sorry long one – and could be boring for the MF investor.

I am more of an Absolute Return Investor – and hence an accrual method of debt fund is far more important! Similarly when it comes to equity investing, I am happy to look at my portfolio on a longer basis than a Quarterly or Yearly basis. I can and do take a  longer view like 2/3/6 years and see if the share is doing well. In the meanwhile if some quarter has poor results, I do a review.

When you are NOT a Relative performance investor, you can sit on your asses for a long time with cash (like I am doing now), pull money out for expenses – foreign tour, major repairs at home, indulgences,….and not worry for 2 quarters.

Discipline is something that all investors and fund managers claim to have, but from a distance you cannot be sure. If I had a rule which said ‘I will sell Cholamandalam at a PE of 20’ I should have sold it by now. Since I do not have it in writing I do not need to do it.

I am happy to go through Investment cycles – and I have seen Prashant Jain handle cycles well. He can ignore noise like nobody else can! I remember exiting the high priced shares in my portfolio in 2007 end, and similarly when Harshad was taking the markets sky high I sold shares to buy an office in Fort. 1992 it was. That has given me about 13% cagr (taxable of course) – far more importantly in terms of costs I paid only 10x – and this was from a share which Harshad had taken from x to 10x. Skill? not so sure, but luck for sure!!

The current boom in the market is not so much of fmcg, pharma or IT. Clearly it is the BFSI boom – and all my friends who have esop have started thinking that their shares are worth that much. Well if you do not sell now, chances are you will not see such valuations in the near future.

WHEN I SAY MARKETS ARE HIGH, I DO NOT MEAN MARKETS ARE ABOUT TO FALL.

I just mean that you will not get up in 2022 and say “Oh I wish I had invested in 2017”.

The discipline of professional managers is communicated as a set of rules and guidelines. This is in the offer document – but honestly it does not say much. The revered IRDA does not think this is necessary EVEN though the assets under management in the life insurance industry is now high. Investment guidelines are set out in the presentation booklets. These rules are used by asset managers to communicate how a strategy will be implemented. They are meant to reassure investors that the manager will stay in their appropriate style box. However, in India style boxes are meant more for show but the manager himself does not know clearly to which box he belongs. I have known agents / marketing heads being able to punch holes in so called “philosophy statements”. For relative return investors, remaining in a style box is important, as they are mostly (mostly is needed here) hired with the assumption that they will act a certain way relative to a benchmark. For example, if you’re a mid-cap growth manager, the rules and benchmark will be set appropriately!

In my opinion, an investment discipline founded on how a manager is labeled is often restrictive and encourages closet indexing. By following label-driven guidelines, he is following or copying the CROWD.  A manager’s investment beliefs and opinions SHOULD be overridden by rules and mandates. How the manager wishes to invest and how she is allowed to invest, may be two different things. In my opinion, this isn’t investment discipline, it’s compliance!! Imagine having to explain to a bunch of people who know nothing about investments – the Trustees and Directors. Also once a FM (aka CIO) becomes big, the same trustees and directors dare not ask him whether what he is doing is right!

For me discipline is different. It is not a set of rules, it is a set of investment beliefs and principles. For me rules should improve flexibility, not hamper it. I have a strong opinion or belief and will stick to it – I do not invest in companies based in Hyderabad. I prefer NBFC which are owner managed. There is only one exception – I have missed one owner managed finance company – and the company has not done well. That is a different post I guess. I can move from pharma to IT or IT to banks without worrying about breaking the balance vis -a- vis the index. OBVIOUSLY my style will mean lumpy returns and very bad years when I made mistakes. I can live with that. It’s better than a below average long performance.

I refuse to be ‘boxed’. I buy large cap, mid cap, micro cap. I do day trading, delivery based trading. I buy value, deep value, growth, as well as momentum. I walk across industries without batting an eyelid. Most of my rules are qualitative in nature and is in my head.

Hey like Rama Bijapurkar says “we are like that only”.