Less is More!!

Today's Topic  - Many Schemes.

After great response to my maiden blog series on Behavior and Investing, I am excited to write another series “Less is More”. Here we discuss how and why less is more?

I am sure, you will find it useful!!

Today we will discuss “Many Schemes”

Do you think more schemes/products are good in investing?

I know Investors who like to (over)diversify their investments into many schemes on principal of never put all eggs in one basket.

I do not agree to more schemes! Many schemes are usually chaos!

Broadly there are 4 asset classes. Debt, Equity, Property and Gold.

As an Investor, your starting point has to be deciding percentage allocation of total net-worth into these 4 asset classes. You should not burst this ratio at most point of times. While making asset allocation chart, consider having more of financial assets (like FDs, Debt, Mutual fund, stocks etc) rather than physical assets –like property and gold. Property is illiquid is nature, has high maintenance and transaction cost (stamp duty, registration, GST, up-keeping, brokerage etc.) Gold is a good hedge for portfolio and inflation but, you shouldn’t go beyond 10-20% depending upon ethnicity and time horizon (gold cycles can be 10 years long also wherein you make no returns and your patience can be tested)

Consider below points

1)      Too many products/schemes meaning too much of spread. Foot in many boats.

2)      Many products meaning low conviction of your advisor or yourself.

3)      It’s observed that over diversification leads to inefficiency in returns.

4)      If you don’t invest meaningful monies, you lose out on meaningful gains too.

5)      Reviewing too many product performance is cumbersome.

6)      Exiting also takes time and effort.

7)      Maintaining record and data management is also challenging. Like checking contact details, Bank details, tracking dividend/redemption payment.

8)      Its mammoth task when it comes to transferring investments from deceased person to surviving member and nomination hassles.

If you have many stocks in your portfolio or you have invested in many Mutual Fund schemes. You must have experienced what I have mentioned herein.

Keep it simple. Have few schemes in portfolio. There is no ideal number of schemes but 10-15 are maximum that one can go with. Look for schemes that gives you true flavour of all market segments. Review performance with the help of advisor and if required switch the poor performing scheme to high conviction idea. That’s it!!

If you are holding too many schemes or stocks in your portfolio, and wish to make slim and smart portfolio? Do contact me at 9833778887 or wealthcarein@gmail.com

If you find our blogs helpful, pls do like, share and comment

Author –

Bhavesh D Damania

Founder - Wealthcare Investments

EduPrenuer, TV show panellist and Blogger

You can reach him at 9833778887 and wealthcarein@gmail.com

"Risk comes until you know what, where and why you are Investing"

Disclaimer: We respect all individual approaches. Sole objective of this series is to burst a few myth in Investing. There could be genuine reason/experiences and “less is more” may not be appropriate. Investor must consult own advisor to figure out right approach before adopting any of these suggestions.

Illusion of Skill

In this blog series, 21 behavioural biases were discussed. These biases affects our life and Investments. Hope you liked them and were eye openers for few. The primary objective of writing on this subject was to create awareness around this unknown evil of biases. Another objective of linking these biases with Investing, was to create tribe of informed investors. 

Once you are aware of self biases and Investment wisdoms, you are most certain to become wise Investor!!👍

Thank you so much for your patronage and compliments on this blog series. I am overwhelmed🙏

Today’s blog is on “Illusion of skill”. The critical one!!

As they say “It’s more important to know what you don’t know. Rather than knowing what you know”. Couldn’t understand? Read it again.

Many a times we feel, we know this or can do that easily👍. But once we are at it, we realize it’s not our cup of tea!! Don’t you agree?

At times we also feel we have learned enough about something and do not pursue to learn it more. Ask any successful professional (Doctor, Architect, Lawyer CA) how important it is for them to keep learning? “I know everything syndrome” in them could mean death or low growth of their practice😊.

Any successful/renowned professional, will be student for entire life. That’s what even client expect from these professionals. Mere degree is no certification of wisdom!! Same is true for every human being. Continuous skilling is only way to survival or growth. IT professionals deal with the challenges of obsolesce of coding languages and technology.

In investing, many investors feel they are skilled. Here are some of the reasons Investors have shared with me

1)      I am skilled because I have been investing since decades.

2)      I am owner of business therefore I know how to invest.

3)      I am CFO of the company hence I am good at Investing.

4)      I am MBA- Finance, CA or CFA etc, therefore I am skilled.

5)      I have many smart Wealth Managers coming from large Banks/Institutions. So I know all the buzz.

6)      I have been reading Investment and finance magazines (or taking social media doses regularly) since yrs.

7)      I have been tracking markets since years and now I am skilled.

I am sure all of you have some of these belief in yourself😊.

Well success in investing is not dependent on the skills alone. You need emotion management more than, financial skills.

In bull market, lot of investors become guru (self-proclaimed) and start sharing own success stories😉. Like herd everyone also becomes disciple of that guru. I am yet to meet a person who shared his failure stories. Have you found one?

