The toughest thing to manage in a portfolio is the EGO of the investor. Every investor feels “he has managed the portfolio”. Even I used to think so till I read that “to be a good investor you need a full time job that keeps you busy”. It is true. If I had nothing else to do I would have “over-managed” my portfolio. There are long periods when Hindalco / Colgate etc. have under-performed the sensex. Should I have exited and got in again? would it have been possible?
Did I play favorites?
Did I suffer from familiarity bias?
Did I suffer from Conformation bias? Did I suffer innumeracy? Did I refuse to listen to logic?
The answer to all these questions is yes. For example I did not buy Satyam because the broker who asked me to buy S was manipulating and it, and I knew that. I missed Satyam from Rs. 30 to Rs. 3000. I missed Silverline from Rs. 30 to Rs. 1300. Bias for sure. Missed opportunities? Yes, sure. Regrets? LUCKILY no.
I feel blessed that I managed myself better than I thought it was possible. I am convinced (like Robert Ibbotson) that managing the investor is far more important than ‘managing’ the portfolio. As a ‘manager’ you don’t really have to do something every day, do you have to? Keeping yourself gainfully employed is important – or you will want to feel “active”. Trading is almost unnecessary for a good active portfolio management. Technology has made trading very easy – and has made INVESTING very, very difficult.
It does not matter whether you label yourself as an active investor or as a passive investor. My portfolio does not know me. Colgate does not know that I have had a relationship for the past 42 years. Neither does Hindalco know that it has been in our family portfolio LONGER than I have been in the family. This is just nostalgia for me. The shares do not know you, at all.
Anyway if you have 44,000 shares of Colgate of 5000 shares of Mindtree what the HELL can you really do? change the Board of directors? change the auditors? Gimme a break, you do not matter in the life of the company, unless you have a nice big block of shares. Anyway I know NOTHING about the fmcg markets or about technology nor about banking – what will I achieve even if I could influence the management?
IT IS sheer lack of ego control when you trade. You think that you know that it is time to sell a Nestle to buy a Biocon. Actually you do not. You some times muddle into such decisions. So if you get it right, great. Or if you get it wrong you tell yourself…”thank God I sold only 200 Nestle” – rationalizing instead of being rational.
Let us take Icici securities. Anybody in this space knows that it is profitable – especially if the risk control is mechanized. However when i bought it at 220, I did not expect it to go down to 190. I bought more at 197. Then sold off at 258. No way I was going to wait for it to reach its issue price of Rs. 520! No. I don’t like to trade, but I was worried about Axis and Zerodha hurting I Sec. I know I Sec looks like a company which will make money on the demat account charges rather than on the ‘brokerage’ that it thinks it will earn, but so be it! See how difficult it is for me to understand ‘brokerage’ business which I have watched/ participated since 1980?
So largely unlike a business, portfolio management is about managing the investor (in my case, MYSELF). So being a trainer, blogger, mentor, coach,….helps. It means I look less at these shares – who anyway do not even care that I exist.
After all how long can one suffer in a one-sided love affair?
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