Let me start by saying that our portfolio is a function of 2 things – a) what we do and b) what we do not do. Acts of commission and acts of omission.

So I did not start my life by deciding what portfolio I should have in my life – how much work, how much savings, how much investments, how much leisure…it just fell into place.

So once when listening to the then Chairman of Hero Honda Motors, Mr. Munjal (Senior) he said “Why Hero Honda, all 2 wheeler manufacturers will do well – the market is so big”. I decided to hold HH, Suzuki, and Bajaj. True to his word all the 3 companies were multi baggers. I held HH from 40 to Rs. 3000 – including bonus and split. Once the Jap partner parted I started selling HH and now hold nothing. Ditto for Suzuki. Currently I do not own any two wheeler shares.

So it meant one act of buying HH and 25 years (100 quarters) of saying “NO” to selling HH. We (and our portfolios) are a function of what we do, and what we do not do also. So my not buying Satyam (benefited) and my not buying Wipro (missed opportunity) have as much shaped my portfolio as buying Cummins of buying Siemens…remained the same. Imagine the job of a portfolio manager of a venture capitalist. They both have to say a lot of ‘No’s and very few yes. Once they have said yes they need to keeping saying ‘No’ to the temptation of selling or say ‘yes’ to adding more shares to the portfolio.

In the investing world we struggle with the urge to be active. However to be smart, you need do anything! We do not need to always be doing something. Smart investing is NOT about doing something all the while. In fact it is knowing why you shouldn’t act on your urges.  Or on tips.  We aren’t picking the things we want to own. We’re understanding why we shouldn’t be trading most of the time. A war is 361 days of preparation for a 4 day war. Simple. Investing is about 361 days of research for a 4 day trading. Unless (like me) you have a broker who will trade in some share which you may not have even heard of. For example I do have Icici Pru Life in my portfolio – and I do not like the price – and clearly it is not an investment, but hey, I am nicely in the money as of now.

The thing that makes investing so difficult is that it’s analogous to ordering a daal chawal in a restaurant while hundreds of sales people are explaining why chawal has carbs and is not good for you and the daal was cooked 9 hours ago and lost all its nutrition. Some sales guy is making a ULIP pitch which is going to protect you against inflation, market crashes, etc. Meanwhile, media (TVs and webcasts) are blaring in the background explaining how Franklin India blue chip is on the verge of imminent disaster….

We are constantly barraged with news and events that trigger that urge to act. Not just act, but act now, before the brain can say SHUT UP TO the noise. Noise is in the form of a phonecall, notification, television, newspaper…

And 99% of the time you should say no to these sales people and just order your plain old daal chawal. In the investing world of mine it is Franklin India Prima Plus, Hdfc equity fund, hdfc prudence fund…but hey I do not expect a 1% pm dividend which my relationship manager believes he can wrangle out of the fund house.

 

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