In investing it is more important to also know your safe capital and risk capital. I have seen many investors hold up to 50% of their corpus in risk capital (knowingly or unknowingly). Any amount more than 10% in (undue) risk capital is staggering, no matter how much wealthy you are! At the end of the day it is your hard earned money and can’t afford to take undue risk.

If you feel you are skilled Investor, here are some of the self-check questions:

1)      What % of investment decision of your’s were right?

2)      Did you invest significant amount of money in those Investment ideas? If not, you invested in gut feel and made some money. If you had strong conviction about that investment idea, you would have invested big money.

3)      How often you did you exit at peak and entered at bottom in those investment ideas?

4)      Have you done enough research before investing and exiting? If you didn’t it is herd/luck or tip.

5)      What was your source of Information about the investment idea? Was it social media, TV, colleagues, friends etc.? If this is your source of information, you invested on borrowed conviction (not skilled).

6)      Did you ever missed out exiting before the prices crashed?

7)      Are you holding stocks with up to 90% capital erosion?

No need to reply to me, but I am sure you are able to understand my point.

I personally believe, Investing is not science but it is Art. I spend good time understanding markets and its behaviour. I spend time with fund managers, CIOs and ask them questions like a learner. This helps me draw a picture about future, basis which I decide on the investment ideas. Diverse views helps me to re-check my hypothesis. I still feel I am student and learning about various cycles, hypothesis and frame works. It’s my moral responsibility to give better Investing experience to my clients, who trusted me with their money🙏

Knowing what you don’t know is first step in right direction!!

Apne Investment ka khayal rakhna!! Ye hi aapke bure aur achche waqt ka sahara hai👍🙏

If you find our blogs helpful, pls do like, share and comment

Author –

Bhavesh D Damania

Founder - Wealthcare Investments

EduPrenuer, TV show panellist and Blogger

You can reach him at 9833778887 and wealthcarein@gmail.com

"Risk comes until you know what, where and why you are Investing"

Halo Effect

  In the series of 21 behavioural biases we will discuss the 20^th bias “Halo effect”

Halo effect simply means single or few aspect, characteristic, trait or behaviour overshadows many others. One overpowers many other factors.

Don’t we judge a person by a single personality trait like smiling face, great physique, Social status, beauty or age etc. A person with smiling face, pleasing personality, eloquent speaker, killer eyes, rick and famous aren’t familiar phrases??

In investing also Halo effect works and has bad effects on Investing experience and returns.

Famous example of Halo effect is Ambani brothers. Many Investors had invested heavily in ADAG group as well, premise being he is also Ambani feud and is trained under same leadership of Late Dhirubhai Ambani. Mukesh multiplied his empire and Anil Ambani reduced to Insolvency. I am sure investors who lost fortunes in ADAG group will feel this in heart.

To make my point clearer, let’s see few more examples

1)      Till 2007-08, real estate companies were enjoying great valuations and you know what happened after that. Land Bank was key word during this time.

2)      During same period, Telecom companies were doing extremely well. ARPU (average revenue per customer) was the key word.

3)      Early 2000, dotcom or IT companies enjoyed higher valuations. Growth was key word.

4)      Till recently Housing finance companies and few NBFCs also had dream run. NIM (net Interest margins) and loan book growth were key words.

In each of these sectors, one key word (aspect) took the valuation to obnoxious levels and then it crashed to never recover in immediate future. Many companies have even disappeared or reduced to a penny stock😢.  Halo Effect played on Investor’s mind.

Our mind has short term memory and recent instances gets extrapolated or manifests in our thinking.

If the prices of sector/stocks have crashed, we tend to feel it will feel it will crash further. If a sector/stock is doing good, we feel it’s likely to continue for infinity😊.

Halo effects makes you irrational thinker and poor investor.

PSU, Pharma, Infrastructure and Telecom service as sector are expected to do well in times to come. These sectors were laggards for long time. If you disregard these sectors, you will most likely miss great upside. Similarly, Small and Midcap segment were overvalued till FY 17-18 ( you know we exited all of that in same period) and looks promising in times to come (you are aware that we started building positions in the same since early 2019)!!

Few stocks have rallied meaningfully since 2 yrs and are still going strong!! I believe they have entered the uncomfortable valuation zone and most likely to deliver subpar returns once the market witnesses broad based rally. If you buying these expensive stocks now, you are victim of Halo effect😊

In advisory too Halo effect works. Lot of investors believe that large Institutions are well researched and offer best advise due to their size and reach. Well, that’s true but the biggest issue with these institutions is the alignment of interest. Many a times they are serving their own/organisation’s interest rather than Investor’s. Content is not a problem but the real problem is of intent🤐.

What should you do as an Investor?

1)      As in life, remember that nothing is permanent in Investing too.

2)      If stock/sector or MF scheme is doing good now, it’s not guaranteed to do well in future also. And vice versa.

