When Mr. D called me in 2019 I was surprised that he had my number. He prodded me and reminded me that he had called me in 2013 and had spoken to him. When an Investor calls me for asking some question…I am a little vary. I have no clue on who is at the other end and how useful it is to talk to him. I am scared of him not understanding what I am saying. D was a little different.

He was calling me from Bangalore and when we had spoken in 2013 he was a young 25 year old wanting to invest for the first time. After that he had found a broker and started investing in direct equities and had paid no attention to mutual funds. He was doing well, but also made some poor emotional decisions – and ended up with very poor trading profits and almost nil capital appreciation over a 6 year period. Not unheard of, right? So what is the story?

He was calling because he had shifted OUT of DIRECT investing and had gone to a mutual fund adviser. I was intrigued. So I probed further. He said “It was useful to have a sounding board and some human intervention BEFORE I did anything”. He had closed his online brokerage account and opened one with a small broker (who was charging more) and got an adviser for mutual funds. This call was as much a test for him as his adviser. His adviser had invested his money in large cap, mid-cap and small cap funds. He had lump-sum and sip investments, and his small cap fund had not done well. He said in case he was investing through an online portal he would have pulled the plug from the worst performing funds, but now his adviser was asking him to put MORE AGGRESSIVELY in a small cap fund rather than in a large cap fund. He said “sounds correct because I do not need the money for say 40 years..when I retire”.

Clearly he was developing ‘the ability to watch..without the need to act’ – the exact state of meditation. He had destroyed all his online access – he is a techie and has developed an excel sheet which gives him ONLY his net-worth figure. No break up share-wise or fund wise. If he wants the full portfolio, he has to call his adviser. His adviser has a process by which he can access his portfolio at the brokers end…and the link works for a few hours. Sounds odd? It is like people paying a premium to check into a luxury hotel WITHOUT internet access! So D was developing a meditative state – and he wanted my concurrence on this behavior! Rare yes, but such people do exist.

Many things are “obvious” but not inevitable. I have been saying that Anil Ambani’s cash flow did not justify his market capitalisation for 10 years at least. At last it seems to be happening. However when you talk to employees of Rcom, Idea and Vodafone – many of them are in denial that their company is finished. They are still hopeful “it is too big to fail”…”they are still paying salary” is what you hear. Is it obvious? Is it inevitable? Well I do not know. We do not have enough data and ability to analyze the relationship. When you talk to fund managers they make fun of the small investor saying “they panic”. Not true at all. The SIP figures are a great testimony to the fact that the small investor does not panic as much as the fund manager. However, I am not so sure about the SIP- number as a whole. We have no clue whether it is a 1000 new clients added and 890 clients lost.

None of us knew that Punjab and Maharashtra bank would go belly up in one day. However, once it happened it was easy for people like me to say “co-operative banks are risky”. However the depositor refuses to believe that his money has gone. He says “how can a Category A bank go belly up”. Frankly if a sarkari body  does ranking, you should not trust it. Did you notice that the RBI officers association had put Rs. 105 crores in PMC? So to help its officers RBI will ensure that people get their money.

We all suffer from HINDSIGHT bias and even worse OVERCONFIDENCE bias. I like what D has done. Having a human intervention before you make changes in your portfolio seems to be a BRILLIANT step. I liked the IFA (I did not ask for his name, but I know it is a guy!!) giving temporary access to a client’s portfolio. He has even hidden the folio numbers – which means the client will find it very difficult to redeem his investments without the IFA’s help.

The person making this choice of

a) limited access

b) human intervention for making changes

is a tech guy trying to build his “ability to stay inactive” – like meditation by using such physical props.

In my mind he is today what Graham would have called a “smart investor”. Yes it makes senses to do this!!