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Watch your portfolio and not market levels |
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Rajiv Anand, Head Investments
Reincarnation is in vogue these days. And in true Indian style I must have done something good in my past to be witnessing times like these. The last 6-8 years have been perhaps the most defining years for the country in general and for the markets in particular. And I intend sharing with you what I have collected in the recent past by being a very involved participant in this match.
But I wouldn’t want to insult the intelligence of even the novice investor by expounding on evergreen cliches like Magic of compounding, the best time to invest is now etc.. Not that I am saying that these truths are no longer true. They are and will be the foundation. And the longevity and solidity of your investment structure will depend on the strength of your foundation.
With each new level of the Sensex it gets increasingly difficult to evaluate and exercise judgment for each new level brings a sense of excessiveness. Consider this though, when you travel in a plane and as it goes higher you see more only of the forest. Quite naturally from that height the tall trees make up the forest. However if you pull the plug of the parachute and glide down ever so slowly and delve deeper into the forest you are sure to find a few tall trees have masked a lot of small trees. The point therefore is focus on stocks in your portfolio rather than on the “market levels”.
We live in a complex world and every purchase decision involves wading through has a plethora of choices and views. Gone are the days when there was one car- one phone provider (In fact these companies have either closed down or are rapidly decaying). 10 years ago the market was about “Khabbar” and access to information was with a limited few. Today we have moved to the other extreme. We are bombarded with information from all sides; minute by minute update on stock prices, daily sound bytes from “experts”, regular analysis of daily/weekly/monthly movements of the markets of all types. And it doesn’t help when you live in a country where everyone has “thodu advise”. Even my maid now talks intelligently about yen carry trade! Fine I am exaggerating a bit here. But the point is that for the aam investor, making an informed decision is much easier. If he is willing to make the effort, that is. The effort involved in deciding what to use and what to discard. Remember each set of new information sounds appealing but can be completely useless or maybe even incorrect. If you find that difficult, leave it to the fund managers. The role of the fund managers has now evolved to collecting and gleaning the right kind of information.
We live an age of heightened impatience. We want everything now (yet I notice fewer people are making it on time for appointments). The focus therefore is greater on “instant gratification” or “love at first sight”. Be it products or relationships one needs a quick high. If it ain’t working replace it. And this way of life has in some way crept into the investment behavior as well. Investors want quick fixes on their portfolios as well. However some things never change; the only way to create wealth in the equity markets is through diligence, conviction and patience, in that order.
In a bull market fuelled with high degrees of liquidity, it is easy to collect quick wins (trading gains) but unfortunately these wins are just that. But a quick win is a like an energy drink. Take a swipe and then you feel great but you soon require higher degrees of the same to satiate. But each excess tends to loosen your control. And very few know when to stop. Losses too are quick. It is not uncommon to hear people talk about their last stock pick and how it has gone up manifold. But when was the last time you heard someone tell about the losses on his portfolio. Keeping up with the Patels next door is a dangerous thing to do in investing.
And in the end my advice (like any die-hard Indian) would be the next time some one asks you market kya lagta hai? Just say Kuch khatta, Kuch meetha par long term main zaroor meetha.
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