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We invest in companies which are inexpensive and compounding AND available cheap for a reason. Under unknown circumstances, and huge mortality of businesses / economy, I accept the returns, with gratitude - not with entitlement.
Aim is to compound - some periods r fast, some r slow. Being alive for long is more important, than playing recklessly.
Currently, Im holding somethings where the probability of success is high - however, Im uncertain of monetary system or lockdowns or whatever is happening around... So diversify away from the system. And unalign the mind from dependence of money.
Data for disenchantment
Some very interesting data emerged out of analysis of past 5-7yrs -
- For 2016-2020, 5y period, almost all funds came down to zero return due to covid selloff in march2020.
- Very few were able to raise money in 2020-2021
- Mkts recovered in 20-22, overall giving very modest returns for (5+2)year period, assuming no additional capital in downturn.
- Most of superior IRR came from buying 20cents things in covid downturn period.
- Unsurprisingly, retail panicked in covid, and sold off at wrong time.
- And as a matter of caution, many FMs also exited, surprisingly.
Understanding these numbers need some deep analysis, for which I used following -
- PMS Fund returns are NOT= individual returns. Fund IRR majorly depends on ability to do marketing during downturns - with new capital, buying dollar for 20cents, massively spikes up IRR. Retail, who added during downturns, made good returns.
- Fund House IRR data is easy to find. However inflows/outflows r difficult to find, and very different for different Fund Houses. Hence comparing 2 funds, without taking fund flows into account, is totally incorrect exercise.
- How funds are merged/closing their schemes also needs to be taken into account.
- Context of period needs to be taken into account - markets rising from 2013 bottom or 2020 bottom will show excellent returns. But 2015 or 2016 onwards, numbers will change drastically. Sometimes, 4y or 7y is better way to look into things, but marketing decides narration.
This entire comparison workout is IMPOSSIBLE exercise - and anything else is INCORRECT way to think.
Wrong analysis, wrong periods, wrong narratives r used to justify the marketing. Too much greedy narratives r floating all over in IT-salaries / crypto / startups / funds /real estate - and without good data analysis / insights, this is all a marketing mirage.
IMO, best option is to sit with the FM and educate oneself.
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