As markets continue their incessant rise, it is becoming increasingly difficult to prove our abilities as investment advisers. Everything an investor touches rises and the stock markets are in effect feeling like Midas’s Gold. Over the past 2 years, though in absolute terms our client’s portfolios have grown, our choice of investments for our clients have underperformed wildly speculative rises in many corners of the market. Our principles have always been:
While we remain pretty convinced in our ability to create value for our clients by sticking to our philosophy over the long term – how do we dive deep and introspect when things are not going in our favour? In light of this, a recent interesting blog by Paul Graham- The right kind of stubborn was thought provoking. The blog articulates that stubbornness manifests in two forms – Persistence, its positive form and Obstinacy its rather negative form. Encapsulating it succinctly Mr. Graham writes – The persistent are never more engaged than when you disagree with them. Whereas the obstinate don't want to hear you. When you point out problems, their eyes glaze over, and their replies sound like ideologues talking about matters of doctrine. This is very insightful. The Persistent are foccussed on their goal and are open to corrective action as long as it is a step towards their goal. The obstinate on the other hand are fixated only on their ideas of how to reach their goal.
We ask ourselves, are we being obstinate by not wavering from the principles we set for our ourselves? In avoiding most of the stocks in the recent speculative (in our opinion) rally have we done a disservice to our clients? The answers to these questions will probably only be answered over time. Our avoidance of the risky exposure to speculative bets could either be considered wisdom or folly years from today.
Our goal is the financial well-being of our clients, consistent with their tolerance for risk. While we must remain persistent in achieving this goal, we must not be obstinate about our choice of investment products. We should have no qualms in moving out of investment products that do not stay true to our principles. We have to be persistent and constantly ask questions on whether our choice of investment vehicles continue to remain relevant. We also have to keep an open mind to new investment products/thoughts and ideas.
(a) First do not lose – ie avoid stupidity and extreme risk, stay within client risk tolerance
(b)Focus on the long term – ie ability to stay the course
(c) Keep costs low – ie keep manager costs low, avoid churn, keep low tax drag
While we remain pretty convinced in our ability to create value for our clients by sticking to our philosophy over the long term – how do we dive deep and introspect when things are not going in our favour? In light of this, a recent interesting blog by Paul Graham- The right kind of stubborn was thought provoking. The blog articulates that stubbornness manifests in two forms – Persistence, its positive form and Obstinacy its rather negative form. Encapsulating it succinctly Mr. Graham writes – The persistent are never more engaged than when you disagree with them. Whereas the obstinate don't want to hear you. When you point out problems, their eyes glaze over, and their replies sound like ideologues talking about matters of doctrine. This is very insightful. The Persistent are foccussed on their goal and are open to corrective action as long as it is a step towards their goal. The obstinate on the other hand are fixated only on their ideas of how to reach their goal.
We ask ourselves, are we being obstinate by not wavering from the principles we set for our ourselves? In avoiding most of the stocks in the recent speculative (in our opinion) rally have we done a disservice to our clients? The answers to these questions will probably only be answered over time. Our avoidance of the risky exposure to speculative bets could either be considered wisdom or folly years from today.
Our goal is the financial well-being of our clients, consistent with their tolerance for risk. While we must remain persistent in achieving this goal, we must not be obstinate about our choice of investment products. We should have no qualms in moving out of investment products that do not stay true to our principles. We have to be persistent and constantly ask questions on whether our choice of investment vehicles continue to remain relevant. We also have to keep an open mind to new investment products/thoughts and ideas.