Numbers don’t lie!

Today was a very humbling experience. I did a mammoth exercise of plugging in all numbers since the time I have been investing (6 years). This included stocks, debt (this is a combo of debt mutual funds+cash – not loans), equity mutual funds, one ULIP (yes, I had one ULIP). I didn’t consider PF. Over the past 6 years, my CAGR is 18.2% as of today’s closing prices. And here I was, thinking that I was doing 30-35%.

A few facts upfront, before I dive into details:

i) My broad portfolio as of today is 39% in Stocks, 23% in Debt and 39% in Real Estate. The real estate consists of my home back in my hometown. Technically, it is an asset (I have already paid off the entire loan) but my parents live there and I don’t think I’d be selling the house ever (unless, a massive black swan strikes).

ii) I have not included Gold in the portfolio calculations. Gold is an asset, inflation hedge etc., but we Indians never sell Gold unless and until it’s an emergency. So, again, technically, it is an asset but not really. If I include Gold in the total assets ratio, it’d be 34:20:34:12 (S:D:R:G).

iii) In general, I have tried investing as carefully as possible (one of the prime reasons being, if I fail, I don’t have a inter-generational wealth to back me and pick me up again). This also included taking max. term insurance to protect my family from black swan.

iv) Although I am invested in stocks since 2007, active investing was only since the last couple of years. Before that, it was a combination of pure luck for gains, and pure speculation for losses. The last couple of years have been pretty good in terms of % gains, but not very high in absolute numbers.

Alright, that story done, let me dive into a few details.

a) Let me put the 18% CAGR in perspective. 18% handily beats all ‘Large&Midcap’ and ‘Midcap&Smallcap’ funds. However, my target has always been atleast 25% (else, not worth the effort). My aim is to hit 25% p.a on average till I hit atleast a 8-figure number on the Stock+Debt portfolio. So, 18% did come as a big bummer. Here I was, thinking I could easily beat the markets, value the business, discuss and argue cogently with hallowed investors and then there was this number that stared me in the face (I double checked the numbers, just to ensure I have not under-performed, willingly).

b) The last 2 years of active investing has been pretty good, but so has the record of the midcap/smallcap market in the past 2 years. If I eliminate the first 4 years of my passive investing, the last 2 years CAGR came to about 40% p.a. This again, is due to a combination of extreme luck (forums like valuepickr/theequitydesk in no small measure), effort (constant lurking on wonderful blogs like I mentioned before) and a bit of reading (which helped me avoid the dumbest mistakes). However, since there were a host of factors like paying off my home loan, wedding expenses (oh my!) etc., the lack of sufficient capital led to not much of absolute capital appreciation. I hope I can sustain this luck and learning for a long time so that my capital grows too.

c) Drilling down to the details. HDFC Bank is a clear winner, not much in % terms (it’s like 5x in 6 years) but I put in a quite a lot of capital. In fact, I would boil this down to luck too. I accrued ESOPs since I worked for HDFC Bank, and I bought all ESOPs that got accrued when I left the Bank (split-adjusted price of Rs.125/-). In fact, I had taken a personal loan to buy all the options. Thankfully, Mr. Puri is carrying the Bank along well. A combination of extreme luck (working for the bank and hence ESOPs) and monstrous stupidity (taking a personal loan to buy stocks) – but it is now an anchor stock and has served me well. Too bad, I didn’t buy this one yet again in the 2009 bear market.

d)  Out of the 38% in stocks, 10% of it is in a venture. When I mean, venture, I mean an unlisted company. There is this very good friend of mine who had an aeronautical spare parts company. He was committed to his company and grew it by leaps and bounds. He then got an opportunity to tie-up with a major company and asked me if I’d invest. I knew this guy to be honest&committed, he was putting in a lot of his personal stake, and the major company also put in 50% of the total capital. I saw a large scope of opportunity and committed management and invested 10% of the stock capital in it last year. Thankfully, it is going well. Of course, if and when the company goes for an IPO, I am committed to write a glowing IPO note to pump the stock :). Let’s see how far this goes. Yet again, outlier event, extreme luck of having him as a friend, and he asking me if I’d be interested in investing.

e) In the last 2 years of active investing, forums, blogs and books galore. Inspite of major undervaluations in very good stocks shared by one and sundry, I had the heart to commit major capital to only two stocks – Mayur Uniquoters and Atul Auto. Of course, I have exposures to Astral Poly, Kaveri Seed, Muthoot Capital, PEL etc., but even if they go 3x, at the current capital allocation level, they are not going to make much of a difference to overall wealth. Inspite of multiple people urging me that ‘Pharma’ was simple, it was simply my laziness and lack of interest that I didn’t dig through the story of Ajanta Pharma/Unichem etc. Ajanta Pharma, in hindsight of course, was a major miss. This 40% p.a return in 2 years, I would admit, involved a lot of effort, apart from luck. Effort in reading up valuepickr/theequitydesk every day and see if I can invest in a stock or not.

f) In essence, if you remove my top 4 stocks – HDFC Bank, Venture investment, Mayur Uniquoters and Atul Auto, my portfolio % returns is okish, but the absolute capital is very meager. It is surprising how Buffett’s rule (top 25% stocks make most returns) is discrimination-less even for an amateur investor like me.

g) Of course, contrary to Buffett’s rule, I have made far more than 20 purchases (20 punch-holes). And in most of them, the returns are less and some are even negative. I should have just stuck to buying more of the success stocks rather than diversifying into many and multiple.

h) As I was doing the analysis all of today afternoon (I had to pull out 6 years worth of reports etc.), the experience was very taxing and liberating at the same time. I understood some of the mistakes I made, some of the portfolio allocation decisions I took, portfolio sizing problems that I encountered and will encounter in the future etc. So to say, it was a meditative experience. Till, I hit the ‘Enter’ button on the XIRR formula. After that, everything came crashing to the ground, which is currently leading me to deep questioning and introspection. I don’t know what will come out of it though.