3)      Judging merely by latest performance and investing is not wise way of investing.

4)      Examine factors which are likely to affect your investment decision. These factors can be negative or positive. If negative impact expected, book profits or exit. If positive impact expected, add more or start investing. Don’t just judge investment by its price.

5)      Don’t be victim of Halo effect of “large institution/ Banks do good advisory and are aligning their interest with your interest”. You know thousands of examples of mis-selling by these outfits.

MF Trivia: Averse to risk of Markets but still wish to invest with safety guards? Consider Asset allocation funds. There are asset allocation funds with debt tilt and equity tilt. Ask us to find out what is more suitable for you.

If you find our blogs helpful, pls do like, share and comment

Author –

Bhavesh D Damania

Founder - Wealthcare Investments

EduPrenuer, TV show panellist and Blogger

You can reach him at 9833778887 and wealthcarein@gmail.com

"Risk comes until you know what, where and why you are Investing"

Anchoring effect

  In the series of 21 behavioural biases we will discuss the 19^th bias “Anchoring effect”

Like a ship controlled at bay with an anchor, similarly we also anchor thoughts with few data, hypothesis and average observations.

Let’s look at an example. Asking women her age is like next to crime😊 . Still what tools we use to guesstimate her age will be something like this. Kid’s age or education year or marriage year or husbands age minus 3-4 yrs age difference and so on. Some might consider looks to estimate age also.

Well, all the methods will mostly allow us to estimate the near correct age of a woman. But it’s not true in current world as women don’t marry at 25 nor they have child so soon or the difference in spouse age could be more than 4 yrs or even wife could be elder to husband😊 

Anchoring effect makes us generalise a few traits and events to be true forever and for all. Haven’t we made prototype image of how doctors should look or how Banker/Investment managers look. Any other appearance of them makes us conclude about their sincerity to profession. Isn’t it??

Don’t we say Chinese are crooks, western guys are spendthrift? Arabs are rich and lazy and Japanese are hardworking and honest.

Anchoring bias works on Investments too!! Answer yourself about a few expected returns and risks

1)      Don’t you feel all FDs are safe? Be in co-operative Bank, corporate or any other.

2)      Don’t you feel FDs must return around 8-9%

3)      Equity must deliver over 15% -25% return?

4)      Wise to Invest in equity is to look for multibagger, make quick buck and exit?

5)      Properties are best for highest return

6)      Property prices never fall.

7)      Gold is solid Investment class.

I am sure you are aware that all the above anchors are faulters.

Anchors are important for evaluating investment options but segregation of irrelevant anchors are most important in successful investing. There is no substitute to critical thinking in investing.

Broking companies give buy and sell call or expert speak of the stock and markets. They might have different audience, perspective and hidden agenda. Why should you anchor your thoughts around that? Staying invested is best policy, certainly reduce risk from time to time but timing the market is total waste of energy. Recall how many times markets have surprised you? Recall how many calls of the analyst, broker or expert on TV and print have been right?

Wise way of Investing is establishing time tested anchors like- Valuation, risk v/s reward and simple and transparent products. Ancillary anchors could be inflows, sentiments, Global/domestic growth rate, Interest rate etc. to name a few.

We at Wealthcare Investments also believe in the well-established Anchors and manage portfolios. We use ancillary anchors for generating extra returns from portfolio (opportunist approach). We had started investing in small and Midcap segment since Mar 19 and investing currently also (albeit with STP route). Results have been quite good. With Ancillary anchors, we don’t commit full money of sizable money. We still hold safer assets in portfolio like liquid funds, Asset allocation funds, Hybrid funds etc. When we see visibility of the well-established anchors playing out, we will be quick enough to go aggressive in portfolio. Our philosophy is- Investors don’t mind lower return but do mind higher risk/losses.

As an Investor, One must have rational approach in investing exuberance may work sometimes, not always. As I mentioned in my previous blogs also – many investors approached us when markets were scaling heights and they showed resistance when markets were cheap.

What should you do as an Investor?

1)      Decide on the few solid time tasted Anchors for your decision making.

2)      Pay attention to process of Investing rather than returns alone.

3)      Do not pay attention market noise. Most of the times they are NOISE only.

4)      Pay attention to your goals rather than returns. Of course returns are important but Goals and risk controls are even more important.

5)      Time in market is more important than timing the market. Experts have also failed in timing the market.

6)      Listen to your financial advisor. If you don’t have, appoint one.

MF Trivia: Investing Money in FDs because you need safety? Consider debt mutual funds. They are capable of giving higher tax adjusted returns. Although returns are not guaranteed like FDs, they did beat the FD returns since many years. Speak to us for more details.

If you find our blogs helpful, pls do like, share and comment

Author –

Bhavesh D Damania

Founder - Wealthcare Investments

EduPrenuer, TV show panellist and Blogger

You can reach him at 9833778887 and wealthcarein@gmail.com

"Risk comes until you know what, where and why you are Investing"