Amazing inaction is required..
Fortunately or unfortunately most of the net wealth that I have created is by being in the markets and for long periods of time. However this did not lead to a career in Portfolio Management Services – simply because the method of compensation and the amount of compensation did not attract me at all. If there was a business where there is a conflict between ‘action’ – and he client feeling that something was happening and me feeling that nothing was necessary, it was in the PMS ‘profession’. Let us take an example if I had bought Gillette, Colgate, Wipro, Hdfc, Hero Honda – say all in 1985 – and held on till today…how many of you would have paid 2% per annum (on increasing prices) for INACTION? Want an honest answer.
So to make money I would have had to sell Wipro buy Silverline (you want action, I have to make a living), sell Hero Honda to buy Kinetic Honda, etc. maybe both of us would have been happy, you would have been poorer.
If I had done nothing, but just sent the bill, you may not have paid at some stage.
Of course there is another set of clients who would have said..’I agree Hero Honda has done well from the year 1985 to 2009, however, we could have sold it, bought it back, ….and thus improved the return. Very difficult to talk to people who have 20-20 hindsight.
Why I know of an amazing lady who had a messy equity portfolio (Rs. 100,000 perhaps in 2000) – and very scared of equities. A friend of mine who also happened to be her neighbor introduced her to a PMS provider (again a friend of mine!) – in the years from 2002 to 2004 her portfolio doubled. Then again doubled in 2005-6. This was FAR superior to a mutual fund – forget the index. So crudely put her returns went up from sub-7% of her own making to about 42% p.a.
She was not happy….because the PMS manager had not captured some tops and bottoms.
So happy not to be in PMS ..but in training. Hopefully my client knows what I want, and the requirements are for a day, not a decade.
raag
Gurdialji,
1. So, a long-term investor should switch when she notices that her stock is not performing for a quarter or two. Every stock under-performs once in a while so that would mean that you keep switching.
2. How much diversification? How many stocks? Or just buy the whole index?
You might be right but I wanted to bring HUL up because I wanted to highlight that life is NOT as simple and rosy as “Equity is always great” would suggest: if someone had bough HUL and did NOTHING (as this post’s tile “inaction” suggests), that particular investor wouldn’t have benefited much. That’s all I want to say.
subra
if there was just one thing to be done and then just, no action ….life would have been simpler. Unfortunately life is more complicated than that….
Sanjeev Bhatia CFP
@ Venshu,
Well said Venshu.
@ Muthu, like Venshu said, nobody has an issue with your capabilities or undestanding. There is nothing persoanl against you but it is you who takes everything personally.
It may come as a shock to you, But I have been visiting your blog off and on, so that shows I have nothing personal against you. Sombody told me quite a long time ago that you have to be like a sponge, trying to soak up wisdom from everywhere, irrespective of the source. If the source is Muthu, so be it.
@ Raag / Gurdial,
HUL is one of the sad stories among blue chips. Probably, the growth is not visible so markets are punishing the stock. Monitoring is a must. I Had a small position in HUL way back at abt 170-180 levels. Lost patience when saw poor growth rates and got out at 210. Never regretted the decision when I see it languising still at these levels.
venshu
@ Sanjeev Bhatia,
I fully agree with you. I too have been reading Muthu’s posts in his blog site off late and honestly, I find his posts quite informative.
What annoys me (and I am sure quite a few others here as well) is the attitude. Muthu says he has every right to comment but our only right is to ignore his comments – this means we should read his comments but should not respond to the same. When he can say what he wants then why can’t we? I know I am being a bit childish here but the larger issue here is being acceptable in a public forums like this. Being knowledgable is not the only criteria for acceptance. One also needs the ability to be a part of the group and learn to take criticism constructively unlesss of course the comments / criticism is of a personal nature. Trust me I do not have anything personal against Muthu whatsoever. Frankly, I rather like his resilience (the way he gets back with his comments and counter comments!) and his knowledge in his chosen field (his blog posts being the evidence).
But at the end of the day, what is right is right and what is not right is not. I know very well that right and wrong are subjective and there is nothing absolute about it. However, one should not forget that he/she is on a public forum and a certain decorum needs to be maintained to be aprt of such a public group.
I rest my case.
Muthu
Sanjeev Bhatia CFP – Read all your previous comments and tell me were you not criticizing me? To create peace, you should contribute for the peace. You cannot fight with someone and at the same time expect peace. I’m 6 feet 2 inches tall. Do not want to grow more.
Venshu –Like I mentioned to Sanjeev Bhatia CFP, read your previous comments. If one his highly personally critical instead of being objective, ‘venom’ is not an inappropriate word. If you feel it is your personal right to criticize me in a democracy, I also need to respond back with my views. I never know quoting Buffett, Lynch, Soros and recommending some interesting books in the area of investments would be irrelevant to a personal finance blog.
What’s most surprising is that some of you talking as if ‘Subramoney’ being your own cult where Mr.Subra is the Guru and you all being his fanatic disciples? Then the access to website may be restricted with user id and password. Like I cannot prevent my friend Sanjeev Bhatia CFP from reading what I write in my blog, which is in public domain, the same holds good for ‘Subramoney’ also.
Do not make this webportal as a cult with Mr.Subra being the undisputed guru and you being his ferverent worshippers. Give space for different perspectives too. Don’t mimic ‘Malice towards all’ to ‘outsiders’ like me. You be the insiders, your pleasure. Don’t gag outsiders with brute majority.
Muthu
Also for people who have been indirectly hinting that I promote myself and my webportal through Mr.Subra’s, the average daily number of hits have not changed after September 13th except on 14th when many of you came to read what I’ve written about Mr.Subra.
