One thing investors will NOT DO is keep proper records of their investing. What they think they are doing is “being smart about equity investing”. So I asked a few investors

HOW MUCH MONEY DO YOU THINK YOU WILL MAKE IN EQUITIES?

And the answers were stunning. With amazing regularity I heard 15-19% on their PORTFOLIOS.

Yes this included some IFA, some bloggers, some twitter heroes, ……………..

Clearly they did not know whether they were talking about their total portfolios or their equity portfolios or their equity mutual fund portfolio.

Many of them had pathetic asset allocation – the best had some 70% in equities, but most of them was having not more than 30% in equities. With allocation of 30%, for your OVERALL portfolio to get you 18%…your equity returns will have to be 35% to compensate for the 8% that debt is likely to provide. Ana d there are ‘reputed’ or rather famous advisers who encourage them and say “you may not get 20%….but look at our history..you will get 18%”.

Well this is an awful combination of a greedy investor and a stupid adviser. It is far more prevalent than you think.

I also met a friend who has invested in Private equity. He has participated in 8 venture fund investments….and only ONE is outperforming his best sip over a 8 year period. Yes it is a multi-cap aggressive hybrid equity fund. It really makes no sense considering the kinda travel, and other efforts that he puts in for the PE investing that he is doing.

Institutional investors, educated investors,….well not much of a difference. People are still carried away by celebrity nonsense endorsements! I find it difficult to tell a group of people:

• debt CAN outperform equity over longish periods of time
• there is a role for debt in most portfolios
• equity return of 12% pa for 30 years does create amazing wealth
• Getting 12% on your equity portfolio is tough, getting it on your TOTAL portfolio is IMPOSSIBLE
• please do not use past Indian data to show how you will get 18% pa for the next 30 years
• what has worked in the past may not work in the future (we all know this I presume!)

We deal with data EXACTLY the way the SMOKER deals with the warning on the cigarette packet. We ignore inconvenient data. Simple. It is too painful to think and worry about equity under performance. We need to worry about our over-confidence and love for status quo. We need to worry about the last 10 years Equity return with such a low standard deviation. It has made us complacent.

Buy right sit tight works. However sometimes that “right” is myopia, and the refusal to Verify just because you Trust is not a sensible thing to do….