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One Year | Portfolio Yoga

We are a Year Old

The other-knowing are wise

The self-knowing are discerning

Those who triumph over others have muscle

Those who triumph over themselves are commanding

Those who what enough is are affluent

Those who practice strenuously have resolve

Those who don’t lose their place are enduring

Those who die and don’t disappear are long-lived

– Laozi / Tao Te Ching

For many businesses, the first year can be a make or break. Fifty percent of businesses die in their very first year of operation. Most businesses get started because the founder generally sees either a lacunae in the current setup which he hopes to fill or believes he can offer a better product compared to those that are currently available.

It doesn’t matter how good a product is or how big a gap the founder thinks he is filling if the market doesn’t validate him and the way of validation is achieved by being able to sell the idea to the public for a price. 

Financial Advisory is dime a dozen and yet there is a real dearth of quality financial advice. The biggest sellers of Mutual Funds for example are not Financial Advisors but Banks. Selling Insurance and Mutual Funds is part and parcel for most Private Bank employees to the extent that many would rather push investors who come to place a fixed deposit to either a Unit Linked Insurance Plan or a Mutual Fund. 

Technology is seen as a one stop solution for all things including finance. Robo Advisory is the next big thing in finance with personalized solutions being provided to clients at a fraction of the cost that traditional advisory shall cost. Think of it as a Low Cost Airline vs a Full Service Airline.

While low fees is definitely a great appeal, the issue when it comes to finance is our inability to hold our emotions in check when the chips are down. Asking a computer to solve it isn’t going to help. 

In March 2020, I saw fear and panic envelop as markets cracked like no other time before with the Index down 40% from a peak it had hit at the start of the year. My own portfolio was down more than 25%.

When markets fall big time, even experienced professionals tend to panic. Today, it’s all nice to wonder what if one had bought during the fall but at that time, the question was whether to take the hit and move on or wait and see how things may unfold. 

To try and get a better understanding I tweeted 

https://twitter.com/Prashanth_Krish/status/1241242995300564993

What I could see was real pain and pressure felt by many. This was also the time that Analysts on TV were warning about even more pain that could be coming. A famous technical analyst using an esoteric model of analysis even painted a picture of Nifty going down to 2000. 

Looking back at the DM’s I don’t think I advised many to buy more but I did advise to hold on for now, the pain has been seen and I personally felt that markets may not tumble down the rabbit hole as many seemed to predict.

If there was any doubt on what space Portfolio Yoga wanted to occupy, this episode gave the clarity it required. While the initial thought was to take the Registered Investment Advisor License, the new rules that were being circulated meant that it was not worth going down that road. 

One could not have asked for a better first year in terms of how the market has behaved. Even a lousy strategy would have worked wonders and it’s not surprising that the Portfolio Yoga portfolio’s had a dream run.

We started with just one portfolio – Portfolio Yoga Multicap Momentum Portfolio and have over the months expanded the offering to include Portfolio Yoga Large Cap Momentum Portfolio, High Price Portfolio and the Coffee Can styled Quality Portfolio.

All this at a simple and single price that we felt was something that would be affordable by those who may not have a large capital to start with but required a bit of hand-holding and a good portfolio to start their investment journey.

One of the differences we feel that we offer compared to others is the ability to call us if you wish to get a better understanding of the services or even the market. This meant getting in touch with more than 50 of our clients and even meeting a few of them personally. 

Also, did I mention that we even today are the only guys that offer partial refunds if one is not satisfied with the services anytime after subscription? Love to say that just 8 of the total of 294 who have subscribed to us wanted a refund. 

One of the easiest ways to sell is to talk about performance. In bad years, everyone wants to talk about the process while in good years, it’s all about performance and how great their stock picking ability has been. While we write a monthly newsletter to clients, we have never talked about our performance. 

Our performance is not shitty but is not the best either. But the reason not to talk about performance is because it in a way sets expectations that may or may not be matched in the future. In 2017, I distinctly remember small cap fund managers tomtomming their returns with many comparing against Nifty 50. Over the next couple of years, it was just one way down for many with drawdowns to the tune of 50% or more. Clients panic at the exact wrong time because they got sold an idea without selling them on the risks.

