When people inherit a portfolio and it is small, they should sell it off and invest it in mutual funds. I strongly believe in this.

What should you do if it is a reasonably big sized portfolio? Should you let it lie and ‘hope’ it will continue to do well without the love and attention that the portfolio owner was giving it?

I THINK NOT. Either hire a very good portfolio manager and monitor what he is doing, or take interest and manage it yourself, or sell it off and put it in equity / debt funds as per your comfort.

At any point in time in the economy you have good companies, bad companies, lazy companies, companies resting on past laurels, and young hungry companies willing to devour everything on its growth path. Such companies are run by their owner – the first gen guy. Say 10-15 years ago you saw young companies like Dr. Reddy’s, Apollo Hospital, Sun Pharma, Cipla, Biocon…and these should have been in your portfolio. However on that day if the person attending to the portfolio was too ill or infirm he may have had Nestle, HuL, Colgate, ITC, – not bad at all, in fact excellent companies…but not the real hungry for growth kinda companies. Also if it is a portfolio that was built in the ’40s, to the ’60s, it is bound to have Tata Steel, Hindalco, Tata Motors. What about Nocil, Mafatlal industries, Swadeshi Mills, Thackersey, – you may not find these shares anymore. I recently found a handwritten list including Orkay, Patheja forgings, Shaan interval, Indiana Dairy, Silverline, Krishna Filaments, Garware, – many of thm are not around today.

So it is a possibility that they missed these, TCS, Infosys, Mindtree, Wipro – just because the person attending it was too ill or the inheritors were too lax. I see too many portfolios with ITC, LnT, Icici – and I would surely prefer to see a Hdfc bank, Kotak bank and Cholamandalam Finance. When you see an active portfolio gone dormant, you can easily find out when that person stopped paying attention to the portfolio. For e.g. a person at 75 may have stopped paying attention but died at age 80 – you can see the ‘start date’ of neglect at his age of 75. Actually that is the stage when somebody should have stepped in and made the necessary changes. However people tend to get emotional…ok..granted, but at least 6 months after his death…get realistic.

Five or ten years later you will end up with a portfolio full of shares and bonds of companies which were perhaps doing well now. I recently (happily) shifted from Colgate to Indigo and about a year ago from Hdfc to Cholamandalam – even in my own head these were so so difficult switches, but as of date I am happy with the switches. Even Kings retire. So market leadership changes. Even today when portfolios come for review they have Reliance Industries – I have about 100 shares of Reliance – a far cry from the quantity that I used to have about 5-7 years ago.

So if you are not going to learn, or seek professional help for your ‘inherited’ portfolio, just get rid of it. That is the best favor you can do to the departed soul.