Not sure if this post helped you in any way. Not sure if 3 facts and 8 ramblings made the post long and/or boring. The key takeaway though is I needed extreme luck and constant lurking on different forums to make any of my gains 🙂

I look forward to interactions with any senior investors reading this – a) Were you in this situation before? b) How do you go about correcting flaws in thinking/approach? and any other tips/tricks to help me survive and grow in the market.   

P.S: If you are a novice/amateur investor, and haven’t done the exercise of pooling in all the stock&debt portfolio at one place (I recommend Google finance, simply for the reason that excel sheets tend to get lost in nested-nested-nested folders with the same names), please do so. I can assure you, even if the XIRR value is not too exciting, the very fact of putting down those numbers is tremendously educative.

DISCLOSURE: The stocks that I mentioned or referred ARE NOT be taken as recommendations for a Buy or a Sell. Please do your own due diligence before investing.

  1. #1 by Manshu on March 3, 2013 - 4:33 AM

    This is an interesting, frank and very brave post. I am not sure how much better you can do with that amount in fixed income, unless of course the fixed income also gives you capital gains in the years to come.

    These are great returns given the market conditions of the past 6 years, and had the market been a bit better, I’m sure you would’ve done a lot better.

    However, the kind of returns you’re targeting makes me think that it can’t be done if you own 20 plus stocks but maybe that’s because I don’t follow a similar approach.

    All the best.

  2. #2 by kdaakuran on March 3, 2013 - 3:09 PM

    Thanks Manshu!

    The fixed income part of it is more of holding cash for the past few months and selling out overvalued stocks. But I get what you mean.

    I don’t own 20 plus stocks. I own 6-8 stocks on average. I was referring to Buffett’s rule of not buying more than 20 stocks in your lifetime (20 punchholes). I bought much more than 20 stocks in the ‘General’ category over the past 6 years.

    Thanks for your comment.

    • #3 by Manshu on March 3, 2013 - 3:54 PM

      I don’t think he meant that as a rule so much as to emphasize that you would be a lot more careful in buying shares if you could only do 20 in your life. If you have a link handy, could you give it to me? I’d like to read more about it to see if I’ve misunderstood it all along 🙂

      • #4 by kdaakuran on March 3, 2013 - 4:56 PM

        Yep, your understanding is correct too. I guess just different ways of looking at it. Here is his exact quote –

        “I could improve your ultimate financial welfare by giving you a ticket with only twenty slots in it so that you had twenty punches – representing all the investments that you got to make in a lifetime. And once you’d punched through the card, you couldn’t make any more investments at all. Under those rules, you’d really think carefully about what you did, and you’d be forced to load up on what you’d really thought about. So you’d do so much better.”

  3. #6 by anon.coder on March 3, 2013 - 10:50 PM

    How do you value your venture investment in present terms. Thanks for this great post. Do share your lucky picks promptly with the community 🙂

  4. #7 by svpgroupindia on March 6, 2013 - 5:48 PM

    Thanks for posting great article .. Keep it up.

    Real Estate Developers

  5. #8 by Dipen V on March 6, 2013 - 7:03 PM


    For me this post was very educative and informative. I am just a novice investor. I have been “trading/investing” since last 3 years. Actively Trading only since last year. Severely burnt my fingers before that with issues like :

    1) Wrong IPO Selection. Too much emphasis on IPO and quick gains.
    2) Investing without understanding fundamentals.
    3) Going more by recent trends (3 month Trends).
    4) Bad allocation – Prior to last 2 years I must have invested/traded some 25-30 scrips.
    5) No discipline in terms of Stop Loss.

    Adding to that , I think entered at a wrong time (May-2010) when the downturn had already started. Since last 6-8 months, My judgement and understanding has improved slightly, I have gotten better but still a long way to go. I am holding some 12 scrips as of now. 2 scrips are my old blunders for which I don’t have a heart to cut my losses. My allocation is still haywire.

    So summing it up, I feel more such posts will be very useful with some suggestions on tools like:
    1) Which Portfolio Management system do you use ? – Excel / Other Apps / Online
    2) What is your profile (age/qualification and your estimated portfolio size (This is only, if you don’t mind- I am asking this because Age also has a huge impact on your decision making)
    3) For Novice investor like me , can you suggest some good forums/blogs. Books generally tend to be too idealistic. Personal experiences help more in the initial phases when you are in learning phase.

    My email Id is :, In case you are not comfortable in replying to me publicly. Also if its not too much to ask, I would like to have your email ID if possible.
    I was planning to get few pointers on some detailed doubts.


  6. #9 by venkat on April 24, 2013 - 12:36 PM

    It is really an interesting post. can u suggest some quality site (excluding moneycontrol) where i can get public holding data(more than 1%). hope u reply soon

  7. #10 by pune flats on April 29, 2013 - 4:46 PM

    Nice post….interesting

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