Momentum is a good strategy and has an outstanding year and half. But at some point the returns shall wane even as the returns of some other factor will shine. Momentum is not some free lunch in the market. 

After a strong start, client growth has kind of tapered off but that is what happens even when a spaceship is launched, so all izz well 🙂

What Next?

In the world of factors, the only gap that remains from Portfolio Yoga stable is the “Value Portfolio”. Unfortunately the quantitative approach is not the most ideal given the nuances when it comes to Indian stocks & their promoters. We are actively working with someone who has deep insights into Value Investing to bring a Discretionary Value Portfolio out. 

With Corona on the wane and a new office now setup, the hope is also to attract a few youngsters to work with us to bring out deeper insights into stocks and market. In the meanwhile, we now have a presence on the Smallcase platform with our Large Cap Momentum Portfolio.

To better days ahead. Onwards & Upwards. 

One year of Learning through Discussions

The best learning I have experienced has come from interacting with others. While in the good old days you could have a long email chat with co-conspirators, in these days of Whatsapp and Twitter, who has time for all these anyways.

So, to get deeper discussions going I started a Slack Channel that was free for anyone and everyone to join exactly one year today. Free forums are tough to seed with conversations for since if one is not paying anything, one doesn’t find it imperative to be online and interact with other members. 

If we wish to have medical advice, we don’t take one from anyone who professes to provide a view. If the advice asks for surgery, we would rather take a second and maybe even a third doctor’s advice even though each one of them will be similarly qualified. 

When it comes to financial advice, anyone and sundry seem to be able to not just provide a view but influence the investment process of investors. To just sell medicines, one needs to pass a specific 3 year Bachelor Degree. To sell investment advice, all you need is to pass a couple of easy exams and voila,  you are an expert. 

But this is not new, this has been the case even before the existence of Social Media though the reach Social Media allows is something else. It’s tough for most, even professionals to cut through the noise to seek out the signal. One of the best ways is to discuss with like minded professionals.

But unless you are an employee in a large financial organization, that is not evidently possible. On Twitter, those who we seek cannot really be expected to answer every question of us. A 144 character response while interesting doesn’t add value either.

As I wrote in the introductory post, a lot of my learning came from interacting with others on a Yahoo Group Forum. While the Yahoo Groups is now dead, I wanted to recreate some of the magic that happened there once again.

The first year has been promising. While I was the only real poster for much of the first year on the Yahoo Groups (while also promoting it elsewhere), I am happy to see keen interest and involvement by quite a few guys. Thanks to Abhinav Mehrotra, Aakash, Anand, Ajay P, Kesav, Mahesh, Manish, Pradeep, Rakesh Arunachalam, SK Rahman among many others who have graciously spent time and effort to answer queries that frequently come up on the channels. 

On Twitter, more the interaction, more the followers and more the visibility. It’s kind of dopamine that keeps us coming back over and over again and tweeting more and more. On private forums though, there are no rewards and that makes it even more  generous. Messages such as these is what makes the day for me

Learning doesn’t happen in isolation other than for the really genius kind of guys. Books are a major help in learning from others but the ability to discuss and debate on something takes it to the next level.

While the idea and even today the objective of the forum was to have discussions on every sphere of the markets, much of the discussions have been with respect to Momentum Investing. I am not really surprised since not only is Momentum Investing having its best days in a long time but also the fact that there are no other forums (as far as I know) where you can discuss and debate the strategy. 

The secret of Momentum is that there is no Secret. This is not a black box method that is proprietary in nature. The strategy is simple and open ended. What is more important than the strategy itself is the ability of one to trust the system rather than our views. Anand kind of made it more concise in what he learnt in the year

While the total membership is more than 800, around 200 on an average read the discussions and 50 to 60 participate regularly. If you wish to join this wonderful group, do click the following link and Join (if the link is no longer valid, please DM me on Twitter)

Join the Slack Community – its FREE 🙂

The returns of 2020 – 21 may not repeat in 2021 – 22 but I am pretty sure that the lessons one learnt will be valuable even in 2030 – 31.