Friday, November 27, 2020

Hope you are not doing this- LONG TERM HOLDING- Reason for underperformance

Mr. Soni had invested in HDFC TOP 100 and also had a 1 year SIP for 2 years then. One fine morning in November,’20, he received letter from HDFC mutual fund, which gave him reminder that he had done this investment . He realized that he had invested Rs.3.4 Lac in total then and today it’s value is Rs.5 Lac. He called me up and asked me what to do, but one thing repeatedly he wanted me to say is whether he has earned good returns or was there better fund which could have given better returns

Mr.Kulkarni inherited Castrol shares from his father which were purchased @Rs.10 then. He had emotional bonding and for 5 years he was not selling those shares, rather he was saying, “badh raha hai and dividend bhi de rahah hai, then why to sell”. At the same time, in those years term, he bought another 3 shares and the returns what he got was much above holding value returns of Castrol, but he never used to compare and consider selling Castrol

GONE ARE THE DAYS of holding everything bought for long term

YES< Investments should be for long term, but same fund or company or asset should be minutely tracked and rebalancing should be done

Below is the example to understand better –

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( Disclaimer : this is representational and does not necessarily mean actual )

Mr. Shah, started Investing just in March,’20 and his lump sum investment value was Rs.1 Lac. When he approached his financial planner, his planner, prepared strategy to invest in 50:12:38 ration for Equity: Debt: Gold , and they Invested accordingly. Mr.Shah and his planner were very clear that this 1 lac of investment they are investing for long term ( specifically for Mr.Shah more than 12 years )

In November start, the values had increased and Rs.1 Lac invested was then Rs.1.65 Lacs.

Generally 90% of Investors and 78% of Advisors understand long term means KEEP IT AS IT IS. But his planner did something which very few do. His planner re-balanced the whole portfolio to original set asset allocation and redeemed from Gold , and Equity ratio proportionately and re-invested to reset the whole investment to originally set 50:12:38 weightaes to the asset classes.

90% of investors do this, long term, means buy and hold, but the times have changed and active management is required.

Gone are the days when Dada purchased and Grand son reaps the benefit, and in between keep holding same funds, same shares, same asset class.

It’s time to change, if not , you are inviting underperformance

So Which one do you choose-

A_ Buy, Hold and ready for underperformance

C_ Buy and keep re balancing

D_ Sit on the sidelines- ie “ better hai invest hii mat karon as I do not understand anything”

What is your current way ?

Happy Investing, Keep growing

Happy to hear from you

DISCLAIMER : In no way this should be considered the ideal asset allocation , nor does it in any way to be considered or assumed that we are claiming that we can give "XYZ " returns. This is for simple understand of not making mistake of buy and keep holding and not reviewing or not rebalancing, just because of the normal NOMENCLATURE of LONGTERM. It needs re-think , on investment strategy and the advisor you are working with


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