rules and YOU have to live with YOUR rules.
Now take investing, most of the fund managers are ‘top’ of the class. Wait a minute, not all of them are Phi Beta Kappa scholars or Ivy League toppers, but yes they are from IIM or are CAs with rank..and most of them you meet are alpha males. No now I will not get too much into details – and many of them are not from Ahmedabad. Bangalore and Kolkatta IIMs also have their share of top fund managers. Now you know whom I mean do you not?
One thing the big boys have conquered is ‘Log kya Kahenge’. Remember it is far more difficult for a Prashant Jain, or a Naren to do that. I am answerable ONLY TO MYSELF. The fund managers are answerable to their Trustees, directors, colleagues, IFA, bankers, investors – and all of them talk like they know more than the fund managers. However as these FMs have conquered their ego and have an internal scorecard (WB’s words) they may not care that the market makes them look stupid. Remember being stupid is bad, but looking stupid is fine as long as you know why you are being made to look stupid. Also these fund managers have given a good CAGR over a long time – and that also adds to that conviction. If you see the discrete return in these funds, the years that the markets have done well, T 200 does well and in a recession it falls less !!
So circa Jan 2016 I looked STUPID for staying invested in Hdfc Equity, Top 200 and Prudence. In Jan 2017 I am not looking so stupid after all. I have been told many times to shift to Icici Top 100, but my love affair with Discovery continues. There have been times when my Franklin India Bluechip, and Franklin Prima and Franklin India Flexicap looked STUPID, but overall I do not have too many regrets for periodic ‘stupid looking’.
I believe there is a shortage of professional investors willing to look stupid!! Many of the professional managers, DIY, IFA, will hate to look STUPID in a group. So imagine you are in a Network FP meet or in a CIFA 2016 meet. How many of the IFA will have the guts to say ” I am doing nothing, just letting the SIP continue in …”. OMG he will look STUPID. Throughout their lives many of the fund managers have received pats on the back reconfirming what they already know – they are extraordinarily smart! So an important learning over the years is smart investors don’t like to look stupid. In retrospect that is obvious is it not?
I have had this problem in the past. In 2007 I bought some FMCG – and that was going nowhere – remember it was an infra boom and not just a ‘market boom’. My portfolio looked bad..till when in 2008 the market fell and my FMCG shares held its own, and I bled less than the ‘general market’. I was made to look stupid when I had fertilizers and sugar in my portfolio – this was in 2015 when these shares were at their bottom (Eid parry was 110 if I am not wrong) and Coromandel was beaten down to 161. Yes I was told – no brand power, no advertising, no ‘pull’ demand…there was NOTHING going right for sugar or fertilizers. Today (Feb 2007) both these investments have doubled. Oh la la la.
As long as performance deviations are not due to valuation errors (trusting the management too much) and permanent losses (at least visibly) to capital, investing differently during periods of ballooned and inflated valuations may not be stupid! When I invest in Icici Prudential Discovery, or Templeton Income Equity Fund, I know that the fund will do badly when Franklin Bluechip or I Pru Top 100 are doing well. The former 2 funds are the funds which should be checked once in 5 years and not on a Quarter or even annual basis. So imagine going to Naren every quarter and cribbing about ‘comparative performance’. Value funds take time to perform, which means your patience will have to be strengthened! Looking stupid is not the same as being stupid.
The “secret” of looking stupid (or getting intoa, is not caring what other people think. This ‘log kya kahenge’ aka Perception risk is a huge – and weaker managers may not be able to stand the peer pressure. In fact one fund manager finds it difficult to explain to his Trustees why he is just not copying PJ’s portfolio. In the tech book the market made Warren Buffet looked stupid from 1998 to 2002!!
If you’re constantly concerned about what your boss, benchmarks, girl (boy) friends, peers, and clients think about you and your positioning, you will not know what to do.
read this …http://ericcinnamond.com/the-art-of-looking-stupid/ – that article is much better written of course. I saw that article after I had published, then took some lines from there and made my article better 🙁
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