Deepak Shenoy
Raag-bhai, HUL had a 1:10 split in 2000, and a 1:1 bonus in 2003 – and yes, prices were about 2600, but your per share cost today is 130 even if you bought then. You would have got approximately Rs. 60 in dividends, and current share price is 300+, which is a net return of Rs. 360 on a Rs. 130 investment. It’s not an utter failure – about 9% return overall, not considering reinvestment of dividends.
There are much bigger failures if you want to look at ’em – from the likes of GTB and Nedungadi bank, to my often quoted Arvind Mills, to the hundreds of share certificates of companies that have just died (like Parasrampuria Synthetics and what not).
Subra – you have a solid point. Doing nothing is brilliant advise, often unsaid because people don’t like to pay for advice. There’s this US hedge fund Manager – Mike Burry, mentioned in The Big Short by Michael Lewis – who returned his investors money because they hassled him about his investment allocation, despite which he managed a huge return. A number of others simply choose to manage their own money and not others’ because people want to micro-manage the manager. Advisors have the least amount of ijjat – no advice, no money!
Also, I hope we can all lighten up about Muthu – if it hurts you pls to ignore, if it pains Subra he can take action, let’s leave it at that. Different folks, different strokes. Choti si to zindagi hai, aur itna tension….
Venshu
I have now decided to spend more time on Muthu’s blog instead of spending time commenting and launching scathing personal attacks (against Muthhu)here!! I will look up the Thesarus and find out what the word personal means and also if criticizing and fighting are one and the same!. At least, I can refresh my vocabulary on Muthu’s site and pick up some wonderful adjectives.
Jokes apart, I seriousluy intend spending time reading Muthu’s blog and get a few more perspectives with regards to personal finance.
subra
to make money you need the following things:
create a good portfolio (if you cannot create ask Prashant Jain or Naren Sankaran to create it for you),
invest regularly (SIP)
insure risks
stay for the long term
portflio shuffling is necessary, but not as an obsession. Recently moved from H Honda (bought in 1985) to a auto ancillary of the same group – Shivam Auto – and it is a happy move.
Inaction has to be a DELIBERATE action based on future performance, NOT A Laziness action of ‘not acting’. So Hdfc, Hdfc bank, H HOnda, Hindalco, Colgate, Cummins, P&G, Oracle, Tata steel, T Motors, L&t, Tata Power, T Invest, Coro fert, cholamandalam (traded like mad on this scrip)….remain. MIstakes like HK Finechem, Silverline, Arvind trading…go out. that is all..
pravin
michael burry suffers from aspergers syndrome.so one essentially needs a brain that can be so focused on one activity that it doesnt mind grinding it out reading all the annual reports and analysing them using intelligence rather than boiler plates, and then having the conviction of your research. difficult for 99% of the investor community -expert or not.
subra
last fortnight I was in the Supreme Court – and the Judge was Raveendran (same person who had heard the Ayodhya case). A very sharp and obviously very articulate judge. Wish I had referred Muthu’s case to him :). Manish Chauhan sent an email (choose not to comment) saying ‘stop fighting the Ayodhya verdict is not yet out’
LOL/
Manish
@Subra .. enna sir , enna panninga !!
I would say people on this blog should not get stopped by anything and just move on .. weather it is muthu or anyone else , lets just see positives and take what we can get ..
If I relate personal finance with the incident , this happens in our financial life also .. there is no much going around with loads on info , opinions etc that we just get stopped by all this and forget what we have to do eventually 🙂 and just dont take action ..
this is a unique blog with different kind of experience, so lets take the best out of it and dont take what you dont like ..
Manish
Venshu
Some times the judgements dished out by the judicial courts will pale in comparison with the judgements given by the court(s)where the ‘Public’ sits in judgement. Janata Jaanardhana!
You have had 30 comments excluding this one from me – is this a record of sorts Subra?
Muthu
Let me end the ‘conflict’ this way. I would not react to counter comments for my comments, for the next 15 days. It would be a difficult but worth trying exercise for me. I’m not a vindictive person by nature. At the same time, I defend myself a lot in the arguments and sometimes try getting even. This at times (not always)result in winning an argument but straining a relationship. Let me consciously try if I can make friends out of my ‘critics’ by NOT reacting to their criticism for 2 weeks.
raag
Deepak Sir: Thanks for those calculations. Unfortunately, it wasn’t bonus issue in 2003. It was some gimmicky bonus debenture worth just 6 rupaiya. I got a momentary heart attack when I read your bonus issue comment thinking my broker had done some ghapla and not credited them to my a/c 🙁
I know equity should work in the long run but for dumb folks like us, it normally doesn’t when even companies like HUL run by IIM legends have to struggle to give investors even FD returns.
rrp
“Amazing inaction is required ..” both in equity as well as in the comments battle in this post , how ironic or how apt ? 😛
Gurdial
@ raag,
My experience shows that parking a certain percentage of your funds in a well managed mutual fund(consider it as the 6th stock in your portfolio- allocation depends on the individual) along with direct investing in stocks can give decent returns in the long run,even if one or two stocks in your portfolio underperformed.
subra
Deepak Shenoy,
there are 2 fund managers in India who returned money to their customers. They were running a PMS – in 2007 one of them said..’cannot understand the market’ so he returned it.
the other guy returned the money AND THE FEES FOR THE PREVIOUS YEAR..saying ‘I did not justify it’.
both guys are millionaires (billionaries not sure), now not in public domain, and will kill me if I name them in public. Height of decency.
Deepak Shenoy
Subra-bhai, My goodness. I would love to hear of them, and I hope they come out with their story. It takes a lot of courage to return money especially if it’s “I don’t justify it”!
Raag: I was mistaken and you’re right, that was a Rs. 6 dividend sent as a debenture – HUL hasn’t even returned FD returns!